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The education sector in UAE will see many changes under VAT, as now, certain goods and services provided by educational institutions will be subject to VAT @ 5%. Educational institutions will have doubts about the implications of VAT in their sector. Let us answer some FAQs with respect to VAT levy on the education sector.
Answer: Educational services and related goods and services will be zero rated, if it is provided by any of the following 'qualifying educational institutions':
This means that these institutions will not charge VAT on the educational services they provide and will be able to recover VAT paid on related costs at the time of VAT return filing.
Any educational services provided by other entities not listed above, will be subject to VAT @ 5%.
Answer: Yes, if the supplies by the qualifying educational institution exceed AED 375,000, the institution has to register under VAT. However, if the institution does not provide any services or goods taxed at 5%, it can apply for an exception from registration. Exception from registration, if granted, would relieve the institution from filing regular tax returns but at the same time, the institution will not be able to recover input tax incurred on expenses.
Answer: If a 'qualifying educational institution' supplies other goods and services that are directly related to the supply of education, they qualify for zero rating as well.
For example: Books and digital reading material supplied by qualifying educational institutions, that are directly related to the curriculum being taught also qualify for zero rating.
Answer: Yes. There are supplies related to the provision of educational services which are subject to VAT @ 5%, even if they are provided by a qualifying educational institution, such as:
Answer: Accommodation provided to students will be exempt from VAT. Hence, educational institutions will not charge VAT on supply of accommodation to students but they will be unable to recover VAT incurred on costs which directly relate to the provision of accommodation.
Hence, for the education sector, educational services provided by qualified educational institutions will largely see no change under the VAT regime. Such institutions need to note the goods and services which will be subject to VAT @ 5%. Also, educational services which are provided by institutions which are not qualified educational institutions will be subject to VAT @ 5%.