The Land Use Charge Law of Lagos State (LUC 2018) imposes the land use charge on properties in Lagos state. It is a property tax. A property tax is a tax levied on real estate or land. Property taxes in Nigeria include capital gains tax, stamp Duties tax, ground rent, land use charge, tenement rate
- Land use charge is a tax levied by the state government on land owners for the use of the land.
Old Law
- The land Use Charge Law of Lagos State 2001 (LUC 2001) was enacted to harmonise and consolidate the collection of tenement rate, neighbourhood improvement charge and ground rent in Lagos state.
New Law
- The land Use Charge Law 2018 repealed LUC 2001. It also repealed the Neighbourhood improvement Charge law and the Land Rates Law of Lagos State.
- The LUC 2018 vests the responsibility for payment of land use charge on owners of property or occupiers of leases less than 10 years. Occupiers of leases ten years and above are also liable to pay land use charge.
- Occupier is defined to include both lawful and unlawful occupiers, with the exception of lodgers.
Reliefs Provided
- The Law provides a general relief of 40% of the value of the property for all properties. The law provides further specific reliefs for the following categories of persons: 100% for pensioners;
5% for long occupation of property by owners (12 years);
10 percent for aged persons (70 years & above);
10% for properties aged 25 years and above;
10% for persons with disability who are owner-occupiers;
20% for non revenue generating property.
15% for early payments (within 15 days of receipt of demand notice)
Exemptions Provided.
- Property owned by a religious body and used exclusively as a place of worship or religious education.
- Public cemeteries and burial grounds.
- Property used as a registered educational certified by the Commissioner to be non-profit making.
- Property used as public library or private library 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.
- All palaces of recognized Obas and Chiefs in the state.
- Any property specifically exempted by the Commissioner by notice published in the state official gazette.
Responsibility For payment
- The LUC 2018 extends the responsibility for payment of land use charge to occupiers of leases. Land use charge is therefore both an owner and occupier charge in the light of the LUC 2018.
Analysis
- The LUC 2018 consolidates all property taxes in Lagos state. The law however fails to make a clear distinction between owners and occupiers for payment purposes. Section 9(1) provides that the owner of a property or occupier of a lease of less than 10 years is liable to pay the land use charge, while section 9(2) simply provides that the occupier holding a lease of less than 10 years is liable to pay the land use charge, without mention of the owner.
- This can be interpreted to mean that with regards to leases 10 years and above, only the occupier is liable to pay land use charge; while the owner or occupier could be liable in respect of leases less than 10 years old, depending on who is in occupation.
- It could also be interpreted to mean that either the owner or occupier of a property is liable to pay the land use charge both for leases below 10 years and for leases 10 years and above.
- In any case, the intention of the draftsmen is quite vague. What is certain however, is the extension of persons liable to be charged to occupiers of leases for periods below 10 years, 10 years, and above 10 years.
- One contentious area in the LUC 2018 is the usurpation of the constitutional powers of the Local Government to assess, levy, and collect tenement rates as provided in Section 7(5) and Item 5(j) 1999 Constitution.
- In our view, the above powers of the Local Government cannot be legislated away by the Lagos State House of Assembly. The provisions of Sections 3, 5, 6 10 & 14 of the LUC 2018 are therefore contrary to the provisions of the Constitution.
- A civil action has been commenced at the Lagos State High Court seeking to declare these contentious sections of the LUC 2018 null and void. We eagerly await the decision of the Court.
- The Lagos state Government has commenced enumeration, capturing and valuation of all billable properties in the state for the purpose of land use charge. The exercise has commenced and will end on 31st August 2018.
Recent Review of the Land Use Charge Law 2018
- Following criticisms from various quarters on the high rates and stiff penalties of the Land Use Charge 2018, the Lagos State Government announced at the meeting of its Executive Council on Wednesday, March 14, 2018 that sequel to dialogues with stakeholders such as the Organised private sector, Nigerian Bar Association, Real Estate developers and other professional groups, it has resolved as follows
In addition to the previously granted reliefs, the following reliefs are granted:
Commercial property owners will now enjoy a new 50% discount.
Property occupied by owner, and third party, and property used for industrial and manufacturing purposes will now enjoy a further 25% discount.
Owner occupied property will enjoy a 15% discount.
The penalty for late payment has been waived completely.
Introduction of instalmental payment system.
- The Executive Council also resolved to forward the following regulations to the Lagos State House of Assembly for review and passage:
The regulation for review of applicable rates and regime of reliefs on categories of properties pursuant to the Land Use Charge Law.
The Regulation for a framework for self assessment.
- This has to a large extent reduced the harsh effect of the LUC 2018 on property owners and occupiers. Property owners and occupiers will therefore have less difficulty complying with the LUC 2018.
Omonigho Churchill Esq
Ijewere & Co (Chartered Tax Advisers)
Lagos, Nigeria