The educational sector is one of the most essential and crucial units of any society that contributes to future generations’ development. The United Arab Emirates’ educational services are no exception, continuously making an effort to improve the curriculum and quality of education.
Some of the educational institutes are non-profit organizations, while some others are for-profit organizations. The organizations that earn profit by providing education are liable to pay value-added tax to the government authorities. However, the scenario differs according to the situation, which confuses the taxpayers and often earns them penalties.
If you are confused about a few scenarios regarding VAT on educational services, you have reached the perfect space. This article will provide you the opportunity to explore frequently asked questions about VAT on educational services.
Top 6 FAQs about VAT on the education sector in the UAE
The value-added tax applies to the educational institutes in the United Arab Emirates. However, the rate of tax is dependent on the type of service provided by the institute. The educational units have to be very cautious about these details, as it can affecttheir tax payment and penalties.
The following are some of the FAQs about value-added tax on the education sector in the UAE.
1. How does VAT treat education in UAE?
VAT treats the education sector in the UAE in two different ways. Educational institutes, as well as related goods and services pau zero-rated tax that falls in this category:
- Nurseries and preschools
- Schools are owned or funded by the local or federal government.
On the other hand, educational units falling in the below-mentioned category have to pay tax at five percent.
- Schools owned by the private sector.
The rate of VAT differs according to goods and services, which is another hassle for the management. Therefore, most of the private school owners hire services of the best VAT consultancy to comply with VAT requirements and avoid any penalties.
2. Which educational services are taxable?
The educational services that are not directly linked with curriculum are taxable in the United Arab Emirates. These include:
- Soft skills development courses
- Professional skills development courses
3. What are the registration criteria for qualifying institutes?
The registration threshold for educational supplies in the UAE is 375,000 united Arab Emirati dirhams. If any school or educational units exceed this mandatory registration threshold, it is liable to seek registration.
On the other hand, if the provided goods and services do not fall in this criterion, then the institutes can file for VAT exception. In case it is granted, they will not be able to recover input VAT according to their expenses.
4. Are goods and services provided by educational institutes taxable?
The goods and services provided by the qualifying educational institutes that are related to education fall under zero-rated tax. It includes the provision of study material like books and notes. In addition to it, interactive reading materials like blogs, journals, and webpages also fall under the same category.
5. How does VAT apply to student accommodation service?
Most of the educational units try to provide on-campus or adjacent to campus accommodation to the students. The purpose of this is to provide them a quality atmosphere to learn better and polish their skills. However, most of the educational institutes stay confused about the VAT implications of this service.
VAT does not apply to the provision of service of accommodation to the students. This service is exempted from VAT payment. However, the educational institutes can also not recover VAT incurred at the expense of this service.
6. What are the exceptions to zero-rated educational service?
There are certain goods and supplies which are not directly related to education but are still provided by the educational institutes. Such goods and supplies are an exception to the zero-rated VAT implication. A standard rate of five percent is applied to the provision of such services. These include the following.
- Goods and services provided to the unenrolled persons.
- Uniforms provided by the qualifying educational institutes.
- Electronic devices used in educational institutes.
- Food and beverages are supplied by the qualifying educational institutes.
- Recreational field trips are arranged by the qualifying educational institutes.
- Extracurricular activities are arranged by the qualifying educational institutes.
If you are confused about any of these services or their subcategories, you can hire the support of professionals and fulfill your responsibility diligently. You can consult the best VAT consultancy in Dubai and comply with all VAT requirements, registration, and return filing without any delay or error.
Seek the consultants if you have more questions!
Having detailed knowledge about various VAT implications is quite important to save your organization from fines and penalties. If you have any more questions, you do not need to suffer alone. You can always seek the help of consultants to resolve your confusion and pay your responsibilities toward the state. So, contact the professionals now to avoid any more inconvenience.