Nigerian college students who earn cash from facet jobs or small companies are thought-about revenue earners for tax functions as soon as that revenue arises from work or industrial exercise, even when they continue to be in class.
That is for college kids who obtain common pocket cash from dad and mom but in addition earn cash often from tutoring, freelancing, on-line gross sales or digital providers, a rising actuality as younger Nigerians search further revenue amid rising residing prices.
“In case you do one thing else, you’re now not only a pupil in that sense,” mentioned Olufemi Olarinde, head of Fiscal and Tax Reforms Implementation Division on the Nigerian Income Service, responding to a query throughout a BusinessDay Discuss Trade. “When you earn revenue, the revenue might be chargeable to tax.”
Olarinde defined that the tax system doesn’t recognise “pupil revenue” as a particular class. Moderately, it distinguishes between cash acquired as help and cash earned by effort or enterprise.
Pocket cash from dad and mom or guardians doesn’t qualify as revenue, however earnings from paid actions do.
“Everybody who earns an revenue is chargeable to tax, besides the regulation exempts such revenue,” he mentioned. “The regulation could exempt some revenue or revenue, however typically talking, as soon as there’s revenue, you’re chargeable to tax.”
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Beneath Nigeria’s private revenue tax framework, people incomes as much as N800,000 yearly fall inside an exempt band and don’t pay tax on that revenue. Larger earnings are taxed progressively, whereas sure earnings and revenue streams are additionally exempted by regulation.
These exemptions, nonetheless, apply to the revenue itself, to not the person’s id.
Scholar standing doesn’t protect revenue earned outdoors tutorial exercise. When college students introduce themselves as having a number of roles, for instance, pupil and freelancer, every position is handled individually for tax functions.
“In case you say, ‘I’m a pupil and a knowledge analyst,’ that facet of you being a knowledge analyst is chargeable to tax,” Olarinde mentioned. “When you’re doing that enterprise, you aren’t doing it as a pupil; you’re doing it as a enterprise particular person.”
This interpretation additionally applies to informal or occasional revenue, which many college students assume falls outdoors the tax system. Revenue earned irregularly from gigs, short-term jobs or one-off providers nonetheless qualifies as revenue, even when it isn’t constant.
Tax professionals say this is without doubt one of the most typical misconceptions amongst college students and younger those who solely full-time employment attracts tax, or that casual earnings are routinely excluded.
In apply, all revenue earned inside a 12 months is assessed collectively, with exemptions utilized afterwards.
Nigeria’s casual sector, the place most pupil facet hustles function, accounts for over 93 % of complete employment as of 2024, in line with the Nationwide Bureau of Statistics. As extra college students flip to casual work to complement allowances, questions round compliance have gotten extra frequent.
One other space of confusion pertains to registration. A Tax ID is legally required for anybody incomes revenue or working a enterprise in Nigeria. For people, registration is dealt with by state tax authorities.
Whereas incomes revenue doesn’t routinely imply tax is payable, registration brings people into the tax system and permits revenue to be correctly assessed. College students operating small companies or incomes persistently from facet jobs are anticipated to acquire a TIN and file annual returns.
Tax is paid on revenue or revenue, not on mere exercise. The place earnings fall inside exempt thresholds, no tax is payable, however revenue should nonetheless be declared.
Annual private revenue tax returns for the previous 12 months are required to be filed with the related tax authority by March 31 of the present 12 months, no matter whether or not tax is due.
As pupil entrepreneurship turns into extra widespread, understanding the boundary between pocket cash and earned revenue is important. Being a pupil defines one’s tutorial position, however as soon as revenue is earned outdoors that position, tax obligations are decided by the character of the exercise.
