As a tenant in Nigeria you should be prepared to witness an increase in rent payment as the Federal Inland Revenue Service (FIRS), has announced that landlords and property agents are to charge six percent stamp duty on all house rents and lease agreements
The FIRS, on 2nd July 2020 in a statement by its Director for Communication and Liaison Department, Mr Abdulahhi Ahmad, made this known to Nigerians.
According to Ahmad, stamp duty is basically charged in two forms, either Ad Valorem where duty payable is a percentage of the consideration on an instrument or a fixed sum irrespective of the consideration on dutiable instrument or document.
“Property-related transactions like tenancy or lease agreement fall under the Ad Valorem category of the stamp duty which attracts six percent duty payable in percentage of the total value or sum of the tenancy or lease,” Ahmad said.
So, as a tenant, you have the duty of paying the stamp duty to your landlord while your landlord remits the money to the FIRS.
Hence, for instance, as a tenant if your rent was N5 million before this law, you will now be paying an additional N300,000, totalling N5.3 million to your landlord due to the six percent charge on stamp duty.
However, Tax experts have said that it is not all tenants this law applies to. According to these experts, if you rent or lease is less than a year, then you will not be paying any stamp duty.
Below is what you are to pay as a tenant with the new stamp duty law according to experts of the law:
As a tenant, if your rent duration is from one to seven years, you are only required to pay 0.78% on stamp duty.
For example, on rents duration that are one to seven years, what you are expected to pay is 0.78% which is N780 on a rent that is N100,000.
On rent or lease that is more than seven to 21 years, you will pay six percent stamp duty. So, six percent stamp duty on 21 years rent will be N6,000 on a rent of N100,000.
It is the duty of the tenant to pay for the stamp duty. However, FIRS is using the landlords or property agents to collect the monies, which will then be remitted by them as tax.
The effect of this law is an automatic increased hardship for Nigerians especially in this pandemic period according to experts.
Speaking on the implications on tenants, Estate surveyors and Agents said” It will increase rent cost since tenants are to pay more and this is aside the agency fee which is almost 50 percent of the actual cost of rent, and other fees collected by agents and landlords from tenants in Lagos. There will be more landlord and tenant ligitaions among other issues.
In a report, Taiwo Oyedele, the Fiscal Policy Partner and West Africa Tax Leader, PwC, speaking on whether or not the decision by FIRS to implement the stamp duty on rent during this COVID-19 era was the best, said, it is difficult to just blame FIRS because they did not enact the law.
“The law has always been there, many people didn’t comply and the law was not enforced. It is a failure on the part of the government not to have implemented the law when the economy was stable not now when there is crisis,” he said, adding that the government and regulatory agencies can use this period to create awareness and educate the public while proposing a future date when it will commence enforcement of the provisions of the law.
“If Nigerians do not want the enforcement of the law, they can speak to their lawmakers to review the law,” Oyedele said.
Indeed, the consequence of such policy will undoubtedly, result in a surge in crime rate and hardship for the people but Nigerians can protest on such law not be implemented as Oyedele as said.
