Land Use Charge in Nigeria

Land Use Charge in Nigeria

land use charge in nigeria

Many Nigerians regard the Land Use Charge (LUC) as an annoying annual payment deemed necessary by lawmakers. Although LUC is not a new concept and has been in the system for over two decades now, statistics show only 0.45% of the required property owners, landlords, tenants, and businesses across the state pay their levy.  

It makes you wonder if Nigerians do not care about the decree or are unaware of the concept. This article seeks to fix both problems. Here, we will discuss the importance of LUC in Nigeria, how to make payments, and the possible penalties if you do not. Let’s begin.  

What is a Land Use Charge?

Land Use Charge (LUC) in Nigeria is a regular fee that state governments charge on all properties. Your fee depends on your property’s value and how it’s used. 

The revenue from LUC goes to the state government, and they use it to improve things in the state, like fixing roads, schools, and hospitals and providing clean water, among other things. 

The Land Use Charge is based on a law from 1978 called the Land Use Act. This law gave state governors control over all the land in their state, and people and businesses could only use it with permission.

Each state government decides how to enforce this law, including how to calculate the charge and what rates to use. So, the Land Use Charge can differ in each state, with varying rates and rules. 

Who pays land use charges in Nigeria? 

Property owners in Nigeria are mainly responsible for paying Land Use Charge. Here’s what this means: 

If you are the owner of a property, you must pay Land Use Charge for that property. 

The term “owner” includes not only those who own property but also occupants who lease for at least ten (10) years or anyone receiving income from the property, whether on their behalf or as an agent for someone else. 

For landlords

  – Notify tenants about Land Use Charge and clarify payment responsibilities in lease agreements. 

  – Specify in lease agreements whether the landlord or tenant is responsible for paying the Land Use Charge. 

For tenants

  – Be aware if the Land Use Charge is part of your rental agreement. 

  – If it is, ensure timely payment to avoid legal issues or conflicts with your landlord. 

  – Maintain open communication with your landlord regarding Land Use Charge matters. 

Furthermore, if your business owns property in Nigeria, you have similar responsibilities regarding Land Use Charges. Like individual property owners, you must also pay this charge for their properties. 

Who doesn’t pay the Land use charge?  

It is important to note that the LUC does not apply to the following:  

  • Government-owned properties  
  • Properties used for public  
  • Properties used for religious purposes  
  • Properties used for charities.  
  • Historical and cultural sites  

Why is the land use charge important? 

As mentioned before, the money from LUC is used to improve a state’s social and industrial infrastructure, which is important for the whole state. Here are some other benefits of Land Use Charge for the state and its citizens. 

1. Equitable Tax Distribution: Unlike some taxes based on income or profits, Land Use Charge depends on property value and use. This means property owners contribute based on what their property is worth and how they use it. 

2. Urban Planning: It motivates property owners to use their land efficiently and follow zoning rules, promoting sustainable city growth. 

3. Transparent Revenue Collection: State governments must clearly explain how they calculate Land Use charges and use the funds for public benefit. As a property owner, you have the right to know how your money is used. 

4. Supporting Local Governments: Sometimes, a portion of Land Use Charge funds goes to local governments. This helps these local authorities provide vital services to their communities. 

5. Infrastructure Development: By paying your LUC, you directly contribute to better public infrastructure like roads, schools, and healthcare facilities. 

6. Legal and Financial Security: Remaining compliant with LUC laws, brings peace of mind and reduces the risk of legal problems, penalties, or losing your property. 

How is the land use charge calculated? 

LUC (Land Use Charge) is calculated like this: 

LUC = [(LA x LR) + (BA x BR x DR)] x RR x CR

Where; 

LUC: amount you pay annually in Naira for the Land Use Charge. 

LA: The size of your land in square meters. 

LR: The average value of land in your area per square meter, as determined by professional valuers. 

BA: The total size of the building on your land in square meters. 

BR: The average value of buildings in your area per square meter, as determined by professional valuers. 

DR: the rate that considers the condition and completion of your building compared to others in the neighborhood. 

RR: It’s a relief rate decided by the Commissioner and published in official documents. 

CR: The annual charge rate as a percentage of your property’s assessed market value. It can vary depending on factors like property type and ownership.

Properties are evaluated separately when it comes to Land Use Charge. Even if two properties look alike, their physical condition, appearance, age, and how they are used can affect the rate they are charged. This means that similar properties might have different charge rates. See the table below for the rates applied to different types of properties. 

S/N Definition AreaCharge Rate
Owner-Occupied Residential Property 0.0394% 
Industrial Premises of Manufacturing Concerns 0.132% 
Residential Property/Private School (Owner & 3rd Party) 0.132% 
Residential Property (Without Owner in Residence) 0.394% 
Commercial property (Used by occupier for Business Purposes) 0.394% 
Vacant Properties and open empty Land 0.0394% 
Agricultural Land 0.01% 

Factors Affecting Calculation

Several things can affect how Land Use Charge is calculated: 

1. Property Value: The property’s assessed value is a big factor. If your property is worth more, your Land Use Charge is likely to be higher. 

2. Land Use Category: Different types of land use, like residential or commercial, have their own rates or multipliers that get applied to the assessed value. What you use your land for can change how much you pay. 

3. Location: Where your property is in the state or local area can also matter. Some places might have different rates or rules that affect your Land Use Charge. 

4. Government Rules: If the government changes its rules about Land Use Charge rates, exemptions, or waivers, it can change how much you owe. 

How do I pay my land use charge? 

In the past, Land Use Charge bills were mostly delivered to your property. Now, you have more options: 

– Online Payment Portals: Depending on your state, you can go to a website to access a payment portal. For example, if you live in Oyo, you can generate your LUC bill online. 

– Bank Payments: You can visit specific banks to pay your Land Use Charge. You can do this in person by filling out forms or electronically through bank transfers or online banking. You can also pay in installments if you use the Bank Payment Code (BPC) mentioned on the bill. 

– Mobile Banking Apps: Some banks and payment platforms have mobile apps that let you pay Land Use Charge using your smartphone or other mobile devices. 

– Payment at Government Offices: If you prefer face-to-face transactions, you can go to local government or tax assessment offices to pay your Land Use Charge in person. 

The payment methods available might vary by state, so check with your local tax authorities to see which options work in your area. 

Penalty for nonpayment of land use charge? 

Similar to the 2001 Law, if you don’t pay Land Use Charge on time, you’ll face consequences: 

– Late Payment Penalties: If you miss the deadline, you might have to pay extra. This extra fee is usually a percentage of the unpaid Land Use Charge. The penalty for not following the LUC Law has increased from ₦100,000.00 to ₦250,000.00, and there’s a chance of a 3-month imprisonment. 

– Interest Charges: On top of the late penalty, you might also have to pay interest on the unpaid Land Use Charge. The interest rate and how it’s calculated can vary depending on where you live. 

– Legal Actions: If you keep not paying, legal actions can happen. This might include putting a lien on your property or, in extreme cases, taking away your property. 

– Loss of Property Rights: If you don’t comply for a long time, you could lose your property altogether. The government might take legal steps to get the property back and use it to settle your unpaid Land Use Charge debts. 

Conclusion

Paying your Land Use Charge isn’t just about following the law; it also helps your community and local development. We hope this article encourages you to stay updated on your state’s rules and deadlines for LUC and make your payments on time. 

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