Taxation: PwC concerned about the education sector in Nigeria

A report by PriceWater-HouseCooper (PwC) Nigeria said that the Federal Government’s decision to pass the Finance Act 2021 and remove educational activities from the Corporate Income Tax (CIT) exemption list will be bad for the country’s education sector in the future if not reversed. PwC Nigeria, in the report made available to New Telegraph titled: “Finance Act 2021: What removing the tax exemption for educational institutions means for education in Nigeria”, said that with With Nigeria’s 2022 budget deficit of around N6.3 trillion, the Federal Government seemed keen to raise revenue across various sectors of the economy as much as possible.

The report notes that given the challenges facing the education sector and the need to develop human capital, the introduction of an income tax on educational activities may discourage potential investors in the sector, increase the cost of education, while generating minimal additional revenue for the government. . Further, he noted that this could worsen the state of education in Nigeria, given that the government has been unable to meet public demand in terms of quality and access to education. education.

On the implications of the Finance Bill 2021 amendment, PwC said: “Given the removal of educational activities from the list of exempt profits in Section 23(1) of the CITA, companies carrying out educational activities in the Nigeria may be subject to income tax regardless of their status of registration or incorporation, although some schools may still argue that the exemption could still apply to them on the grounds that they are an organization charity, particularly if their educational activities do not constitute a business. PWC Nigeria noted in the report that it surveyed 60 private secondary schools, registered with the Corporate Affairs Commission. Based on the limited sample, 71.7 percent were registered as corporations (limited by shares and limited by guarantee), 21.7 percent registered as incorporated trustees and 6.7 percent were registered as as trade names.

“Similarly, we surveyed and analyzed the incorporation status of 135 tertiary institutions in Nigeria. The result showed that 73 percent of the institutions surveyed are registered as limited companies, 26 percent as partnerships limited by guarantee, while one percent are registered as business names. “Based on the survey, the results show that a significant number of educational institutions were already subject to income tax before the FA 2021 amendment. Therefore, the legislative change is expected to affect less than 30% of educational institutions.

“Some schools, which are incorporated as limited liability companies or sole proprietorships, have generally taken the position that they are exempt from income tax in practice, this leads to a compliance gap which may not be resolved by a change in the law, but taxpayer education and enforcement.Citing practice in other jurisdictions, the PwC Nigeria survey said a review of other jurisdictions showed that in Ghana, private universities were exempt from tax, provided that 100% of their profits were invested in the business.” Similarly, South Africa exempts certain research-oriented private universities from income tax.

In Uganda, however, private schools are subject to income tax of 30% of their annual profit. “Individual taxpayers in Germany benefit from a tax reduction of 30% of tuition fees paid to private schools on behalf of dependent children, excluding the price of accommodation, supervision and meals. “Finland is adopting a more socialist policy to fund basic education. The state government and municipalities have primary responsibility for providing basic education to citizens,” the report adds. PwC Nigeria revealed in the report that in January 2022, the United Nations International Children’s Emergency Fund (UNICEF) reported that “35% of Nigerian children who attend primary school do not attend school secondary. Half of all Nigerian children had not attended secondary school by 2021.”


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