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The Court of Appeal judgement on the taxation of an educational institution in Nigeria

The Court of Appeal judgement on the taxation

The Court of Appeal (COA) in its judgement delivered on 11 December 2018 upheld the judgement of the Federal High Court (FHC) in Best Children International Schools Limited (“BCISL” or “the Appellant”) vs Federal Inland Revenue Service (“FIRS” or “the Respondent”) to the effect that BCISL, not being a company limited by guarantee, was liable to Companies Income Tax (CIT).

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Wole Obayomi

Partner & Head, Tax, Regulatory & People Services

KPMG in Nigeria

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The Court of Appeal judgement on the taxation of an educational institution in Nigeria

Facts of the case and issues for determination

BCISL is a company limited by shares and provides primary and secondary educational services in Nigeria. The company did not pay CIT liabilities for 2008 – 2012 tax years on the basis that its educational activities are exempt from income tax under Section 23(1)(c) of the CIT Act (CITA). The Company in April 2013 received a confirmation from the FIRS through its National Association, that its profits from educational activities were exempted from CIT so long as such profits were not derived from a trade or business carried out by the Company.

However, the FIRS assessed the Appellant to income tax for 2008 to 2012 tax years in September 2014 on the ground that BCISL did not qualify for the exemption conferred by Section 23(1)(c) of CITA, which provides as follows:

23(1) “There shall be exempt from tax – (c) the profits of any company engaged in ecclesiastical, charitable or educational activities of a public character in so far as such profits are not derived from a trade or business carried on by such company”.

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