VAT exemptions for schools in UAE: FTA releases circular

Abu Dhabi: The Federal Tax Authority, FTA, launched the “Basic Tax Information Bulletin” as part of its campaign for 2020, as it seeks to continue raising awareness about taxes and providing taxpayers with periodic and detailed tax information.

In its first edition, the bulletin focuses on tax treatment for the education sector, including schools, pre-schools, and nurseries.

Zero-rated, standard-rated and exemptions

Available via the FTA’s website, as of today, the document explains that the supply of educational services, including printed or digital reading material related to the recognised curriculum, among others, is zero-rated, where both the curriculum and the educational institution are recognised by the competent federal or local government.

The bulletin also noted that services of transporting students from home to the location of the educational institution are exempt from taxes.

On the other hand, the supplies that are considered “standard-rated” and subject to five per cent Value Added Tax, VAT, include supplies made to persons who are not enrolled in the educational institution, uniforms, electronic devices, food and beverages, field trips that are not related to the curriculum, and goods and services provided by a business that is not an educational institution.

According to the bulletin, educational institutions making zero-rated and standard-rated supplies are required to register for VAT, provided the value of their supplies exceeded the mandatory registration threshold of Dh375,000 in the last 12 months, or is expected to exceed it in the next 30 days.

These institutions are, therefore, required to issue tax invoices.

Registered educational institutions are eligible to recover input VAT, except for “blocked” items, such as certain entertainment services, and purchased, leased, or rented motor vehicles that are available for personal use.

“The new ‘Basic Tax Information Bulletin’ service is part of the FTA’s efforts to educate businesses, in general, regarding their rights and obligations under the UAE tax system. Each edition of the bulletin will address tax treatment in a given sector that is subject to the tax system, delving into the details of the topic and presenting it in a simple manner,” said FTA Director-General Khalid Ali Al Bustani.

The bulletin seeks to publish tax information pertaining to every sector so that businesses can refer to and easily understand where there are concepts or practices related to tax laws, executive regulations, and procedures that they find ambiguous.