15
STATUTORY LAWS GOVERNING LAND/PROPERTY TRANSACTIONS IN NIGERIA: PART 2
In my last post, I talked about the first part of
the various statutory laws governing land/property transactions in Nigeria
(http://realestatesurveyor.blogspot.com/2014/02/15-statutory-laws-governing.html)
So today, I will be
writing on the concluding part of those statutory laws governing land and
landed property transactions in Nigeria.
The purpose of writing
on these statutory laws is basically to enlighten and expose all those people
carrying or aspiring to carry out land and property transactions (mortgage,
lease, assignment/conveyance, alienation, transfer and ownership) in Nigeria
about the various government laws regulating and guiding any of those
transactions.
The second part of the
statutory laws governing land and property transactions in Nigeria are:
8
Stamp Duty Act
9
Withholding Tax Act
10
Capital Gains Tax Act
11
Value Added Tax Act
12
Personal Income Tax Act
13
Federal Mortgage Bank Act
14
Mortgage Institutions Act
15
National Housing Fund Act
8. STAMP DUTY ACT CAP. S8 LFN 2004
This is a statutory
levy that is imposed on certain matters in Nigeria inclusive of land and landed
property transactions such as mortgage bonds, settlement of estates, lease
agreements and conveyance of property.
The law stipulated
various stamp duty charges payable on any land and property transactions in
Nigeria.
Any transaction
relating to the exchange, conveyance, lease, mortgage of land and landed property
document/agreement that is not duly stamped with the appropriate postage stamp
will be regarded as been useless and illegal because stamping of land/property
transaction document is a compulsory requirement for registering of title
documents/instruments as well as getting governor’s consent in any land and
property transaction.
The relevant sections
in the Act guiding land and property transactions in Nigeria are: 52,53,54,55,56,57.58,59,62,63,64,65,
68,69,70, 80,81 and 82
9. WITHHOLDING TAX ACT
Withholding tax is the deduction of
a payable levy due to a benefitting party by the paying party for onward
remittance to the appropriate tax authority of the benefitting party.
Withholding tax is
a form of tax required by statutory law to be withhold by a party from each
payment made to another contracting party from the income or services rendered
to such party.
Withholding tax been
witheld is required to be remitted to Federal Inland Revenue Service (FIRS) at
the appropriate period as stipulated in the law establishing the act. if such
withholding tax is received from corporate companies, while the one for
individuals is remitted to the State Inland Revenue Service (SIRS) board in
each state of the federation on behalf of the state government.
The Inland Revenue
Service is in turn mandated by the withholding tax law to issue a Withholding
Tax Credit Note for the benefit of the latter party, part of whose income was
withheld.
The various
aspects of land and property transactions in Nigeria where withholding tax is
applicable are:
·
All aspect of building, construction and related
services
·
All types of contract and agency arrangement,
other than outright sale and purchase of goods and property in the ordinary
course of business
·
Consultancy, Technical and Professional services
·
Management services
·
Commissions
10. CAPITAL GAINS TAX ACT CAP 354 LFN 1990
This is a
form of tax payable on gains made on the disposal of chargeable asset by any
person in Nigeria either an individual or a corporate entity.
The
motive behind the enactment of the act was to levy a certain amount of money
inform of tax on gains accruing to chargeable persons in Nigeria from the
disposal of their chargeable assets.
Chargeable
persons include:
·
Individuals (both residents and non-residents)
·
Trustees in respect of chargeable asset by the trust disposed
·
Partners in respect of chargeable assets of the partnership disposed
·
Personal representatives in respect of chargeable assets of a
deceased person disposed to 3rd parties other than the beneficiaries
·
Companies on chargeable assets of the company disposed.
Section 3 of the Act defined chargeable assets as-
(a)
Options, debts
and incorporeal property generally;
(b)
Any currency
other than Nigerian currency; and
(c)
Any form of
property created by the person disposing of it, or otherwise coming to be owned
without been acquired.
Gains
arising from the disposal of assets are taxed at the rate of 10%. Taxable
assets include land and building situated in Nigeria, as well as plant and
machinery.
11. VALUE ADDED TAX (AMENDMENT) ACT of 2007
Value added
tax is a tax imposed, charged and payable on the supply of certain goods and services
in Nigeria.
The rate of
tax chargeable on all goods and services is 5% except those exempted in the
First Schedule of the Act.
