Consequently, Tertiary Education Tax (formally Education Tax) is a tax imposed on the assessable profits of all companies registered in Nigeria including companies subject to tax under Petroleum Profits Tax Act.
It is charged at the rate of 2 percent on the assessable profits of a company registered in Nigeria.
Who pays this type of tax?
Every Nigerian company chargeable under the Company Income Tax (CIT) and the Petroleum Profit Tax (PPT) is expected to pay Tertiary Education Tax.
Therefore, only companies registered and make their annual tax returns in Nigeria pay Tertiary Education Tax.
Why does the FIRS collect this tax?
The Federal Inland Revenue Service is charged with the responsibility for the assessment and collection of the tax. It does this at the same time as it carries out each Company’s Income Tax assessment.
ALL YOU MUST KNOW ABOUT TERTIARY EDUCATION TAX IN NIGERIA – RELEVANT TAX LAWS
In this article, the relevant tax laws are:
1. Companies Income Tax Act CAP C21 LFN 2004
2. Petroleum Profit Tax Act CAP P13 LFN 2004
3. Education Tax Act CAP E4 LFN 2004 ( as amended).
Certain aspects of the enabling Act
is reproduced here for better understanding.
TERTIARY EDUCATION TRUST FUND (ESTABLISHMENT, ETC) ACT, 2011
This is an Act to repeal the Education Tax Act Cap. E4 Laws of the Federation of Nigeria, 2004 and Education Tax Fund (Amendment) Act No. 17, 2003 and establish the Tertiary Education Trust Fund charged with the responsibility for imposing, managing and disbursing The Education Tax to public tertiary education institutions in Nigeria; and for related matters.
(1) As from the commencement of this Act, there shall be charged and payable an annual tertiary education tax which shall be assessed, collected and administered in accordance with the provisions of this Act.
(2) The tax at the rate of 2 percent shall be charged on the assessable profit of a company registered in Nigeria (in this Act referred to as “a company”).
(3) The assessable profit of a company shall be ascertained in the manner specified in the Companies Income Tax Act or the Petroleum Profits Tax Act (in this Act referred to as “the Act”)as the case may be.
Education tax is intended to achieve restoration, rehabilitation, consolidation and development of tertiary education in Nigeria. ………By this TERTIARY EDUCATION TRUST FUND (ESTABLISHMENT, ETC) ACT, 2011 The Education Tax Act, CAP E4, Laws of the Federation of Nigeria, 2004 and the Education Tax Fund (Amendment) Act No. 17, 2003 are repealed.
ALL YOU MUST KNOW ABOUT TERTIARY EDUCATION TAX IN NIGERIA
(4) The Federal Inland Revenue Service (in this Act referred to as “the Service”) 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; and
(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.
(c) The tax imposed by this Act shall be due and payable
within 60 days after the Service has served notice of the assessment on a company.
(d) The Service may, for the purpose of assessment and collecting the tax imposed by this Act, devise such forms as it may deem necessary.
Filing of returns for Tertiary Education tax is done along with the Company or Petroleum Income Tax as the case may be.
OIL AND GAS COMPANIES:
For companies engaged in petroleum operations, due date for filing is;
– Filing of a return of estimated tax is within 2 months after the commencement of each accounting period, i.e. on or before February.
– Filing of a final return is within 5 months after the end of the accounting period, that is, on or before May.
NON OIL AND GAS COMPANIES
For companies other than those engaged in petroleum operations due date for filing is;
– In the case of a newly registered company, either within eighteen (18) months from the date of incorporation or six (6) months from the end of the company’s first accounting year whichever is earlier.
– In the case of an existing company, within six (6) months from the end of company’s accounting year.
Penalty for failure to pay the tax due within the specified time is the unpaid tax plus a sum which is equal to 5 percent of the tax.
THE AUTHORITY OF THE FUND:
(5) There is established the Tertiary Education Trust Fund (in this Act referred to as “the Fund”) for the rehabilitation, restoration and consolidation of tertiary education in Nigeria which shall be managed by the Board of Trustees established under section 4 of this Act.
The Fund –
(a) shall be a body corporate with perpetual succession and a common seal; and
(b) may sue and be sued in its corporate name.
(c) The Federal Inland Revenue Service shall pay the tax collected under this Act into the Fund and shall, when doing so, submit to the Fund, in such form as the Board of Trustees shall approve, a return showing-
– the name of the company making the payment;
– the amount collected;
– the assessable profit of the company for the accounting period; and
– such other information as may be required by the Fund for the proper administration of the tax.
(d) The Fund shall, before disbursement of the amount in the Fund, set aside in each year, an amount not exceeding 5 percent of the total monies accruing to the Fund in the preceding year which shall be applied-
(i) for the cost of administration and management of the Fund;
(ii) for the maintenance of any property acquired by or vested in the Fund and generally to pay for services rendered to the Fund;
(iii) for project monitoring;
(iv) to meet all the needs of the Fund necessary for the due administration and implementation of the purpose of this Act.
