The Finance Act 2019 introduced a number of amendments to the Stamp Duties Act Cap S8, LFN 2004 (as amended) (the ‘Act’). One of such amendments is the inclusion of electronic documents (‘Electronic Documents’) as instruments liable to stamp duty under the Act. Following these amendments, the Federal Inland Revenue Service (‘FIRS’) issued a circular titled Clarifications on the Provisions of the Stamp Duties Act (the ‘Circular’). The objective of the Circular is to provide information and further guidance on the application of stamp duty to Electronic Documents under the Act.
By virtue of the Circular, the FIRS clarifies that stamp duty applies to written, printed or electronic dutiable documents and receipts and provides examples of such electronic documents, which include e-mails, short message service (SMS), instant messages (IM), documents on website or cloud-based platforms, POS receipts and Automated Teller Machine (ATM) printouts. Nigerians will now pay a
ℕ50 Stamp Duty on all forms of electronic notifications acknowledging receipt of funds. This includes messages on electronic platforms such as WhatsApp messages.
The Circular provides some examples of situations where the electronic receipts will be liable to stamp duties. One example is in a situation where a WhatsApp acknowledgement would amount to a dutiable receipt:
“ABZ Ltd’s chief accounting officer, after receiving a cash payment of N500,000 from Mr. XYZ on behalf of ABZ Ltd., composed a message which reads: “receipt of N500,000 is hereby acknowledged” and sent same to Mr. XYZ via WhatsApp messenger.”
Other examples include transactions involving lease agreements executed online with no hard copy documentation, informal lease agreements where terms and conditions have been memorialised via email, as well as Electronic Documents which are received in Nigeria.
In the above situations, the FIRS will require the party receiving the acknowledgement of the funds to make a disclosure of the details of the transaction using the FIRS e-stamp duty platform or to the relevant stamp duties Commissioner. This will lead to assessment and payment of appropriate stamp duties and a consequential issuance of a stamp duty certificate or an acknowledgement by the FIRS. Such certificate or acknowledgement will suffice as evidence that stamp duties have been paid by the party and that the electronic receipt has been stamped appropriately.
The Circular also clarifies that the FIRS is the sole body with authority to collect Stamp Duties on behalf of the Federal Government. Indeed, there appears to be an ongoing contention between the FIRS and the Nigerian Postal Service (‘NIPOST’) over which federal government agency is authorised to collect stamp duties. The NIPOST has argued that it is statutorily empowered to print, mint, produce, retail, and provide adhesive postage stamps, which is the product which gave rise to the stamp duties in the first place. However, section 53 of the Finance Act 2019 clearly recognises the FIRS as the Federal Government institution with the competence to impose, charge and collect stamp duties. By the doctrine of implied repeal, the Finance Act 2019 ought to be regarded as the relevant legislation for the purpose of determining which Federal Government institution has the power to impose, charge and collect stamp duties. Accordingly, we posit that it is proper to remit stamp duties to the FIRS rather than to NIPOST.
Whilst this move by the FIRS may be commended as an effort to increase government revenue in difficult times where the COVID -19 pandemic has brought about a drastic reduction in crude oil revenues, the extension of the definition of “Electronic Documents” to include SMS and WhatsApp messages appears to be quite novel and demonstrates the Nigerian governments resolve to ratchet up fiscal revenue. However, the move also comes at a time when the financial strength of individuals as well as businesses have been adversely impacted.
Another challenge with this development is with enforcing compliance to these new rules. By the Circular, the FIRS expects an individual who makes a cash payment and receives an electronic acknowledgement by SMS or WhatsApp to self-declare the payment on the FIRS’ e-platform and pay the necessary stamp duties. This may not be a reasonable expectation unless the FIRS is able to independently monitor compliance. Additionally, there have been complaints that the platform does not facilitate bulk remittance of stamp duties, it seems the platform only allows individual stamping of documents.
The challenges notwithstanding, failure to stamp a document have consequences under the Act. In addition to the inadmissiblity of an unstamped document that requires stamping as evidence in judicial or quasi-judicial proceedings in Nigeria, the issuance of a receipt not duly stamped, or the refusal to give duly stamped receipt both attracts a penalty of
N20. This sum is negligible and can hardly deter non-compliance. However, the FIRS Circular now includes such consequences as payment of ‘penalties of various degrees’ and enforcement actions. It is still not clear which penalties the Circular refers to and whether there will be a further amendment to the Act to increase the penalty payable by defaulters upon a conviction for failure to stamp an Electronic Document.
In order to effectively implement the Act, it may well be necessary to further amend its provisions in order to be able to serve the fiscal ends contemplated by the Finance Act 2019.
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