The introduction of the 2021 Finance Act has raised questions about whether private educational institutions in Nigeria are now required to pay company income tax.

Before the Act, Section 23(1)(c) of the Companies Income Tax Act (CITA) exempted educational institutions with a public character from taxation. However, the new law, which removed “education” from the list of charitable exemptions, has led the Federal Inland Revenue Service (FIRS) to assert that private schools must now be taxed, stirring legal uncertainties and potential disputes.

Legal experts argue that the Finance Act’s provisions conflict with other laws such as the Companies and Allied Matters Act (CAMA), which mandates that non-profit educational institutions reinvest their surplus into their activities rather than distribute it as profit. The FIRS has introduced new conditions for granting tax exemptions to educational institutions, a move some critics claim oversteps legal bounds. There is growing speculation that these changes could soon face judicial scrutiny, particularly regarding their alignment with Nigeria’s broader legal framework.

On the policy front, stakeholders warn that taxing private schools could lead to increased tuition fees, making education less accessible to lower-income families. Many private institutions, which already operate on tight budgets, may struggle to maintain high standards if forced to pay taxes. As Nigeria continues to grapple with an underfunded education sector, there are calls for a review of the Finance Act to safeguard investments in education and ensure the sector’s growth.