The act
went further in defining taxable persons to
“include an individual or body of
individuals, family, corporations sole, trustee or executor or, a person who
carries out in a place an economic activity, a person exploiting tangible or
intangible property for the purpose of obtaining income there from by way of
trade or business or a person or agency of government acting in that capacity”
The act makes it
mandatory for professional Estate Surveyors and Valuers to include a 5% levy as
Value Added Tax on the gross professional fee or commission charged their
clients on any professional services relating to land and property transactions
rendered to such clients.
The 5% VAT been levied
on clients is for the professional services rendered to them by the
professional Estate Surveyor and Valuer.
12. PERSONAL INCOME TAX ACT
This is another
important statutory law imposed on any income gained from the ownership, leased,
assignment and transfer of land and landed properties by the owner or trustees of
such land and landed property.
Section 1 of the
act states that “There is hereby imposed a tax on the income-
(a) of
individuals, communities and families; and
(b) arising
or due to a trustee or estate,
which shall
be determined under and be subject to the provisions of this Act”
Various sections in the
act that governs any land and property transactions in Nigeria are: 1,2,3,4,5,16,
27, 40, 41, 54, 55, 56, 68, 69, 74, 76, 77, 79, 80, 85, 94, 95 and 96
13. FEDERAL MORTGAGE BANK ACT
The establish of the Federal Mortgage Bank of
Nigeria is to provide long-term credit facilities to mortgage institutions in
Nigeria and encourage and promote the development of mortgage institutions at
the rural, local, State and Federal levels.
Section 5 explained the functions
of the Mortgage Bank shall be “To
(a) provide long-term credit facilities to
mortgage institutions in Nigeria at such rates and such terms as may be
determined by the Board in accordance with the policy directed by the Federal
Government, being rates and terms designed to enable the mortgage institutions
to grant comparable facilities to Nigerian individuals desiring to acquire
houses of their own;
(b) license and encourage the emergence and growth of the required
number of viable secondary mortgage institutions to service the need of housing
delivery in all parts of Nigeria”
The federal mortgage
bank of Nigeria operates as a secondary mortgage institution to serve the needs
of the housing delivery in all parts of Nigeria, as well as provide credit
facilities to primary mortgage institutions, real estate development companies
or bodies, housing corporations and housing operatives in Nigeria at such rates
and on such terms and conditions as may be determined, from time to time, by
the Board of the Mortgage Bank in accordance with the Regulations or Guidelines
of the Central Bank of Nigeria.
Section 6 explains the powers of the Mortgage Bank to carry out researches that
will improve the housing patterns in both rural and urban centres as well as on
the activities of primary mortgage institutions’ activities and the
construction industry in Nigeria.
Section
6 (1) of the Mortgage Bank Act states that “Without prejudice to the generality of
section 5 of this Act, the Mortgage Bank shall have power to-
(d)
carry out research aimed at improving housing patterns and standards in both
urban and rural areas of Nigeria;
(e) carry out research on
mortgage finance activities and the building construction industry in Nigeria”
14. MORTGAGE INSTITUTIONS ACT
The Act made provisions
for the establishment and licensing of mortgage institutions in Nigeria to
grant loans and advance to individuals for the purchase or construction of a
dwelling house; carry out improvement or extension of an existing dwelling house;
and to accept savings and deposits from members of the public and to pay
interest thereon.
Relevant sections of
the Mortgage Institutions Act that pertains to land/property ownership or
transaction in Nigeria are; Sections 1, 5, 6 and 7
SECTION 1 (1) of the
Act states that “No mortgage business shall be transacted in Nigeria except by a
company which is duly incorporated in Nigeria for that purpose and in
possession of a valid license granted by the Minister authorizing it to do so”
The same Act also identified
the basic requirements needed for any company desirous of carrying out mortgage
business in Nigeria.
Section 5 of the Act
make provisions for the power granted mortgage institutions in Nigeria to grant
loan advancement to people for the purpose of purchasing/constructing a
dwelling house or carry out improvement/extension on an existing dwelling
house, as well as determine the interest rate applicable/payable on such loan,
deposit and/or advancement.
