VAT on UAE Education Sector
Harish Elimban, Manager
It has been 2 years since UAE introduced VAT and the implementation has been successful so far. But people are still sceptical about the whole process and its application across various sectors. The FTA has issued a bulletin to provide information on tax treatment for the education sector in UAE, which discusses the below points;
Standard-rated, zero-rated and exempted supplies
VAT is not chargeable on all the supplies in the education sector. Certain supplies are exempted from VAT and for certain others standard rate is applicable.
- Supplies made to persons who are not enrolled in the educational institution;
- Uniforms, electronic devices, food and beverages;
- Field trips which are unrelated to the curriculum;
- Extracurricular activities provided for an additional charge;
- Supply of membership in a student organization;
- Goods/services provided by a business that is not an educational institution
Cases wherein both the curriculum and the educational institution are recognized by the competent federal or local government, the service/ supply won’t be charged any VAT and will be treated as zero-rated, which are;
- Supply of goods or services where the supply is directly related to the zero-rated educational service;
- Supply of printed or digital reading material which are related to the recognized curriculum.
VAT won’t be applicable for services that involve transporting students from home to the location of the educational institution and vice versa.
Educational institutions that make zero-rated and standard-rated supplies should register for VAT, if the value of their supplies exceeded the mandatory registration threshold of AED 375,000, in the past one year. The institutions must also register for VAT, if the value is expected to exceed the threshold limit in the next 30 days.
Voluntary registration can be done if the value of taxable supplies or taxable expenses incurred exceeded the threshold limit of AED 187,500 in the last 12 months or is anticipated to exceed in the next 30 days.
Where an educational institution only makes zero-rated supplies, an exception from VAT registration may be applied for via the registration application.
Tax invoices are mandatory for all standard-rated and zero-rated supplies. Cases wherein the supply is made to an unregistered recipient or the consideration for the supply made to a registered recipient is AED 10,000 or less, simplified tax invoices may be issued. If the supply qualifies to be wholly zero-rated and there are enough records to establish particulars of the supply, then tax invoice may not be issued.
Educational institutions that make zero-rated or standard-rated supplies, can recover the full input tax. But certain entertainment services and purchased, leased or rented motor vehicles that are available for personal use, are considered as blocked and full recovery of input VAT is not possible on these.
If the educational institution renders exempt transportation services, only proportionate input VAT is recoverable.
- Will VAT be applicable on extra-curricular activities offered by a school, provided the activities are wholly related to the curriculum?
If the extra-curricular activities are offered without any additional fee, then the supply of extra-curricular activities will be zero- rated. VAT will be applicable if additional fee is charged.
- Are supplies from vending machines subject to VAT?
Yes, The date of supply is the date on which the funds are collected from the vending machines.
- If a school offers a pick-up and drop-off facility for students, will the service be charged VAT?
No, it will be exempt from VAT.
- Are supplies of food and beverages in the canteen subject to VAT? What is the treatment for vouchers?
Yes, the supply of food and beverages in the school canteen is subject to VAT. The supply of monetary vouchers for consideration up to the face value (or less) is disregarded for VAT purposes and the VAT liability crystallizes only upon redemption of the voucher.
- Is the supply of school uniforms subject to VAT?
Yes, even if they are supplied as part of educational services.
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