How to Pay Your Property Tax in Lagos

Paying property tax is an essential obligation for property owners in Nigeria. Property tax plays a crucial role in financing local government services and infrastructure development. However, navigating the process of property tax payment can be daunting for many individuals.

The property tax rate in Nigeria annually is 0.3% for recreational property, 0.4% for residential property, 0.6% for commercial property and 0.7% for others. 

Key Takeaways

• Property tax is a mandatory levy imposed by local governments on property owners in Lagos based on the assessed value of their properties. 
• Property tax assessments are conducted by local tax authorities to determine the taxable value of properties. 
• Property owners in Lagos have various payment options for settling their property tax obligations. These may include online payments, bank transfers, payment at designated tax offices, or through designated collection agents. 
• Property tax payments in Nigeria and Lagos are typically due annually or semi-annually, depending on the local tax cycle.

Understanding Property Tax

Property tax is a levy imposed on the value of real estate properties owned by individuals or entities. In Nigeria, property tax serves as a significant revenue source for local governments and plays a vital role in funding essential services such as road maintenance, waste management, and public infrastructure projects.

Property tax applies to various types of properties, including residential, commercial, industrial, and agricultural properties. The legal framework governing property taxation in Nigeria varies across states and local government areas, with each jurisdiction establishing its regulations and assessment processes.

Understanding the fundamentals of property tax is the first step toward fulfilling your tax obligations as a property owner in Nigeria. In the following sections, we’ll delve deeper into the intricacies of property tax assessment, registration, calculation, and payment methods.

Types of Property Tax in Lagos, Nigeria 

In Nigeria, property taxes come in various forms, each serving different purposes and levied by different levels of government. Here are the types of property taxes commonly encountered:

Land Use Charge

This is a property tax imposed by state governments on real estate properties within their jurisdiction. The land use charge is levied annually and is based on the market value of the land and improvements (buildings) on the land. It is a significant revenue source for state governments and is used to fund infrastructure and public services.

• Obtain your Land Use Charge assessment notice from the Lagos State Government.
• Visit the designated Lagos State Government website or portal for online payment or proceed to a designated bank branch for offline payment.
• Input the necessary details such as your property identification number and assessment number.
• Follow the prompts to complete the payment process, which may involve selecting your preferred payment method and entering your payment details.
• Upon successful payment, ensure you retain a copy of the payment receipt for your records.

Tenement Rate

The tenement rate is a property tax levied by local government authorities on residential and commercial properties within their jurisdiction. It is typically assessed based on the rental value of the property and is payable by property owners or tenants, depending on the terms of the lease agreement.

• Receive your tenement rate assessment notice from the local government authority in your area.
• Visit the local government office or designated website for online payment options.
• Provide the necessary details such as your property information and assessment number.
• Proceed with the payment process, following the instructions provided by the local government authority.
• After completing the payment, retain the payment receipt issued by the local government authority.

Capital Gains Tax (CGT) 

Capital gains tax is imposed by the federal government on the gains derived from the sale or disposal of capital assets, including real estate properties. When a property is sold at a profit, the capital gains tax is calculated based on the difference between the sale price and the acquisition cost (purchase price) of the property.

• Calculate the capital gains tax payable based on the profit realized from the sale of your property.
• Submit the necessary documents, including the sales agreement and proof of property acquisition, to the Federal Inland Revenue Service (FIRS).
• Pay the calculated capital gains tax amount to the designated FIRS bank account.
• Ensure you obtain a stamped and certified copy of the payment receipt from the FIRS as proof of payment.

Stamp Duty 

Stamp duty is a tax levied on certain documents, including property transactions such as sales agreements, conveyances, and leases. Property transactions attract stamp duty charges, which are payable to the relevant government authority. The rates and applicability of stamp duty may vary depending on the nature and value of the transaction.

• Determine the applicable stamp duty rate based on the nature and value of the property transaction.
• Visit the nearest designated stamp duty office or FIRS branch to obtain the necessary stamp duty forms.
• Complete the stamp duty forms accurately, providing details of the property transaction.
• Submit the completed forms along with the required payment to the stamp duty office or FIRS branch.
• Receive a stamped copy of the relevant documents as confirmation of payment.

Development Levy

Some state governments impose development levies on property owners within designated development areas or growth corridors. The proceeds from development levies are used to finance infrastructure projects and urban development initiatives aimed at improving the quality of life for residents.

• Check if your property is located within a designated development area or growth corridor.
• Obtain the development levy assessment notice from the relevant state government authority.
• Visit the state government website or office for payment options and instructions.
• Follow the provided guidelines to make the required payment, ensuring you provide accurate property information.
• Retain the payment receipt issued by the state government authority as proof of payment.

Assessing Your Property Tax Liability

Assessing your property tax liability is a crucial step in the property tax payment process. It involves determining the taxable value of your property, which serves as the basis for calculating your tax obligation. 

Property tax assessments are typically conducted by local government authorities or designated agencies tasked with valuing properties within their jurisdiction.

To assess your property tax liability accurately, factors such as the size, location, condition, and use of your property are taken into consideration. These factors help determine the property’s market value, which forms the basis for determining the tax amount.

It’s essential to ensure that your property is accurately assessed to avoid underpayment or overpayment of taxes. Property owners should cooperate with assessors and provide accurate information about their properties to facilitate fair and equitable assessments.

How to Calculate the Land Use Charge in Lagos State

Based on Section 10 of the Land Use Charge Law, the LUC shall be calculated using the prescribed formula below:

(Land Value + Building Development Value) × Relief

Rate × Charge Rate.

Under Sections 5 & 6 of the LUCL, the Commissioner is required to assess or appoint property identification officers, professional valuers, and other necessary persons for the assessment of such chargeable properties. 

