FEDERAL HIGH COURT NULLIFIES N50 STAMP DUTY ON BANK DEPOSIT

On 13 March 2017, in the case between Retail Supermarkets Nigeria Limited (AKA Shoprite) and the defendants Citibank Nigeria Limited (Citibank) and Central Bank of Nigeria (CBN), a Federal High Court (FHC) delivered a judgment on the validity of the circular issued by Central Bank of Nigeria (CBN) referenced CBN/GEN/DMB/02/006

The issue considered in the case is determining if the CBN circular aligns with the provisions of the Stamp Duties Act (SDA). The FHC held that the provisions of the CBN circular are inconsistent with the provisions of the SDA and as such are null and void.

Background of the Case

CBN issued a circular on 15 January 2016, mandating all banks and other financial institutions to enforce collection of ₦50 stamp duty on all electronic transfers and teller deposits from ₦1,000 and above.

Further, to the release of the circular, Citibank intimated its customers that it will begin to implement CBN’s directives and subsequently began deducting stamp duties from Shoprite’s account, in line with the CBN circular.

Dissatisfied, Shoprite initiated a law suit at the FHC, citing huge cost implications due to implementation of the circular, and therefore sought clarification from the court on whether the stamp duty of ₦50 was consistent with the provisions of the SDA 

Judicial Precedence

In a similar case between Standard Chartered Bank Nigeria Limited and Kasmal International Services Limited & Ors (SCB V KASMAL), the Court of Appeal ruled that:

a. Section 89 of the SDA provides that stamp duty to be charged on receipts. Receipts include any note, memorandum, or writing, bill of exchange or promissory note for monies amounting to N4 and above, acknowledged or expressed to have been received or deposited or paid. The applicable stamp duty rate is 2 kobo. 

However, the Schedule to the SDA specifically exempts receipts given for money deposited in any bank from stamp duties 

b. In this regard, the CoA held that there was no provision or amendment in the SDA conferring powers upon the banks and other financial institution to deduct and collect stamp duty on deposits or transfers 

Rulings of the Federal High Court (FHC)

The Federal High Court, bound by the decision of a higher court (the Court of Appeal), ruled that:

a. The provisions of the CBN circular on stamp duty are invalid, null and void and have been set aside by order 

b. Perpetual injunction order restraining Citibank and its agents from implementing the provisions of the CBN circular. 

However, inspite of the judgment of the two courts (the Federal High Court and the Court of Appeal), most banks are yet to stop the deduction of N50 stamp duty from customer accounts.

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Written by Abayomi Samuel

Source: Deloitte Nigeria