Is VAT charged on school fees in the UAE?

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.

Educational Institution should then issue a Tax Credit Note in respect of the standard rated Tax Invoice for the application or registration fee, and issue a new Tax Invoice for the zero-rated tuition.11 Registration fees charged to students who are already enrolled in a program qualify for zero-rating, provided the fees are for an integral part of, and directly related to zerorated Qualifying Educational Services. Where students leave the educational institution before the end of the academic year or term, the educational institution may refund part of the registration or enrolment fee. Where VAT was accounted for on the fee and a Tax Invoice was issued, the educational institution should issue a Tax Credit Note for the amount refunded. 4.4.2. Events Fees charged by a Qualifying Educational Institution for fund raising and similar events will be subject to VAT where the event is not directly linked to, and integral to the course of study. For example, an event to sell Goods (e.g. cakes) to raise funds for a new library is not primarily carried out for the purposes of delivering the education. The sale of the Goods would be subject to VAT, except where the sale is conducted by and on behalf a non-Taxable Person, e.g. the parents of the students. However, where the Goods are sold by a Taxable Person, e.g. a caterer, the supply would, generally, be subject to VAT and the Taxable Person would be required to account for the VAT. This can be contrasted with a concert held by a school to showcase student achievement and progress in music or the performing arts, and where this is part of the Qualifying Curriculum. The sale of tickets to a ballet or musical recital that forms part of the student’s examination under a Qualifying Curriculum would qualify for zerorating if it can be evidenced that the concert or event is directly linked to the provision of education, e.g. where it forms part of a music student’s examination. 4.4.3. Field trips Fees charged for a field trip by a Qualifying Educational Institution may be subject to VAT at the zero-rate where the following conditions are met:12 • • the field trip is directly related to the Qualifying Curriculum, and the field trip is not predominantly recreational in nature. Where the field trip does not meet both conditions, the supply would, generally, be 11 Where the conditions in Article 59(3) of the VAT Executive Regulation are met, the Qualifying Educational Institution is not required to issue a Tax Invoice for a wholly zero-rated supply. 12 Article 40(4)(f) of the VAT Executive Regulation. VAT Guide | Education | VATGED1 11