VAT for Schools in UAE

From 1 January 2018 UAE will be implementing a VAT for 5% on all goods except for educational institutes which are zero rated As per Article 45

The supply of educational services

“The supply of educational services and related Goods and Services for nurseries, preschool, elementary education, and higher educational institutions owned or funded by Federal or local Government, as specified in the Executive Regulation of this Decree-Law”

Which means that services offered by government owned schools will be zero rated, on the other side these entities will be able to claim input tax paid. Educational institutes are required to carefully review their activities and see these activities need to be charged at 5% or 0%. School fee will be subject to 0% however extracurricular activities such as sports classes, music lessons or school transport will be subject to 5% VAT. As per the regulation the responsibility to correctly account for the tax lies with the corporation, check our thread Compliance for VAT in UAE for more details.

Review Revenue Activities

These institutions are required to review their revenue activities and see how they need to be accounted. As per the regulation computation of tax return is equals to output tax minus recoverable input tax. Procurement of educational institutions might include purchase of furniture, books, copies, computers and other fixed assets which brings input tax while majority of their services will be zero rated. This means in majority of their scenarios they find themselves with tax credit with FTA.

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