Getting a good location for your business tends to increase visibility and reach to target customers. Although, from a survey we took, business owners said they would rather have online stores than walk-in ones, having a store in a good location helps to bring quick and fast returns on investments.
Often, since it is more advisable to rent or lease a business space in a good location than to build from scratch, many business owners opt for that. In a recent announcement, the Director of the Communications and Liason Department of the FIRS, Mr Abdullahi Ahmad, stated that tenants and service providers have to pay an extra 6% Stamp Duty charge to the Revenue Service.
Here’s how it would work.
Stamp duty is a tax that governments place on legal documents, usually in the transfer of assets and property, to raise money to fund government activities and projects. A good example of the stamp duty charge in Nigeria is the money that is deducted when a person makes a cash transfer, through deposit banks or financial institutions.
In line with this, the Federal Internal Revenue Service, FIRS made an announcement ordering all property owners, landlords, and their agents to charge 6% stamp duty on all tenancy and lease agreements they enter into, remitting all funds promptly to the FIRS.
What this means is that if a business space valued for 1 million naira is to be rented or leased, the intending tenant is required to pay an extra 60,000 naira which would be remitted to the FIRS. This money is independent of the dues which may be charged by the agent, or utilities that have to be paid for during the period in which that space is rented.
This directive was given to prevent the FIRS from running foul of the Stamp Duty Act. The agency further explained that the implementation of this new policy was necessary to grant the tenant or renter the legal backing required and to make such transactions legally binding on all parties.
“In any case, the party making the payment shall have the obligation to account for the applicable stamp duties. The responsibility of collection and remittance falls on the landlord or agent in charge of the property for lease or rent.” – Mr Abdullahi Ahmad.
This new stamp duty policy is not limited only to leasing or renting spaces, however, as there are other types. They include, Appraisal or Valuation of Property, which goes at 1.5%, Sales Agreement which is 1.5% also, Legal Mortgage which goes at 0.375% and many more.
This new policy has to be adhered to strictly by property owners, agents, and tenants, as failure to remit the duties to the appropriate accounts would attract relevant penalties and interests as stipulated in the Stamp Duties Act.