TETFUND BOARD OF TRUSTEES
(6) Establishment of the Tertiary Education Trust Fund Board of Trustees:
(1)There is established for the Fund, a Board of Trustees (in this Act referred to as “the Board of Trustees”) which shall consist of –
(a) a chairman who shall –
(i) be a person with good knowledge in finance and administrative matters;
(ii) have qualifications and experiences as are required to perform the functions of that office under this Act.
(b) 6 persons, each representing a geo-political zone in the country;
(c) a representative each of the following Federal Ministries, who shall not be below the rank of a Director-
(i) Education; and
(d) a representative each from the Universities, Polytechnics and Colleges of Education; and
(e) the Executive Secretary, who shall be the Secretary to the Board of Trustees.
The membership of the Board of Trustees shall reflect the six geo-political zones of the Federation.
ALL YOU MUST KNOW ABOUT TERTIARY EDUCATION TAX IN NIGERIA
The Board members shall-
– be a persons with considerable experience from both the public and private sectors to represent the business, financial and education sectors;
– be appointed by the President on the recommendation of the Minister;
– other than the ex-officio members, each hold office for a term of 4 years in the first instance and may be eligible for reappointment for a further term of 4 years and no more;
– be paid such remuneration and allowances as the President may, from time to time, determine.
– A member of the Board of Trustees shall cease to hold office if he-
(a) becomes of unsound mind;
(b) becomes bankrupt or makes a compromise with his creditors;
(c) is convicted of a felony or any offence involving dishonesty; or
(d) is guilty of serious misconduct in relation to his duties.
A member of the Board of Trustees may be removed from office by the President if he is satisfied that it is not in the interest of the Fund or Public that the member should continue in that office.
A member of the Board of Trustees, other than an ex-officio, may resign his appointment by a notice in writing under his hand, addressed to the President.
Where a vacancy occurs in the membership of the Board of Trustees, it shall be filled by the appointment of a successor to hold office for the remainder of the term of office of his predecessor, so that the successor shall represent the same interest and shall be appointed by the President.
ALL YOU MUST KNOW ABOUT TERTIARY EDUCATION TAX IN NIGERIA
(7) The Board of Trustees shall meet for the conduct of its ordinary meetings 4 times in a calendar year.
– the Board of Trustees may meet to conduct such other business as exigency demands.
– the supplementary provisions contained in the Schedule to this Act shall have effect with respect to the proceedings of the Board of Trustees and other matters contained therein.
(8) Board Functions: the board shall –
(a) monitor and ensure collection of education tax by the Service and ensure transfer of same to the Fund;
(b) manage and disburse the tax imposed by this Act;
(c) liaise with the appropriate ministries or bodies responsible for collection or safe keeping of the tax;
(d) receive requests and approve admittable projects after due consideration;
(e) ensure disbursement of funds to various public tertiary educational institutions in Nigeria;
(f) monitor and evaluate execution of the projects;
(g) invest funds in appropriate and safe securities;
(h) update the Federal Government on its activities and progress through annual and audited reports;
(i) review progress and suggest improvement within the provisions of this Act;
(j) 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;
(k) make and issue guidelines, from time to time, to all beneficiaries on disbursement from the Fund on the use of monies received from the Fund; and
(l) generally to regulate the administration, application and disbursement of monies from the Fund under this Act.
HOW IS THE FUND REALISED UTILISED?
(9) Fund Application:
The Fund shall be applied for the provision or maintenance of:
(a) essential physical infrastructure for teaching and learning;
(b) instructional material and equipment;
(c) research and publication;
(d) academic staff training and development; and
(e) any other need which, in the opinion of the Board of Trustees, is critical and essential for the improvement of quality and maintenance of standards in the higher educational institutions.
The Board of Trustees shall administer, manage and disburse the tax imposed by this Act on the basis of-
(a) funding of all public tertiary educational institutions;
(b) equality among the 6 geo-political zones of the Federation in the case of special intervention; and
(c) equality among the States of the Federation in the case of regular intervention;
The distribution of funds shall be in the ratio of 2:1:1 as between Universities, Polytechnics and Colleges of Education.
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 tertiary education.
The Minister shall, on the recommendation of the Board of Trustees and subject to approval by the President, make guidelines for disbursement of funds under this Act.
CFMC LTD CONCERN IN THIS ARTICLE:
CFMC Ltd concern in this article is to ensure you have the knowledge of all I reproduced above. There could be other ways of summarising the issues but that would not give you enough of what you desire to know on the subject matter. Now I am happy you know so much about Education Tax in Nigeria.
As you can see, tax matters in Nigeria are technical matters that require professionals for better application. Contact us for your business tax issues. You may also require tax coaching.
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