By Orowo Victoria Ojieh
On 31st December 2021, President Mohammed Buhari signed the 2021 finance act into law which brought about notable changes for business in the Nigerian tax system. The education sector was not excluded from the impact of the finance act.
It’s however necessary for stakeholders in the educational system to be informed whether this amendment will impact all educational institutions in Nigeria or whether certain educational institutions can still continue to enjoy tax exemption status.
Prior to the enactment of the finance act 2021, section 23 (1) (c) of company income tax act paraphrase “states that educational institutions enjoyed tax exemption status to the extent that they provide educational activities of a public character and their profits derived solely from educational activities and not from trades or business”.
The amended section 23 (1) (c) of company income tax now suggests that educational institutions that have previously enjoyed tax exemption will now be subject to income tax as applicable under CITA.
However, going by previous judicial precedents on taxing educational institutions and following from companies and allied matters act regarding how a company should be registered either limited by shares, limited by guarantee and unlimited companies, it’s important to note section 26 of the CAMA provides that a company which is to be formed for the purpose of promoting education should be registered by guarantee where it does not intend to distribute profits to its member and such companies are prohibited from making profit for distribution.
In conclusion, it’s clear that not all educational institutions will automatically be liable to income tax in Nigeria under the finance act 2021. Only educational institutions that are registered as companies will be liable to income tax going forward.
