The Stamp duty charge is a tax levied on financial transactions and on official documents. Legal documents such as receipts, cheques, and marriage licenses have had stamp duty mandated for them.
The Central bank of Nigeria (CBN) on September 17th, 2019 released a circular, the circular mandates that all transactions by Nigerian merchants worth N10,000 or more will be charged a stamp duty of N50.
If you are wondering what payment methods are covered or how it generally works, this article will explain in detail.
How does the CBN Stamp duty charge affect businesses?
The CBN Stamp Duty Charge is a form of tax that is applied to businesses that use non-bank payment channels. It is a way to discourage people from using non-bank payment channels and instead use mainstream banks and credit unions.
The CBN Stamp Duty Charge applies when you make payments through your smartphone, tablet, or computer via apps such as PayPal, MOLPay, and Google Pay.
If you pay using cash (for example at your local grocery store), then there’s no need for this stamp duty charge because it’s not applied when paying with cash!
Who bears the costs?
The receiver pays the N50 stamp duty not the sender. The sender already bears the cost of the transaction.
As the cost of stamp duty is passed on to consumers, it’s likely that the price of goods and services will rise. This is because businesses pass on their costs in order to stay competitive and make a profit.
Businesses pass on their costs through higher prices or lower profits. For example, if a business sells cars at a lower price than competitors then they may lose out on sales opportunities as customers choose another product over theirs.
If this happens often enough then eventually they may have no choice but to raise prices as well in order to compete again with other companies offering similar products at similar prices (or worse).
Which business is affected?
The new stamp duty charge is applicable to all products and services that are not regulated by the CBN. This includes:
- Loans secured by real property (e.g., mortgages)
- Gifts, inheritances, and donations made from abroad
- Interest-bearing deposits in foreign currency account with non-residents in Nigeria or with non-resident entities such as banks operating through agents based abroad
The CBN has also said that it will not be charging stamp duty on withdrawals through Automated Teller Machines (ATM), Point of Sale terminals, and other devices used for electronic payments; however, this does not mean you can avoid paying stamp duty if you use these devices to transfer funds into your bank account.
The stamp duty charge of N50 only applies to exchanges worth 10,000 Naira or more. For every deposit of N10,000 or more received, a stamp duty of N50 is charged.
In contrast, where the deposit or transaction made on an account is less than N10,000, stamp obligation does not apply on such exchange.
Also, where the total payment received on an account in a given period is not up to N10,000, there is no authorization for any financial institution to deduct stamp duty on such transactions. Stamp duty is chargeable on deposits that are N10,000 and above.
Stamp duty does not apply to transfers or deposits made by a person into another account with the same account name within the same bank.
This means a customer cannot be charged for moving money from one of his accounts to another account within the same bank.
Basically, stamp duty should not be deducted irrespective of the amount of money moved by an account holder from one of his accounts held with a bank into another of his account held with the same bank.
The stamp duty is a singular charge, it does not apply per N10,000 deposited. For instance, a customer that receives a one-off payment of N70,000 can only be charged N50. Hence, subsequent deposits of N10,000 and above will be charged N50 as well.