Tertiary Education Tax in Nigeria: Everything you need to know

Tertiary Education Tax in Nigeria: Everything you need to know

Tertiary Education Tax in Nigeria

Discover the ins and outs of Tertiary Education Tax in Nigeria. Explore its history, legal framework, who’s affected, how it’s calculated, and its impact on education. Stay compliant and informed with our comprehensive guide.

In the ever-evolving landscape of education and finance in Nigeria, one crucial aspect often discussed and debated is the Tertiary Education Tax. It’s a topic that holds immense significance, as it directly influences the development of higher education institutions in the country.

As we delve into this comprehensive guide, we will unravel the layers of this tax as part of the Nigerian tax system, offering you a thorough understanding of its history, legal foundation, entities subject to it, the intricate calculations involved, and the impact it has on Nigeria’s educational landscape.

What is Tertiary Education Tax? 

Tertiary Education Tax in Nigeria is like a special fund. It’s money that certain businesses and organizations have to set aside to help universities and higher education institutions.

The tax is governed by the Tertiary Education Trust Fund Act of 2011. I am sure you have come across Tet-fund or TETFUND-sponsored infrastructure around school areas, especially students.

It is this tax that contributes to the fund. The amount in the Fund is distributed between Universities, Polytechnics, and Colleges of Education in the ratio of 2:1:1 respectively.

The main goal? To make education better. This tax is there to support schools, improve facilities, and ultimately provide students with a better learning experience. So, in a nutshell, it’s a way to invest in education and make sure it gets even better in Nigeria. 

Who pays Tertiary Education Tax in Nigeria? 

Not everyone is liable to pay the tertiary education tax. Here are the people/persons that are liable for the tertiary education tax in Nigeria.  

Registered Companies: Most registered companies in Nigeria are required to pay Tertiary Education Tax. This includes private and public limited liability companies, partnerships, and sole proprietorships. 

Government Agencies: Certain government agencies and parastatals that generate revenue are also subject to this tax. However, it’s important to note that government-owned universities are not required to pay. 

Non-Profit Organizations: Some non-profit organizations may also fall under the tax net if they generate income. However, their exemption status can depend on their specific activities and sources of income. 

Trusts and Estates: In some cases, trusts and estates that generate income are also liable for Tertiary Education Tax. 

Exemptions from Tertiary Education Tax

Now, let’s explore the exceptions to the rule—entities that enjoy exemptions from Tertiary Education Tax: 

Educational Institutions: This is a significant exemption. Educational institutions, both public and private, are generally not required to pay this tax. That means primary and secondary schools, as well as higher education institutions like universities and colleges, are off the hook. 

Religious Organizations: Religious institutions, such as churches and mosques, are typically exempt from Tertiary Education Tax. However, this exemption may not apply if the religious organization engages in commercial activities that generate income. 

Government Bodies: As mentioned earlier, government-owned universities and other government bodies related to education are usually exempt. However, government agencies generating revenue from commercial activities may not fall under this exemption. 

Small Companies: Small companies with an annual turnover below a certain threshold are also exempt. The exact threshold may vary, so it’s essential to check the latest regulations for specific details. 

Non-Profit Organizations: While some non-profit organizations are taxable, those engaged in charitable and humanitarian activities with no profit motive may be exempt. 

Individuals: Individuals, including employees and private citizens, do not pay Tertiary Education Tax. The tax primarily targets entities and organizations. 

What is the tax rate? 

The tax rate is calculated as 2% of assessable profits 

What happens if I do not remit the Tertiary Education Tax? 

The first offence against the Act is liable on conviction to a fine of ₦1, 000,000 or a term of 6 months imprisonment or both. Second and subsequent offences attract a fine of ₦2, 000,000 or a term of 12 months or both. 

The bottom line

Tertiary Education Tax plays a pivotal role in shaping the landscape of education in Nigeria. It is not merely a financial obligation but a commitment to the growth, improvement, and sustainability of higher education institutions. By understanding the nuances of this tax, businesses and organizations can fulfill their civic duty, contributing to a brighter educational future for all Nigerians. This tax is not just a financial transaction; it’s an investment in knowledge, progress, and the empowerment of generations to come. 

FAQs 

1 What is Tertiary Education Tax, and why is it important?

Tertiary Education Tax is a contribution made by certain businesses and organizations in Nigeria to support higher education institutions. Its importance lies in its role in financing and improving education, helping universities and colleges grow and enhance their facilities and programs.

2 Who is required to pay Tertiary Education Tax?

Entities subject to this tax typically include companies, government agencies with commercial activities, and some non-profit organizations. Specific details may vary, so checking the latest regulations is essential. 

3 Are educational institutions required to pay Tertiary Education Tax?

No, educational institutions, including schools, colleges, and universities (both public and private), are generally exempt from Tertiary Education Tax.

4 How is the tax rate determined for different entities?

The tax rate is pegged at 2% of total assessable profit.

5 What constitutes taxable income for Tertiary Education Tax purposes?

Taxable income typically includes profits for businesses, revenue from commercial activities for government agencies, and income from non-exempt commercial activities for non-profit organizations.

6 How often is Tertiary Education Tax paid?

Similar to how the company income tax is paid, the tertiary education tax is paid annually.

7 Are there penalties for non-compliance with Tertiary Education Tax regulations?

Yes, penalties can apply for non-compliance. It’s essential to understand and meet your tax obligations to avoid these penalties, including fines and legal actions.

8 Who collects Tertiary Education Tax?

The FIRS is the body responsible for collecting Tertiary Education Tax.

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