Based on the recent LUCL Amendment Bill which is currently before the Lagos State House of Assembly for deliberation and subsequent enactment, the LUCL may be amended to replace the word “Market Value” with “Value” wherever it appears in the LUCL. 

The LUCL also provides that pending such periodic reviews, the land value and building development value rates may be increased by the Commissioner in line with the rate of inflation.

Persons liable to pay LUC

Based on Section 9 of the LUCL, the owner or the occupier of a property is directly liable to pay LUC in the case of a lease for less than 10 years. Section 9(2) of the LUCL further provides that where a lease is for a period above 10 years, the occupier holding the lease is liable to pay LUC. It is noteworthy that the LUCL defines an occupier to include lawful and unlawful occupants of taxable property. The liability of the occupier to the LUC is a clear deviation from the provisions under the LUCL that were enacted in 2001 which provided that the only persons liable to pay LUC are the owners of properties.

Given that there are no standard rental charges for specific locations in Lagos State and since the landlord of a rented accommodation usually has an edge in rent bargaining, there is a risk that the landlord of any premises, whether residential, commercial, or industrial can readily transfer the burden of the LUC to the tenants. Thus, the transfer of LUC liability for premises leased for a period exceeding 10 years, from the lessor to the lessee appears to be a redundant provision.

Penalties

Section 31 of the LUCL provides that the charge payable, in the event of default in payment within the period in the demand notice, shall be increased by the percentages below:

a) Between 45 & 75 days – 25%

b) Between 75 & 105 days – 50%

c) Between 105 & 135 days – 100%

Furthermore, the law provides that the assessed property shall be liable to enforcement under the LUCL if payment is not made after 135 days. In this regard, civil action can be instituted against the owner, occupier, or authorized agent to recover the accrued LUC or to obtain an order of the court for the distraint of the property or other consequential orders.

Exempted properties

The LUCL expressly exempts the following properties from payment of LUC:

• Properties owned by religious bodies exclusively used as places of worship or religious education and registered in the corporate name of the religious body;

• Properties used as public cemeteries;

• Educational institutions certified by the Commissioner to be non-profit-making;

• Public or private libraries certified by the Commissioner to be non-profit making;

• Any Property specifically exempted by the Executive Governor by notice published in the State Official Gazette; and

• All palaces of recognized Obas and Chiefs in the State.

An exempted property shall forfeit its exemption status when it is leased out to private entities for revenue generation. Owner-occupied pensioner’s property as well as Lagos State Government properties are also exempted from the LUC.

Calculating and Estimating Property Tax

Calculating and estimating property tax liabilities involves understanding the methods used to determine tax amounts and the factors that influence tax rates. In Nigeria, property tax calculations may vary depending on the local government’s regulations and assessment practices.

Property tax liabilities are typically determined based on the assessed value of the property and the applicable tax rates. The assessed value is determined through property valuation exercises conducted by assessors, taking into account factors such as property size, location, usage, and market trends.

Tax rates may vary depending on the property’s classification (residential, commercial, industrial) and the local government’s tax policies. Property owners should familiarize themselves with the applicable tax rates and assessment methods to ensure accurate tax calculations.

Estimating property tax payments involves multiplying the assessed value of the property by the applicable tax rate. Property owners can use this information to budget and plan for their tax obligations effectively.

Payment Options and Procedures

Property owners in Nigeria have various payment options and procedures available to fulfill their property tax obligations. These may include online payment platforms, designated bank branches, tax offices, or mobile payment services.

Online payment platforms allow property owners to conveniently pay their taxes from the comfort of their homes or offices. Many local government authorities provide online portals where property owners can access their tax bills, make payments, and receive electronic receipts.

Offline payment options include visiting designated bank branches or tax offices to make payments in person. Property owners can also make payments via mobile payment services offered by telecommunications companies or financial institutions.

Before making payments, property owners should ensure they have accurate tax bills or assessment notices issued by the relevant tax authorities. It’s essential to retain proof of payment, such as receipts or transaction records, for future reference and documentation.

Paying Property Tax in Lagos State, Nigeria

Here’s a breakdown of procedures for property tax payment in Lagos:

• Lagos State Internal Revenue Service (LIRS) eTax Portal: This is the preferred method for convenient online payments. Visit the Lagos State government website or search for “LIRS eTax Portal.”
• Registration: If you’re a new user, register on the eTax portal using your Personal Identification Number (PIN). Existing users can log in with their PIN.
• Generate Bill Reference: Once logged in, navigate to the “Property Tax” section and generate a bill reference number for the specific property you’re paying for. Important: Traditional methods of obtaining bill references are no longer valid.
• Payment Options: The portal allows payments using various methods, including:

• Debit/Credit Cards (local and international)
• Internet Banking
• Digital Wallets (e.g., Paga)
• Confirmation: Upon successful payment, the portal will generate a Lagos State Receipt and a Remita Receipt for your records. You’ll also receive copies via email (if provided).

The Lagos State Internal Revenue Service website (https://lirs.gov.ng/) is your primary source for the latest information on property tax procedures and updates. Procedures and authorized payment channels may change.  It’s always recommended to consult the official LIRS website for the most up-to-date information specific to Lagos State.

Conclusion

As we conclude this guide on paying property taxes in Nigeria, empowerment through understanding is our focus. Armed with insights into the process, legal nuances, and essential steps, you’re poised to fulfill your tax obligations seamlessly. 

Remember, contributing to community development is a shared responsibility, and a proactive approach to property tax payment ensures you play a pivotal role in building a stronger, more vibrant society. 

Embrace this knowledge, navigate the intricacies with confidence, and contribute to the growth of your community through responsible property tax compliance.

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