In recent times, the Electronic Money Transfer Levy (EMTL) has become an integral part of Nigeria's tax and financial landscape. This levy is, among others, primarily designed to generate revenue for the government. The Finance Act, 2019 amended various subsets of the existing tax and fiscal legislation at the time, including the Stamp Duty Act (SDA). Through the Finance Act 2019, the scope of receipts and instruments that must be stamped was widened to include the dutiable instruments, and receipts can be written, printed, or electronic.
This article examines the operations of the Electronic Money Transfer Levy (EMTL) since its commencement in 2020, its contributions to Nigeria's financial environment, and the overall impact on the Nigerian economy.
Electronic Money Transfer Levy (EMTL)
The deduction of EMTL in Nigeria refers to the imposition of a fee on financial transfers made electronically within the country. While some opined that the Nigerian government implemented this levy to primarily raise income, others are of the view that it is designed to regulate the usage of electronic payment systems. In fact, its operations enhance the monitoring of electronic payment systems, while generating additional revenue for the economy.
Typically, EMTL is levied on transactions conducted via platforms such as mobile money, internet banking, and other electronic payment methods. The Finance Act, 2020 further specified the particular rates and circumstances of the Levy, which ensured transparency and consistency in its application. It applies to all electronic transfers of funds placed in a Nigerian-licensed bank or financial institution. The Levy is imposed as a singular and one-off charge of ₦50 on electronic transfers or electronic receipts of money in the sum of ₦10,000 or more. Transfers under ₦10,000 and between accounts within the same financial institution are outside of the scope of EMTL. The process of collecting and remitting the Levy involves financial institutions collecting the Levy on each qualifying electronic transfer and remission is expected to be made to FIRS within the timeframe stipulated.
The Finance Act, 2023 stipulates that revenue accruing by the operation of EMTL shall be distributed to the three (3) tiers of government on the basis of derivation with the Federal Government receiving 15%, State Governments receiving 50% and the Local Governments receiving 35% of the EMTL realized. It is expected that the proceeds realized from this Levy are channeled towards supporting programs for economic development and growth at all strata of the government.
Recent Amendments and Potential Impacts of EMTL
Originally, the Finance Act, 2019 introduced the amendment to Section 89 of the SDA, which gave rise to the operation of EMTL. It began as a singular and one-off duty of N50 on electronic transactions of ₦10,000 and above. However, EMTL does not apply to money paid into one's own account or money transferred electronically between accounts of the same owner within the same bank. Subsequently, Finance Act, 2020 introduced a new Section 89A of the SDA, which properly renamed the duty as Electronic Money Transfer Levy (EMTL) and empowered the Minister of Finance to make regulations regarding the imposition, administration, collection and remittance of the Levy. This amendment also introduced a sharing formula limited to only two (2) tiers of the government – 15% to the Federal Government and 85% to the State Government.
This newly introduced section was also amended through Section 27 of the Finance Act, 2021 by expanding the scope of the Minister's oversight to include auditing, accounting, allocation and distribution of arrears duties and EMTL collected between 2015 and 2019 fiscal years within a stipulated timeline. It also mandated that the distribution of subsequently collected EMTL must be completed within thirty (30) days following the month of collection.
Finally, Section 21 of Finance Act, 2023 introduced the most recent amendment to Section 89A of the SDA by reallocating the sharing formula to now include 35% to the Local Government, while the allocation of the State Government has now reduced to 50%.
With all the enumerated amendments in recent times, it is rather apparent that the government has been very intentional about the operation of EMTL in Nigeria. Although, the details relating to the actual contributions of EMTL are yet to be made public, the quantum of qualifying transactions across all banks and financial institutions is significant, considering the low threshold for EMTL. Without a doubt, EMTL has become an important source of government revenue. Banks and other financial institutions are now being audited by the relevant tax authorities in order to verify the amount remitted as EMTL periodically, vis-à-vis the amount due from each reporting entity. The operation of EMTL has also unduly increased the transaction costs as the cumulative impact of such charges can be quite significant when accumulated over a period of time. This will likely impact the overall consumer purchasing power of the citizens, since such charges can discourage electronic transactions or purchase of goods and services that cross the EMTL applicability threshold.
Notwithstanding the benefits and drawbacks, the government must closely oversee the directive's implementation and handle any unforeseen repercussions. It is imperative that the government collaborates with financial sector stakeholders to guarantee that the levy is applied transparently, effectively, and without impeding economic growth.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.