Navigating VAT Rates for the Education Sector in the UAE

Education is a crucial sector in the UAE, and with the introduction of VAT, it has also been affected by the additional tax on certain goods and services provided by educational institutions. Here’s a quick guide to the VAT rates applicable to the education sector:

0% VAT:

• Nursery and pre-school education
• School education
• Higher education provided by institutions owned by the government or receiving more than 50% of their funding from the government
• Printed and digital reading material provided by qualifying educational institutions

Exempt:

• School transportation

5% VAT:

• School uniforms
• Electronic equipment
• Food and beverages on campus
• School trips for recreation
• Extracurricular activities

Under the VAT system in the UAE, a concept of “qualifying educational institutions” has been introduced. Educational services provided by these institutions are zero-rated, meaning no VAT is charged. Qualifying educational institutions include:

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

These institutions are not required to charge VAT on the educational services they provide and can recover VAT paid on related costs during return filing. Additionally, books and digital reading material supplied by these institutions are also zero-rated.

Example:
Abdul School, a VAT-registered school in the UAE, is a qualifying educational institution. Therefore, it does not charge VAT on student tuition fees, and books provided as part of the course are also VAT-free.

Educational services provided by institutions that are not qualifying educational institutions, however, are subject to VAT at 5%.

Example:
Azra Medical College, a private VAT-registered institution, is not a qualifying educational institution. As a result, the course fees and reading materials provided by Azra Medical College are subject to VAT at 5%.

Certain services provided by educational institutions, even if they are qualifying institutions, are subject to VAT at 5%. These services include school uniforms, electronic equipment, food and beverages, recreational field trips, and extracurricular activities.

Example:
Abdul School, although zero-rated for tuition fees, charges 5% VAT on school uniforms sold to students.

School transportation, on the other hand, is exempt from VAT, meaning no VAT is charged, but the institution cannot recover VAT on related expenses, such as uniforms for drivers.

Example:
Abdul School provides transportation services, which are VAT-exempt. No VAT is charged for this service, but the school cannot recover VAT paid on associated costs.

Educational institutions in the UAE must be aware of the VAT rates applicable to their services to ensure proper compliance with the tax laws.