To improve the industry, housing professionals have implored federal and state governments to review multiple taxation imposed in the real estate sector, especially on first time homeowners.
They spoke at a Webinar titled, “Understanding Nigerian real estate taxes and statutory charges”, organised by Fine and Country, Nigeria-a global real estate services provider in Lagos.
Leading the appeal, the Chief Executive Officer, Fine and Country West Africa, Udo Okonjo said the significance of the tax burdens can’t be over emphasised in the light of the attended ambiguities and controversies that have been associated with the subject matter and the importance of boosting investors’ confidence in crisis time.
Okonjo said, there is need to look at the statutory loopholes that presented formidable challenges in terms of interpretation and address the negative impact of multiple taxes in the sector against the backdrop of looming recession in relation to the new Finance Act and the Federal Inland Revenue Service policy.
Some of the applicable direct taxes on real estate include, capital gain tax, stamp duties, consent and registration fees, land use charge, while the indirect taxes on real estate transactions include, Value Added Tax, (VAT), income tax, withholding tax, taxation on Real Estate Investment Trusts (REITs) and education tax.
She explained that the real estate sector plays a major role in economies, urging stakeholders to be mindful of any unintended consequences of the charges for first time home buyers, Small and Medium Scale Enterprises, who require properties as collaterals to grow their businesses.
According to her, the forum became necessary to uncover impact of multiple taxes and statutory charges on real estate investment, especially in Lagos where the buck of the transaction takes place and an economy that requires stimulation for the housing and real estate sector.
To her, a typical example of existing ambiguities, is the application of Value Added Tax, to the sale of land and buildings, which has over the years created conflicts between transacting parties due to the lack of clarity of the statutory provision. She stated that investor’s confidence was critical to stimulating the economy.
The Head of Tax and Regulatory Services at Price Water Cooper (PWC), Mr. Taiwo Oyedele urged authorities to provide tax payment options, which will ensure the avoidance of conflict with the tax authorities and not subject operators to the slow pace of the judicial system.
Contributing, the Deputy Director of Lands, Lagos State Land Bureau, Mr. Ojikutu Olawale said Land Use Act of 1978 gives control and management of land to the state, stating that the implication of the development is that the agency of government generates revenue from land and real estate tax.
He assures that the state government is working hard to reduce the effect of tax burden on the people and has carried out a fair market value of lands and property, for transparency in the charges.
The Assistant Director, Personal Income Tax, Lagos State Internal Revenue Service, (LIRS), Mr. Igho Orienru, on his part explained that taxes collectable by the agency as it relates to real estate sector include, stamp duty items on sales/purchase of properties, lease/rental properties, real estate construction contracts, process of title documents and power of attorney-revocable/irrevocable and others.
The Director, Tax Policy, Federal Inland Revenue Service, Matthew Gbonjubola said in Africa, taxes have always been part of the people’s life, noting that in modern times, taxes are matters of law.
He said: “In Nigeria, the root of all taxes is in our constitution and the taxing rights are shared between the federal and the states. One major issue with taxation is that no one wants to wilfully pay taxes. In an evolving society, tax has become a must for peaceable life and law and order to reign.”