Lagos State Government
According to Investopedia, Property tax is a tax paid on property owned by an individual or other legal entity, such as a corporation. Most commonly, property tax is a real estate ad-valorem tax, which can be considered a regressive tax. It is calculated by a local government where the property is located and paid by the owner of the property. The tax is usually based on the value of the owned property, including land. However, many jurisdictions also tax tangible personal property, such as cars and boats.
Recently, the Lagos State Government has released the new provisions in the 2020 Land Use Charge (LUC) Law, which entails the reduction in penalties for defaults, the people exempted from the charge and forfeiture of N5.8 billion penalties among others. Property taxation as a source of government revenue in Nigeria and other countries is not novel. In Nigeria, property taxes include Neighborhood Improvement Charges, Tenement Rates and Ground Rent. In Lagos State, these taxes have been consolidated into the Land Use Charge (LUC).
Earlier on Wednesday, there has been a report that the state government revoked the 2018 land use charge. Mr. Olowo stated that the government reverted to pre-2018 land use charges.
He also explained that in 2018, there was an upswing in the Land Use Charge rate as well as the method of valuation of properties, this shock had a sporadic increase in Land Use Charge payable by property owners. Therefore, he stated that penalties for land use charges for 2017, 2018, and 2019 have also been waived, which translates to a loss of revenue amounting to N5.6billion as a result, the current administration decided to review the Land Use Charge law by reversing the rate of Land Use Charge to pre-2018 while upholding the 2018 method of valuation.”
In this article, we are going to be looking at this new law and its components.
All property owned and occupied by pensioners are exempted from paying the LUC. The definition of Pensioner, according to the state, has been expanded to include all retirees from private and public institutions in the state or any person that has attained the age of sixty (60) years and has ceased to be actively engaged in any activity or business for remuneration.
Non-exempted
• Profit oriented Cemeteries and Burial Grounds are no longer exempted from payment of Land Use Charge.
• Private Libraries are also no longer exempted from paying Land Use Charge
Reductions of penalties and rates
• Days Outstanding Before Now
45-75 days from 25% to 10%
75-105 days from 50% to 20%
105-135 days from 100% to 50%
• A 48% reduction in the Annual Charge Rates:
Definition Areas Before Now
Owner-Occupied Residential Property 0.076% to 0.0394%
Industrial Premises of Manufacturing Concerns 0.256% to 0.132%
Residential Property/Private School (Owner & 3rd Party) 0.256% to 0.132%
Residential Property (Without Owner in residence) 0.76% to 0.394%
Commercial property (Used by the occupier for Business Purposes) 0.76% to 0.394%
Vacant Properties and open empty Land 0.076% to 0.0394%
• Annual charge rate for Agricultural land was reduced from 0.076% to 0.01%. This is an 87% reduction from the old rate.
• Penalties for Land Use Charge for Year 2017,2018 and 2019 have also been waived. This translates to N5,752,168,411.03 potential revenue waived by the State.
• In addition to the reintroduction of the 15% early payment discount, an additional COVID 19 incentive of 10% will be granted on the total amount payable. This makes the total discount for early payment 25% if payment is made before the due date
• The penalty for obstruction of officials and damage to property identification plague has been reduced from N250,000 to N100,000
• The penalty for inciting a person to refuse to pay LUC has been reduced from N250,000 to N100,000
• The 2020 LUC Law introduced a 10% and 20% special relief for Vacant properties and Open empty land, respectively.
• The right of enforcement has been reduced from notification of three (3) default notices to (2) default notices.
Agents of LUC
• Section 14 of the Law which makes it possible for the Commissioner to appoint any person including an occupier of a chargeable property to be an agent of the owner for the purpose of collecting Land Use Charge.
CONCLUSION
Before investing in any property, it is mandatory to have prior knowledge of property tax and what it entails. It is advisable to consult management professionals with cognate industry experience to guide you through.
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