Education is a very important sector in the UAE. With the introduction of VAT in the UAE, the education sector has also been affected by the additional VAT imposed on certain goods and services provided by educational institutions. Let’s take a look at the ready-made estimation methods for the VAT rate applicable to the education sector:
0% free 5%
Nursery school, preschool education school transportation school uniform
School education electronic equipment
Higher education provided by government-owned institutions, or more than 50% of funds obtained from the government, used for campus food and beverages
Printed and digital reading materials provided by qualified educational institutions for school leisure trips
Therefore, according to the value-added tax, the concept of “qualified educational institutions” was introduced. Educational services provided by qualified educational institutions will be rated as zero. These qualified educational institutions are:
Nurseries, preschools and schools.
b. Higher education institutions owned or funded by federal or local governments.
These institutions should not charge value-added tax on the educational services they provide. They will also be able to recover the value-added tax paid for related expenses when returning the declaration. In addition, the books and digital reading materials provided by these institutions will also be zeroed.
For example: Abdul School in the UAE is registered under VAT. Since it is a school, it is a qualified educational institution. Therefore, Abdul School does not charge students value-added tax on tuition fees. In addition, books provided as part of the course will not be subject to VAT.
Education services provided by any institution other than qualified educational institutions are subject to 5% value-added tax.
For example, the private university Azra School of Medicine is registered under VAT. Since the college is not a qualified educational institution, the course fees charged by Azra Medical College will be subject to a 5% value-added tax. In addition, books and reading materials provided by Azra College will also be subject to a 5% VAT.
However, please note that certain services provided by educational institutions, even if they are qualified educational institutions, are subject to 5% VAT, such as school uniforms, electronic equipment, food and beverages, leisure and entertainment, and field trips to extracurricular activities.
For example: Abdul School is registered under VAT. Since it is a qualified educational institution, the tuition fee charged by Abdul School is zero. However, the uniforms provided by Abdul School to students will be subject to a 5% VAT.
In addition, transportation services will not be provided to students, which means that these institutions will not charge VAT for school transportation services. At the same time, they will not be able to recover the value-added tax paid for related expenses when submitting the return.
For example: Abdul School, registered under VAT, provides transportation services to and from the school for students. As school transportation is exempt from VAT, the school transportation provided by Abdul School will not charge VAT. However, Abdul School cannot recover the VAT paid for related expenses (such as the uniforms of drivers and conductors).
Therefore, educational institutions in the UAE should pay attention to the tax rates applicable to the services they provide and conduct business activities accordingly.