UAE VAT Impact on Educational sector
All businesses having turnover exceeding AED 375,000 shall register for VAT. They must charge their customers VAT on the invoice amount, file quarterly returns and pay the VAT collected to the Authority within the stipulated time. Standard rate of VAT in UAE is 5%. In addition, some supplies are Zero rated and some others, exempted. Basic healthcare services are exempted.
VAT & Education sector
Zero rated categories:
• Course fee for nurseries, preschool and elementary education
• Course fee for higher education as specified in regulations
• Most of related goods and services
• Admin fee directly related to the course
Standard rated categories:
• Sales from campus shops, admission to plays, dances etc
• Short term courses to non-students
• Sale of food to non-students/staff
• Conferences not of an educational nature
• Other training and related expenses
Education care sector is Zero rated, why they must register for VAT?
Though the basic education is zero rated, the elective services fall under the gamut of VAT. In the practical scenario, most of the education providers will be providing zero rated services as well as taxable services. The VAT paid on expenses related to taxable services can be claimed whereas the VAT paid on exempt services cannot be claimed. This will increase the cost of the operations.
The basic education is zero rated, which means they can recover the input tax paid. They must make sure the transactions are properly classified according to the tax rates and all input taxes correctly recorded, which requires the services of an expert. Additionally, tax collected must be remitted within the specified time, which might affect the cash flow of the healthcare provider
The businesses must maintain proper accounting records for 5 years and invoices issued should contain the required information. Qualified accounting staff also required to maintain the accounting and tax compliance