How Is Education Treated Under VAT?
If provided by any of the following “qualifying educational institutions,” the primary educational services as well as any ancillary products and services will be provided at zero rating: Nurseries, preschools, and schools
Universities that are either locally or federally owned or supported.
This means that a “qualifying educational institution” will be entitled to claim back the VAT they pay on associated expenses when they file their tax returns, and they will not be required to charge VAT on the zero-rated educational services they offer.
Any educational services rendered by organisations not on the above list will be charged at the usual rate, which is 5%.
Is registration for VAT mandatory for an approved educational institution?
In response, yes, the qualifying educational institution must register under VAT if its supply exceeds AED 375k. The institution may, however, request an exemption from registration if it offers no products or services subject to a 5% sales tax. If an exception from registration is granted, the institution won’t have to file regular tax returns, but it also won’t be able to claim input tax that it paid on expenditures.
Are there any educational services provided by accredited educational institutions that are exempt from the zero rating?
In response, sure. Even if they are supplied by an approved educational institution, many supplies related to the provision of educational services are subject to VAT at 5%, including:
Products and services provided to non-students of the institution.
Uniforms or any other article of apparel that students attending an approved educational institution are obliged to wear, regardless of whether the institution provides the uniforms as part of the provision of educational services,. Electronic equipment is utilized in instructional programs.
VAT applicable to all education-related supplies?
No. Certain suppliers in the education sector are zero-rated, while others are exempt, in accordance with the applicable VAT legislation in the United Arab Emirates.
Can institutions of higher learning recover input VAT?
Indeed. If educational institutions solely produce zero-rated or standard-rated supplies, they will be able to recoup the input VAT in full. Nevertheless, the following products are categorized as barred items, and such institutions are not permitted to recoup the input VAT on them: A few amusement providers offer automobiles that are bought, leased, or rented specifically for personal usage.
What about money from grants or sponsorships?
Educational institutions occasionally obtain grants or sponsorships from the federal government or other organizations. Whether you are giving the donor something of value in exchange for the funds they have provided will determine how grant and sponsorship revenue is treated for VAT purposes.
Conclusion: Due to the fact that education is a fundamental industry, investors must carefully consider their VAT obligations when providing educational goods and services. Education service providers must be aware of a number of VAT-related topics, including tax ratings for different services, possibilities for input VAT recovery, and the issue of tax bills.