Education Tax in Nigeria: Overview and Details

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Education Tax is a tax chargeable on all companies registered in Nigeria at chargeable profits as a contribution to the Education Tax Fund.

This means that all registered companies in Nigeria are required to pay a percentage of their assessable profit into an Education Tax Fund. The tax is charged at 2%.

In this post, we take a quick look at the education tax in the country and what it entails.

education tax in nigeria

Education Tax in Nigeria: All You Need to Know

One of the first things you should know about the education tax is that it is payable within two months of an assessment notice from the Federal Inland Revenue Service (FIRS). This is in reference to the assessment and collection of tax section of the act. This section states that

1)    The Federal Board of Inland Revenue (in this Act referred to as “the Board”) shall assess and collect from a company the tax imposed by this Act and accordingly-

(a)   shall, when assessing a company for companies income tax or petroleum profit tax for an accounting period of the company, also proceed to assess the company for the tax due under this Act;

(b)   the provisions of the Act relating to the collection of companies’ income tax or petroleum profit tax shall, subject to this Act, apply to the tax due under this Act.

(2)   The tax imposed by this Act shall be due and payable within 60 days after the Board has served notice of the assessment on a company.

(3)   The Board may, for the purpose of assessment and collecting the tax imposed by this Act, devise such forms as it may deem necessary.

Generally, many companies pay the tax on a self-assessment basis along with their CIT. For companies subject to PPT, tertiary education tax is to be treated as an allowable deduction. For other companies, income/profit taxes are not deductible in arriving at taxable income.

However, non-resident companies and unincorporated entities are exempt from the tertiary education tax.

The Education Tax was as a result of the establishment of the Education Fund. The fund was established for the rehabilitation, restoration and consolidation of education in Nigeria and it is managed by the Board of Trustees established under section 4 of this Act.

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The Board of Trustees consist of a chairman; six persons each representing the six geo-political zones of the country;  the Accountant-General of the Federation; a representative of – the Minister of Education; the Vice-Chancellors of the Nigerian Universities; Rectors of the Polytechnics in Nigeria; Provosts of the Colleges of Education in Nigeria; the National Chamber of Commerce, Industry, Mines and Agriculture (NCCIMA); the Manufacturers Association of Nigeria (MAN); the Academic Staff Union of Universities (ASUU); the Academic Staff Union of Polytechnics (ASUP);  the Colleges of Education Academic Staff Union (COEASU);  the National Union of Teachers (NUT); the Association of Nigerian Principals of Secondary Schools (ANCOPS); and the Executive Secretary of the Fund who shall serve as Secretary.

Also, the membership of the Board of Trustees is expected to reflect the six geo-political zones of the Federation and the members of the Board of Trustees are appointed based on their considerable experience in both the public and private sectors specifically the business, financial and education sectors.

These individuals are appointed by the President on the recommendation of the Minister. There are also the ex-officio members that hold office for a term of 4 years in the first instance and may be eligible for appointment for a further term of 4 years and no more.

Generally, the functions of the Board of Trustees include the following:

  • monitor and ensure collection of tax by the Federal Inland Revenue Service and ensure transfer to the Fund;
  • manage and disburse the tax;
  • liaise with the appropriate Ministries or bodies responsible for collection or safe-keeping of the tax;
  • receive requests and approve admittable projects after due consideration;
  • ensure disbursement to various levels and categories of education;
  • monitor and evaluate execution of the projects;
  • invest funds in appropriate and safe securities;
  • update the Federal Government on its activities and progress through annual and audited reports;
  • review progress and suggest improvement within the provisions of this Act;
  • do such other things as are necessary or incidental to the objects of the Fund under this Act or as may be assigned by the Federal Government.
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The Board of Trustees plays an important role in administering the tax imposed by this Act and disbursing the amount in the Fund to Federal, State and Local Government educational institutions, including primary and secondary schools. These include:

  • works centers and prototype development;
  • staff development and conference attendance;
  • library system at the different levels of education;
  • research equipment procurement and maintenance;
  • Higher Education Book Development Fund
  • redressing any imbalance in enrolment mix as between the higher educational institutions; and
  • execution of the nine-year compulsory education programme.

When disbursing the tax as between the various levels of education – higher education section is expected to receive fifty per cent; primary education section receives thirty per cent; and the secondary education section receives twenty per cent, of the tax collected in anyone year.

Also, the distribution of tax accruing to the higher education section shall be in the ratio of 2:1:1 as between universities, polytechnics and colleges of education.

Additionally, the Board of Trustees is expected to administer, manage and disburse the tax imposed by this Act on the basis of:

  • equality among the six geo-political zones of the Federation;
  • equality among the States within a zone;
  • equality among the local governments or area councils within a State or the Federal Capital Territory, Abuja respectively.

However, based on the provisions of subsections (1), (2), (3) and (4) of the act, the Board of Trustees shall have power to give due consideration to the peculiarities of each geo-political zone in the disbursement and management of the tax imposed by this Act between the various levels of education.

Finally, failure to pay the Education tax comes with a penalty. For a first offence, the fine is N10,000 or imprisonment for a term of three years while for a second or subsequent offence, the fine is N20,000 or imprisonment for a term of five years or it could be both fine and imprisonment.

QA

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