VAT FAQs on Education Sector in UAE

Tally Solutions, Feb-10-2020

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.

FAQ 1: How is education treated under VAT in UAE?

Answer: Educational services and related goods and services will be zero rated, if it is provided by any of the following 'qualifying educational institutions':

• Nurseries, preschools and schools
• Higher educational institutions owned or funded by the Federal or local Government

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%.

FAQ 2: Does a qualifying educational institution have to register for VAT?

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.

FAQ 3: How is supply of goods and services related to educational services treated under VAT?

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.

FAQ 4: Are there any exceptions to the zero rating of educational services supplied by qualifying educational institutions?

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:

• Goods and services supplied to persons who are not enrolled in the institution.
• Uniforms or any other clothing which are required to be worn by students of a qualifying educational institution, irrespective of whether they are supplied by the institution as part of the supply of educational services.
• Electronic devices used in educational services.
• Food and beverages supplied at these institutions.
• Field trips, unless they are directly related to the curriculum of an educational service and are not predominantly recreational.
• Extracurricular activities provided by or through such institutions for a fee additional to the fee for educational service.
• Supply of membership in a student organisation.

FAQ 5: How is accommodation provided to students treated under VAT in UAE?

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%.