FG Ends 1% Stamp Duty Deductions On Contractor Payments
FG Abolishes Long-Standing Stamp Duty Deductions by MDAs
THE Federal Government has directed all Ministries, Departments and Agencies (MDAs) to immediately stop deducting one per cent stamp duty from payments made to contractors, suppliers, vendors and service providers, in line with provisions contained in the Nigeria Tax Act 2025.
The directive was conveyed through a Federal Treasury Circular dated June 15, 2026, and signed by the Accountant-General of the Federation, Mr. Shamseldeen Ogunjimi.
According to the circular, the practice of deducting one per cent stamp duty directly from government payments is no longer consistent with the current legal framework governing tax administration in Nigeria.
New Tax Law Redefines Stamp Duty Application
The government explained that under the Nigeria Tax Act 2025, stamp duty is imposed on specific chargeable instruments and documents rather than on routine payment transactions.
This clarification effectively ends a policy that had been in operation for several years, during which MDAs deducted stamp duty from payments to contractors and service providers as part of government revenue collection efforts.
Authorities said the new directive was necessary to prevent the misapplication of statutory deductions and ensure full compliance with the revised tax regime.
Under the new framework, MDAs are expected to charge, deduct and remit stamp duties only where such obligations are expressly provided for by law.
Contracts to Be Treated Differently Under New Rules
The circular also clarified transitional arrangements for contracts affected by the reform.
Contracts awarded before 1st January 2026, when the Nigeria Tax Act came into effect, will continue to be governed by the previous framework. However, contracts awarded from that date onward must comply with the provisions of the new legislation.
The government further noted that stamp duties already deducted before the commencement of the Act remain valid and protected under the law’s savings provisions.
Reform Aims to Improve Tax Administration
Attached to the circular was the Ninth Schedule of the Nigeria Tax Act 2025, which lists instruments that remain subject to stamp duty. These include agreements for the sale of real property, bonds, assignments, annuities, bills of exchange, loan capital instruments and certain securities transactions.
Applicable rates range from 0.04 per cent to 1.5 per cent, depending on the nature of the instrument involved.
The development marks another significant reform in Nigeria’s tax administration system and is expected to provide greater clarity for contractors, businesses and public institutions while ensuring that stamp duty collections align strictly with statutory provisions.
