Due to the value-added tax, many changes will take place in the education sector in the UAE, because now certain goods and services provided by educational institutions will be subject to a 5% VAT rate. Educational institutions will have doubts about the impact of value-added tax in their industries. Let us answer some frequently asked questions about VAT in the education sector.
Frequently Asked Question 1: How does VAT deal with education in the United Arab Emirates?
Answer: If provided by any of the following “qualified educational institutions”, educational services and related goods and services will be rated as zero:
One kind. Nurseries, preschools and schools
b. Higher education institutions owned or funded by the federal or local governments
This means that these institutions will not charge value-added tax for the education services they provide, and can recover the value-added tax paid for related fees when submitting the value-added tax return.
Any education services provided by other entities not listed above are subject to 5% value added tax.
Frequently Asked Question 2: Are there qualified educational institutions that must register for VAT?
Answer: Yes, if a qualified educational institution provides items in excess of AED 375,000, the institution must be registered under VAT. However, if the agency does not provide any services or goods taxed at the 5% tax rate, it can apply for exemption from registration. If a registration exception is obtained, the agency will be exempted from filing tax returns on a regular basis, but at the same time, the agency will not be able to recover input tax due to expenses.
FAQ 3: How to deal with the supply of goods and services related to education services based on value-added tax?
Answer: If “qualified educational institutions” provide other goods and services directly related to the supply of education, they are also eligible for zero rating.
For example: Books and digital reading materials directly related to the course being taught provided by qualified educational institutions also have zero-rated qualifications.
Frequently Asked Question 4: Are there any exceptions to the zero rating of educational services by qualified educational institutions?
Answer: Yes. Even if it is provided by a qualified educational institution, some supplies related to the provision of educational services require an additional 5% VAT, such as:
One kind. Goods and services provided to people who have not joined the organization.
b. A uniform or any other clothing that must be worn by students of a qualified educational institution, regardless of whether the institution provides it as part of an educational service.
C. Electronic equipment used in educational services.
d. Food and beverages provided by these institutions.
e. Field trips, unless they are directly related to the curriculum of educational services and are not primarily entertaining.
F. Extracurricular activities provided by such institutions or through such institutions, subject to fees other than educational service fees.
G. Provide membership of student organizations.
FAQ 5: How to provide accommodation for VAT students in the UAE?
Answer: The accommodation provided to students will be exempt from VAT. Therefore, educational institutions will not charge value-added tax on places where students are provided with accommodation, but they will not be able to recover the value-added tax incurred incurred directly related to the provision of accommodation.
Therefore, for the education sector, educational services provided by qualified educational institutions will remain basically unchanged under the value-added tax system. Such institutions need to indicate the goods and services that will be charged 5% VAT. In addition, educational services provided by non-qualified educational institutions will be subject to a 5% value-added tax.