08 May 2018

Over 100 days of VAT in the Education Sector

Authored by: Hadef & Partners, Sector Groups

In our previous Education sector briefing, we reported on the expectation, at that time, that schooling would be liable to VAT, but zero-rated (see http://www.hadefpartners.com/News/256/New-regulatory-regime-for-the-private-school-sector-in-Dubai). Since then, the new VAT law has come into force (Federal Law No. 8 of 2017) (the ‘New VAT Law’), as well as the VAT Executive Regulations (Cabinet Decision No. 52 of 2017) (the ‘Executive Regulations’).

It has now been over 100 days since the introduction of VAT in the UAE and we have taken the opportunity to provide a general overview of some of the key provisions of the New VAT Law in relation to the Education sector.

The New VAT Law and its impact the Education Sector

A general overview of some of the key provisions of the new law is provided later in this article, but as it relates to the Education sector in particular the following information is now clear. Article 45 of the New VAT Law lists those goods and services which are to be subject to VAT at a % (zero per cent) rate, and these include:

…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 Regulations of this Decree-Law…

With the publication of the Executive Regulations, which support and provide more detail about the New VAT Law, more specificity has been provided regarding the particular types of Education related goods and services that will be zero-rated. Article 40 of the Executive Regulations states that the supply of educational services shall be zero-rated if the following conditions are met:

  1. The services are supplied in accordance with the curriculum recognised by the governmental entity regulating the education sector where the course (to which the services relate) is provided.
  1. The supplier of the services is an educational institution recognised by the relevant governmental entity regulating the education sector where the course is provided.
  1. If the supplier is a higher education institution, the institution is either government owned, or receives more than 50% of its annual funding from the government.

Similarly, any printed and digital reading materials that relate to the curriculum provided by an education provider recognised under the above will also be zero-rated. However, provision of the above services to persons who are not enrolled with the educational institution shall not be zero-rated services, nor shall any other Goods (i.e. other than educational materials) provided by the educational establishment for the purposes of education. These non-zero-rated items would include school uniforms, electronic devices, on-site food and beverages, field trips (unless directly related to the curriculum, and predominantly non-recreational), extra-curricular activities, and membership of any student organisations.

For more information, please contact us on sectors@hadefpartners.com.