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:
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.
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.
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.
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.
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.
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.
The transportation of students from home to school and vice versa is exempt from UAE VAT Law.
The supply of food and beverages in the school canteen is subject to VAT at a standard rate.
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.
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.
Mr. Pradeep Sai
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