How to Calculate Stamp Duty Charges in Nigeria

How to Calculate Stamp Duty Charges in Nigeria

Stamp duty is a tax on instruments (written or electronic documents). This act has been effective since April 1, 1939. It was also amended particularly with the introduction of electronic transactions under section 52 of the Finance Act 2019.

The Finance Act 2019 first introduced stamp duties on bank deposits and transfers, and was later replaced by the Electronic Money Transfer Levy (EMTL) as per the Finance Act 2020.

The scope of the Stamp Duties Act has various written or electronic instruments such as agreements and contracts all under stamp duties. These duties may be assessed either as ad valorem (based on transaction value) or at a fixed rate, depending on the nature of the instrument. For instance, financial institutions are supposed to charge a one-time levy of NGN 50 on cash deposits exceeding NGN 10,000, which must be remitted by the recipient of the deposit or transfer.

Here’s a general guideline on how to calculate stamp duty charges:

1. Know Your Transactions: It is important you know if the transaction or document is subject to stamp duty. As we all know, stamp duty is usually on written or electronic instruments such as agreements, contracts, receipts, bank deposits, and transfers.

2. Know Your Rate: Stamp duty rates can vary depending on the type of transaction or instrument. Rates may be ad valorem (based on the value of the transaction) or at a fixed rate.

3. Calculate the Stamp Duty Amount: Once you have identified the rate, multiply it by the value of the transaction. For example, if the stamp duty rate is 0.5% and the transaction value is ₦100,000, the stamp duty charge would be ₦500 (₦100,000 x 0.005).

4. Special Provisions:It is important you are aware of any exemptions or special provisions that may apply to certain transactions. For instance, there may be exemptions for certain types of documents or transactions below a certain value threshold.

5. Compliance: Make sure to comply with any reporting or payment requirements specified by relevant authorities.

Read Also: How to Calculate Interest on a Loan

SAMPLES: 

Write out the Value: Let’s say the property transaction is worth 5,000,000 NGN.

For property transactions, the stamp duty rate is often 0.78% of the property value.

Calculate the Stamp Duty: Using the given property value and the stamp duty rate:

Stamp Duty = Property Value × Stamp Duty Rate

= 5,000,000 NGN × 0.0078

= 39,000 NGN

So, for this property transaction worth 5,000,000 NGN, the stamp duty charge would be 39,000 NGN.

Leave a Comment