Section 5 (1) states
that “Every
mortgage institution shall have power to-
(a)
grant loan and advance to an
individual for the purchase or construction of a dwelling house
(b)
grant loan and advance to any
person for the improvement or extension of a dwelling house”
Section 5 (2) states
that
“The interest rate applicable to any deposit, loan and advance shall be in
accordance with the interest rate determined by the Federal Mortgage Bank”
The Act also empowers
mortgage institutions to conduct evaluation exercise on every mortgage loan
proposal brought before it by any person or individual and to also
supervise/monitor any construction or extension of a dwelling house in respect
for which the loan is granted or to be granted.
Section 6 states that “Every
mortgage institution shall-
(a)
conduct proper evaluation of the
mortgage loan proposal submitted to it; and
(b)
monitor the construction or
extension of any dwelling house in respect of which a loan is granted”
Section 7 of the
Mortgage Institutions Act laid emphasis on the requirements as to security for
any loan advancement to be granted, and certain restrictions on operations of
the mortgage institutions.
The activities and
operations of mortgage institutions in Nigeria is monitored and controlled by
the Federal Mortgage Bank Act of Nigeria.
15. NATIONAL HOUSING FUND ACT
This is another
important statutory law governing and guiding land and landed property
transactions in Nigeria in the form of either home ownership or development by
anybody who aspires to own a dwelling house of their own.
Section
1 of the National Housing Fund act states that-
(1)
There is hereby established a fund to be known as the National Housing Fund (in
this Act referred to as "the Fund").
(2) All contributions and other monies required or prescribed by
this Act shall be paid into the Fund
Section
2 explained the aims and objectives of the Fund shall be to-
(a) facilitate
the mobilisation of the Fund for the provision of houses for Nigerians at
affordable prices;
(b) ensure
the constant supply of loans to Nigerians for the purpose of building,
purchasing and improvement of residential houses;
(c) provide
incentives for the capital market to invest in property development;
(d) encourage
the development of specific programmes that would ensure effective financing of
housing development, in particular low cost housing for low income workers;
(e) provide
proper policy control over the allocation of resources and funds between the
housing sector and other sectors of the Nigerian economy; and
(j) provide long-term loans to mortgage institutions for
on-lending to contributions to the Fund.
To qualify for this
fund, any aspiring home owner must have been a contributor to the National
Housing Fund Scheme from his/her paid employment. Such contribution must have
been for a period not less than 6 months with satisfactory evidence of steady
flow of income from their employment in order to guarantee loan repayment.
The
National Housing Fund Act also stipulate the conditions for contributing into
the fund by Nigerian workers as well as the interest rate payable on such
contribution made
Section
4 states that-
(1)
A Nigerian worker earning an income of N3,OOO
and above per annum in both the
public and the private sectors of the economy shall contribute 2.5 per cent of
his basic monthly salary to the Fund.
(2) An interest rate of 4 per cent shall be payable on
contributions made under subsection (1) of this section.
The act also refers to a contributor to be a worker
from whose basic salary or income deductions are made and paid into the Fund in
accordance with the provisions of the Act. While a "worker" means an
employee to whom salaries are paid and include a self-employed person who
derives income from his/her employment.
A contributor to the National Housing Fund scheme is
entitled to a maximum loan advancement of fifteen million naira (N15,000,000) or as may be determined by
the primary mortgage institution in the country. An individual borrower can not
be granted loan advancement in excess of 90% of the total cost or value of the
property to be mortgaged.
The interest rate for
each loan advancement as stipulated in the Act is not more than 6% per annum with
a repayment period of not more than 25-30 years.
Relevant sections in
the act governing land and property transaction/ownership in Nigeria are: 1, 2,
3, 4, 9, 10, 14, 16, 17, 20, 21 and 22
All these fifteen (15)
statutory laws that I have written about are very important to be taken
cognizance of by all those aspiring to embark on any form of land and/or landed
property transactions either in the form of mortgage, lease,
assignment/conveyance, alienation, transfer and ownership as they will help
guide through a smooth completion of any of those land and property
transactions
Kindly share this post
with your loved ones, friends and families, colleagues and associates.
ABOUT
THE AUTHOR
Adeniyi Akinjiyan is a
Higher National Diploma (HND) holder of Estate Management from the prestigious
Yaba College of Technology, Yaba, Lagos state, Nigeria. He possesses a
Professional Practice Certificate in Estate Surveying and Valuation from the
Nigerian Institution of Estate Surveyors and Valuers (NIESV).
He is the principal
consultant of Aakient Consultants Ltd, a highly progressive and consolidated
property and construction project management company, which is committed to
providing the highest level of professional services in meeting clients’ real
estate needs.
