February 11 2020

VAT treatment of education sector – bulletin issued

Source: IBFD Tax Research Platform News

On 9 February 2020, the Federal Tax Authority (FTA) launched the first edition of the "Basic Tax Information Bulletin" (the Bulletin) on the VAT treatment of the education sector. Future editions of the Bulletin will address sector-wise VAT treatment through periodic detailed tax information.

The first edition of the Bulletin focuses on the VAT treatment of the education sector, including schools, pre-schools and nurseries. The Bulletin explains that the supply of educational services, including printed or digital reading material, is zero rated where both the curriculum and educational institutions are recognized by the competent federal or local government. The services of transporting students to and from the educational institutions are treated as exempt supplies. The standard VAT rate of 5% applies to supplies, including supplies made to persons who are not enrolled to the educational institutions; uniforms, electronic devices, food and beverages; field trips unrelated to curriculum; extra-curricular activities provided at an additional charge; and supplies provided by a business that is not an educational institution.

The Bulletin also states that educational institutions making exempt supplies or zero-rated supplies are required to register for VAT purposes if the value of supplies has exceeded the mandatory registration requirement threshold of AED 375,000 in the past 12 months, or if the value is expected to exceed this threshold in the next 30 days.

The educational institutions are eligible for recovery of input VAT, with the exception of certain items such as certain entertainment services and purchased, leased or rented motor vehicles that are available for personal use.

The Bulletin also provides clarifications on certain specific issues in the education sector.

The Bulletin is published on the official website of FTA in the VAT section under public clarifications.