6% Stamp Duty On Rent: Read this before giving your hard-earned money to your landlord

…Individual tenants pay to state tax authorities while tenants operating as companies pay to federal government, Taiwo Oyedele clarifies

Last week, the Federal Inland Revenue Service, FIRS issued a directive directing all landlords and agents to start collecting 6 per stamp duty on rents.

This prompted some tax expert to clear the air on the new directive.

One of them, a Fiscal Policy Partner and West Africa Tax Leader at PwC, Taiwo Ayodele clarified that tenants are indeed to pay stamp duty on their tenancy but the rate is 0.78 per cent, and not 6 per cent directed by the Federal Inland Revenue Services.

Oyedele explained that the stamp duty law stipulates that any tenancy or lease agreements in the country that is less than 7 years, should be 0.78 per cent.

“If the lease term is less than 7 years, stamp duty rate is 0.78% (e.g. N780 on N100k rent). For a term of 7+ to 21 years, stamp duty rate is 3% (means N3k for N100k rent). For a term above 21 years, stamp duty rate is 6% (e.g. N6k for N100k rent)

“Given that most people enter into rent agreements for less than 7 years, the applicable stamp duty rate to most people will be 0.78%,” Oyedele said a tweet on Friday.

***Summary of Stamp Duty Rates on Tenancy***

Read also: FIRS directs landlords, agents to collect 6% stamp duty on house rents

Oyedele went further to clarified that stamp duty from tenants operating as individuals should be paid to the state government, while the facility owned by companies either from the tenants or landlords are payable to the federal government citing cases of Lagos Inland Revenue Service (LIRS) and FIRS for Lagos residents.

#Tax101 – Stamp duty on most rent agreements is at the rate of 0.78%, not 6% as being widely circulated. Based on the Stamp Duties Act, stamp duty on lease or rent agreement is payable as follows:

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— Taiwo Oyedele (@taiwoyedele) July 24, 2020

“If you an individual renting from another individual, your stamp duty is payable to the state tax authority such as LIRS, if you are resident in Lagos. If either the tenant or the landlord is a company, then the duty is payable to FIRS,” Oyedele said.

He also reveals that stamp duty is the responsibility of the tenant to pay, while the landlord serves as an agent on behalf of the government for collection and remittance.