Value Added Tax is an indirect tax which is levied on the supply of goods and services. There are only a few items exempted from VAT in the UAE. Few other items are zero-rated and the rest of the items are standard rated.
What do you think is the zero rated item among the following:
- Retail purchases
- Repairs and maintenance services
- Educational services
- Hotels and restaurants
Answer:
3) Educational services.
Explanation:
The main educational services and related goods and services supplied shall be zero rated, if supplied by any of the following ‘qualifying educational institutions’:
- Nurseries, preschools and schools
- Higher educational institutions owned or funded by Federal or local Government.
This means that a ‘qualifying educational institution’ shall not charge VAT on the zero rated educational services they provide, and will be able to recover the VAT they pay on related costs when they file their tax returns. Any educational services provided by other entities not listed above shall be subject to the standard rate (i.e. 5%).
However, there are supplies related to the provision of the education services which are subject to the standard rate (i.e. 5%)
- Goods and Services supplied by a ‘qualifying educational institution’ to persons who are not enrolled in it;
- Any Goods, other than educational materials provided by a ‘qualifying educational institution’, that are consumed or transformed by the students being taught by it;
- Uniforms or any other clothing which are required to be worn by a ‘qualifying educational institution’, irrespective of whether or not they are supplied by such institution as part of the supply of educational services.
- Electronic devices used in educational services, irrespective of whether or not supplied by a ‘qualifying educational institution’ as part of the supply of educational services.
- Food and beverages supplied at a ‘qualifying educational institution’ including supplies from vending machines or vouchers in respect of food and beverages.
- Field trips, unless these are directly related to the curriculum of an education service and are not predominantly recreational.
- Extracurricular activities provided by or through a ‘qualifying educational institution’ for a fee additional to the fee for the education service.
- A supply of membership in a student organisation.
- Another exception to zero rating is the provision of school transportation, which falls under “domestic transportation” and hence is exempt.
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