VAT for Education in UAE
As per the UAE VAT Law, VAT for education in UAE is zero-rated and some fall under the category of exemption. Let us discuss in detail regarding the VAT treatment on education services or VAT for education in UAE. As per Article 40 of the Federal Decree-Law No. 8 of 2017 on Value Added Tax, VAT for Education in UAE shall be zero-rated in the following cases:
- Where both the curriculum and the educational institution are recognized by the competent federal or local government and in the case of higher education institutions if it received more than 50% funding directly from the federal or the local government.
- Supply of Goods or Services made where the supply is directly related to the provision of a zero-rated educational service.
- Printing and digital reading material which is relating to the curriculum.
Let us see the applicability of VAT for Education in UAE as there are exceptions to it.
The following supplies shall not be zero-rated:
- Goods and Services Supplied to persons who are not enrolled in the educational institution
- Uniforms or any other clothing required to be worn by the educational institution irrespective of whether it was part of the supply of educational services.
- Electronic devices whether it is supplied as part of the supply of education service.
- Food and beverages supplied at the educational institution
- Field trips which are not related to the curriculum
- Extracurricular activities that are provided with an additional charge
- Supply of membership in a student organization
All the above-listed transactions will be taxable at a standard rate as they do not have any direct connection with the educational services. As per the recent clarification from FTA, services of transporting students from home to the location of the educational institution and vice versa are exempt from UAE VAT Law.
Should an Educational Institute register for VAT in UAE?
Yes, all educational institutions undertaking either zero-rated or standard-rated supplies in UAE are required to get registered for UAE VAT. The Mandatory registration threshold is AED 375,000/-. If their supplies in the last 12 months exceed or are expected to exceed in the next 30 days, then they need to go for mandatory registration. An educational institution may go for voluntary registration if their supplies in the last 12 months exceed or are anticipated to exceed in the next 30 days the threshold of AED 187,500. If in case an educational institution makes only zero-rated supplies (i.e. does not undertake any supplies that are subject to VAT at the rate of 5%), an exception from VAT registration may be applied for via the registration application.
Is there a need to issue a Tax Invoice?
Yes, the educational institutions undertaking taxable supplies i.e. standard-rated and zero-rated supplies must issue a tax invoice. In case the supply of goods or services is made to a recipient who is not a registrant and the consideration for the supply does not exceed AED 10,000/- then a simplified Tax Invoice can be issued. If in case the educational institutions are entirely engaged in supplies that qualify to be wholly zero-rated and are supported with enough records for such supply, then there is no need to issue a tax invoice.
Are Educational Institutions entitled to recover Input Tax on their expenses?
Educational institutions will be entitled to recover the input VAT on taxable expenses incurred while undertaking taxable supplies. Meanwhile, If the expenses are in the nature of entertainment and any purchase, lease and renting of motor vehicles if used for personal use on such the input tax recoverability is blocked. However, VAT incurred on costs that are linked to exempt transportation services made by the education institute is not recoverable.
Let us consider some specific issues of VAT for Education in UAE and the taxability of those transactions.
-
Whether schools offering extra-curricular activities relating to the regular curriculum subject to VAT?
If the school is offering any extra-curricular activity which is related to the curriculum without any additional fee, then it will be zero-rated as per the UAE VAT Law. However, if any additional fee is charged, such fees will be subject to VAT at the standard rate. Extracurricular activities provided by or through the recognized educational institutions for an additional fee added to the fee for the education service shall be taxable at the standard rate.
-
What is the taxability of supplies from vending machines?
The supplies from vending machines will be subjected to VAT and the date of supply will be the date on which the funds are collected from the vending machines.
-
Whether transportation provided by the school for students is taxable under UAE VAT?
The transportation of students from home to school and vice versa is exempt from UAE VAT Law.
-
What is the treatment for the supply of food and beverages provided in the canteen?
The supply of food and beverages in the school canteen is subject to VAT at a standard rate.
-
What is the VAT treatment for vouchers?
In the case of monetary vouchers, the supply for a consideration up to the face value will not be taken into account as per the UAE VAT Law and the VAT liability will occur only upon the redemption of the voucher.
-
Is the supply of school uniforms taxable under UAE VAT Law?
The supply of school uniforms will be taxable at a standard rate, whether it is supplied as a part of the educational service or not.
Looking for TAX Services in the UAE?
We provide:
For Tax Services in Dubai:
Mr. Pradeep Sai
sai@emiratesca.com
+971 – 556530001
For Tax Services in Abu Dhabi:
Mr. Navaneeth
nav@emiratesca.com
+971 – 558892750
For Tax Services in Northern Emirate (Sharjah, Ajman, RAK, Fujairah)
Mr. Praveen
praveen@emiratesca.com
+971 – 508873115
Sep 25,2024VAT Treatment for Charities in the UAE
