The education sector in the UAE will experience significant changes under VAT, as certain goods and services provided by educational institutions will now be subject to 5% VAT. Educational institutions may have concerns about how VAT impacts their operations. To address these concerns, let’s explore some frequently asked questions (FAQs) regarding the application of VAT in the education sector.
FAQ 1: How is education treated under VAT in the UAE?
Answer: Educational services and related goods will be zero-rated if provided by “qualifying educational institutions,” which include:
- Nurseries, preschools, and schools
- Higher educational institutions owned or funded by the Federal or local Government
This means these institutions will not charge VAT on the educational services they offer and can recover VAT paid on related costs during VAT return filing. Educational services provided by institutions outside of this list will be subject to VAT at 5%.
FAQ 2: Does a qualifying educational institution have to register for VAT?
Answer: Yes, a qualifying educational institution must register for VAT if its taxable supplies exceed AED 375,000. However, if the institution does not provide any goods or services subject to the 5% VAT, it can apply for an exemption from
registration. If granted, this exemption will relieve the institution from filing regular tax returns, but it will also forfeit the ability to recover input tax on incurred expenses.
FAQ 3: How is the supply of goods and services related to educational services treated under VAT?
Answer: If a qualifying educational institution supplies goods and services directly related to educational services, these will also qualify for zero rating. For example, books and digital reading materials supplied by these institutions that are directly related to the curriculum are eligible for zero rating.
FAQ 4: Are there any exceptions to the zero rating of educational services supplied by qualifying educational institutions?
Answer: Yes, certain supplies related to educational services are subject to VAT at 5%, even if provided by a qualifying educational institution. These include:
- Goods and services supplied to individuals not enrolled at the institution
- Uniforms or other clothing required for students, regardless of whether supplied by the institution as part of educational services
- Electronic devices used in educational settings
- Food and beverages supplied on the premises
- Field trips, unless directly related to the curriculum and not predominantly recreational
- Extracurricular activities offered for an additional fee
- Memberships in student organization
FAQ 5: How is accommodation provided to students treated under VAT in the UAE?
Answer: Accommodation provided to students is exempt from VAT, meaning educational institutions will not charge VAT on this supply. However, they will be unable to recover VAT incurred on costs directly associated with providing accommodation.
Overall, the education sector will largely see no change under the VAT regime for services provided by qualifying educational institutions. However, institutions
should be aware of the goods and services subject to 5% VAT, and educational services provided by non-qualifying institutions will also incur VAT at this rate.
