VAT rates applicable to Education Sector in UAE
Education is a very important sector in the UAE. With the introduction of VAT in UAE, the education sector has also been impacted with the additional VAT to be levied on certain goods and services supplied by educational institutions. Let us see a ready reckoner for the VAT rates applicable to the education sector:
|Nursery education and pre-school education||School transportation||School uniforms|
|School education||Electronic equipment|
|Higher education provided by institutions owned by the Government or getting more than 50% of their funding from the Government||Food & beverages on campus|
|Printed and digital reading material provided by qualifying educational institutions||School trips for recreation|
Hence, under VAT, a concept of 'qualifying educational institutions' has been introduced. The educational services supplied by a qualifying educational institution will be zero rated. These qualifying educational institutions are:
- a.Nurseries, preschools and schools.
- b.Higher educational institutions owned or funded by the Federal or local Government.
These institutions should not charge VAT on the educational service they provide. They will also be able to recover VAT paid on related costs at the time of return filing. Further, the books and digital reading material supplied by these institutions will be also be zero rated.
For example: Abdul School in UAE is registered under VAT. As it is a school, it is a qualifying educational institution. Hence, Abdul School will not charge VAT on the tuition fees charged to students. Also, books provided as part of the course will also not be subject to VAT.
The educational services provided by any institution other than the qualifying educational institutions will be subject to VAT @ 5%.
For example: A private college, Azra Medical College, is registered under VAT. Since this college is not a qualifying educational institution, the course fees charged by Azra Medical College will be subject to VAT @ 5%. Also, the books and reading material provided by Azra College will also be subject to VAT @5%.
However, note that certain services provided by educational institutions, even if they are qualified educational institutions, will be subject to VAT @ 5%, such as school uniforms, electronic equipment, food and beverages, field trips for recreation and extracurricular activities.
For example: Abdul School is registered under VAT. Since it is a qualifying educational institution, the tuition fees charged by Abdul School are zero rated. Nevertheless, the school uniforms provided by Abdul School to its students will be subject to VAT @ 5%.
Also, the provision of transportation to students will be exempt, which means that the institutions will not charge VAT for providing school transportation. At the same time, they will not be able to recover VAT paid on related costs at the time of return filing.
For example: Abdul School which is registered under VAT provides transportation to its students to and from the school. As school transportation is exempt under VAT, VAT will not be charged on the school transportation provided by Abdul School. However, Abdul School will not be able to recover VAT paid on related expenses, such as uniforms for the driver and conductors.
Hence, educational institutions in UAE should note the tax rates applicable to the services provided by them and accordingly conduct their business activities.