VAT for education in the UAE is either exempted or zero-rated. It needs some elaboration for a proper understanding of the implication of VAT in the UAE
The Federal law, Article 40 of 2017; stipulates an exemption in VAT for Education in the UAE in the following cases:
- When the course curriculum and the institution are government recognized and
- Also in the case of higher education,
- And if the institution gets more than 50% financial funding from the government. The supply of goods and services in such cases are related to zero-rated service in education.
In the following events, there is no zero rate supply:
Supply of services to persons not enrolled in the institution and for the uniform used by the students. Electronics devise, food and beverage supplied to the institution, field trips not relevant to the institution, extracurricular activities that are charged separately, membership of student organization. All these items are taxable. Transportation of students from home to the institution is exempt from the VAT laws.
Registration of educational institution for VAT in the UAE
All educational institutions have to get themselves registered for VAT regardless of their eligibility for zero-rated VAT. There is a threshold of AED 3,75,000 that requires compulsory registration. If the supplies are going to cross this threshold during the next 30 days, the institution must go for registration. An institution may go for voluntary registration also for which the threshold limit is AED 187, 500. If an educational institution makes only zero-rated supply, there may be an exception from VAT registration which can be applied for.
Need for the issue of a tax invoice.
Educational institutions must issue a tax invoice for both standard and zero-rated supply. A simplified tax invoice can be issued if the recipient is not a registrant or the amount is within 10, 000 AED. For an institution under zero-rated VAT, a tax invoice is not necessary.
Recovery of Input Tax on the expenses
Educational institutions are entitled to recover the input VAT on the taxable expenses while making the supplies. If the expenses are of personal use such as entertainment or purchase or rent a motor vehicle, there is no recoverability. But VAT linked to exempt transport service made by the educational institute is not recoverable.
If the school offers extra-curricular activity related to the curriculum for which it doesn’t charge additional fees, it will be zero-rated as per the VAT of UAE. For any additional fee, the standard VAT rate will apply. Additional fees charged to the fees for extracurricular will be taxable and it will be standard rate. There is a provision for VAT charge for the supplies from vending machines. The transport for the students shall be taxable. There is a provision for standard VAT rate for supply of food and beverage supplied in the canteen.
VAT for vouchers.
The VAT will be charged only after the redemption of vouchers. The school uniforms, if supplied, shall be taxable at a standard rate. The FTA has launched the Basic Tax Information Bulletin for raising awareness among taxpayers about taxes and tax information. The tax bulleting includes tax treatment for educational institutions such as schools.
Rates of taxes including exemptions
Information is available on the website of the FTA which contains an explanation of the supply of educational services that includes printed or digital study material concerning the curriculum.
- It is zero-rated if the institution and curriculum are recognized by the government.
- Transportation of students from home to educational institution is exempt from taxes.
- For supplies, to individuals who are not enrolled in the educational institution, it is @5%.
Educational institutions may not have the manpower in-house to deal with matters related to VAT. Thus reliance on external help will be mandated. GCC Filings can be engaged to deal with such issues.
GCC Filings is a professional accountancy firm in the UAE. It assists clients in matters like VAT filing of returns, keeping the books of accounts and records of the transaction, all VAT-related matters and more.