Is VAT charged on nursery fees?

Article 45 - Goods and Services Subject to Zero Rate18 The zero rate shall apply to the following Goods and Services: 1. A direct or indirect Export of Goods and Services to outside the Implementing States as specified in the Executive Regulation of this Decree-Law. 2. International transport of passengers and Goods which starts or ends in the State or passes through its territory, including Transport-related Services. 3. Air passenger transport in the State if it is considered an “international carriage” pursuant to Article 1 of the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage by Air 1929. 4. Supply or Import of air, sea and land means of transport for the transportation of passengers and Goods as per the criteria and conditions specified in the Executive 18 Article amended as per Federal Decree-Law No. 18 of 2022. Federal Decree-Law No. 8 of 2017 and its amendments – As published by the Ministry of Finance 21 Regulation of this Decree-Law. 5. Supply of Goods or Services, or Import of Concerned Goods, related to the supply of the means of transport mentioned in Clause 4 of this Article and which are designated for the operation, repair, maintenance or conversion of these means of transport. 6. Supply or Import of air or sea rescue and assistance aircrafts or vessels. 7. Supply of Goods and Services related to the transport of Goods or passengers aboard air, sea and land means of transport pursuant to the provisions of Clauses 2 and 3 of this Article, designated for consumption on board; or anything consumed by any means of transport, any installations or addition thereto or any other use during transportation. 8. The supply or Import of investment precious metals. The Executive Regulation of this Decree-Law shall specify the precious metals and the standards based on which they are classified as being for investment purposes. 9. The first supply of residential buildings within 3 years of its completion, either through sale or lease in whole or in part, according to the controls specified in the Executive Regulation of this Decree-Law. 10. The first supply of buildings specifically designed to be used by Charities through sale or lease according to the controls specified in the Executive Regulation of this Decree-Law. 11. The first supply of buildings converted from non-residential to residential through sale or lease according to the conditions specified in the Executive Regulation of this Decree-Law. 12. The supply or Import of crude oil and natural gas. 13. The supply of educational Services and related Goods and Services for nurseries, preschool, school education, and higher educational institutions owned or funded by Federal or local Government, as specified in the Executive Regulation of this Decree-Law. 14. The supply of preventive and basic healthcare Services and related Goods and Services, and Import of related Concerned Goods according to what is specified in the Executive Regulation of this Decree-Law. Federal Decree-Law No. 8 of 2017 and its amendments – As published by the Ministry of Finance 22 Chapter Two – Exemptions

The onus is on the educational institution to retain the relevant documentary evidence that it is recognised, e.g. registration/licence issued by the relevant competent authority, and proof of funding from, or ownership by federal or local government. Other Persons supplying educational Services are not allowed to zero-rate their Services. 3.3.2 Qualifying Curriculum The second condition is that the educational Services must be provided in accordance with a curriculum recognised by the federal or local competent Government Entity regulating the education sector where the course is delivered. Courses that are not provided in accordance with such curriculum do not qualify for zero-rating. For example, the supply of executive education courses on leadership which do not form part of a recognised degree or accredited curriculum would not qualify for zero-rating. Another example is where a nursery is a Taxable Person and does not have an age-appropriate curriculum recognised by the relevant competent authority. In such case, the nursery would not be eligible to zero-rate their Services and the tuition charged will be considered to include VAT at 5%. Other examples of Services that are not regarded as Qualifying Educational Services include: • diplomas and non-degree courses, • tutoring and home schooling provided by any Person that is not a Qualifying Educational Institution, for example a private tutor, • skills development courses offered by training institutions, and • education management Services supplied as a separate supply by a third party, such as overseeing the campus on behalf of another entity, the supply of lecturers, assignment marking and other day-to-day operational support provided to a Qualifying Educational Institution. Zero-rating is an exception to the rules, and, therefore, the provisions should be interpreted strictly and narrowly. VAT Guide | Education | VATGED1 8

BASIC TAX INFORMATION BULLETIN Education Sector (Nurseries, Pre-schools, and Schools) 5. Are institutions in the Education Sector permitted to recover input VAT? Yes, educational institutions making only zero-rated or standard-rated supplies are eligible for a full recovery of input VAT, except for blocked items such as: - Certain entertainment services; and - Purchased, leased or rented motor vehicles that are available for personal use. However, where the educational institutions also render exempt transportation services, only a portion of the input VAT is recoverable. 6. Specific issues in the Education Sector a. An educational institute offers extra-curricular activities that are wholly related to the curriculum. Is this subject to VAT? The supply of extra-curricular activities can be zero-rated only where these are offered without any additional fee. However, where a fee is charged, this fee will be subject to VAT. b. Are supplies from vending machines subject to VAT? Yes, the supplies from vending machines are subject to VAT. The date of supply is the date on which the funds are collected from the vending machines. c. An educational institute offers a pick-up and drop-off facility for students. Are these services subject to VAT? No, transportation of students from home to the educational institute and vice versa is exempt from VAT. d. Are supplies of food and beverages in the canteen subject to VAT? What is the treatment for vouchers? Yes, the supply of food and beverages in the school’s canteen is subject to VAT. The supply of monetary vouchers for consideration up to the face value (or less) is disregarded for VAT purposes and the VAT liability crystallizes only upon redemption of the voucher. e. Is the supply of school uniforms subject to VAT? Yes, the supply of school uniforms is subject to VAT, irrespective of whether or not the uniforms are supplied as part of the supply of educational services.