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| 22 August, 2017

Schools and kindergartens will be zero-rated for VAT: UAE official

Tax authority consultant says schools and kindergartens can’t blame VAT for raising fees. Image used for illustrative purpose.

Tax authority consultant says schools and kindergartens can’t blame VAT for raising fees. Image used for illustrative purpose.

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Tax authority consultant says schools and kindergartens can’t blame VAT for raising fees

22 August 2017
Schools and kindergartens in the UAE should not increase their fees next year as they will not be required to pay the new 5 percent value-added tax (VAT) being introduced in January, a consultant in the UAE’s Federal Tax Authority said.

According to the Emarat Alyoum newspaper, the consultant, Saeda Al Qayoumi, said: “VAT on schools and kindergartens in the country will be imposed at a zero percent rate. Therefore, schools and kindergartens don’t have a right to increase their fees."

The zero percent rate allows companies and institutions to reclaim VAT paid on business costs and services.

Al Qayoumi was speaking at a VAT workshop organised by the Abu Dhabi Chamber of Commerce and Industry and the Federal Tax Authority on Sunday. She said details on VAT for universities and other educational institutes will be announced when the VAT law is released, which is expected to be by the end of the current quarter.

The UAE and Saudi Arabia will be the first GCC countries to introduce VAT next year, the UAE’s director-general of the Federal Tax Authority, Khalid Ali Al Bustani, said at a press conference last week. He said the four other GCC countries, Bahrain, Kuwait, Qatar and Oman, will implement VAT later in 2018.

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VAT will be imposed on a range of goods and services in the UAE, but Al Bustani said that full details about the goods and services that will be subjected to VAT and any exemptions will be spelled out in the tax’s regulatory framework, which should be released in the fourth quarter of the year.

Jeanine Daou, a partner and indirect tax leader at PwC Middle East, said the new framework would give more precise details about the scope of the zero rate of VAT and how it will be applied to schools.

“In theory, if they (the officials) are saying that schools are zero-rated then no increase in the fees should happen because of VAT,” Daou said.

“The regulatory framework typically would comprise the details of the zero rate, what the scope of the zero rate is and what will be covered by the zero rate,” she said.

She said it was possible that the UAE’s financial officials could still apply the 5 percent rate to universities and other educational institutions.

“Typically, some countries would differentiate between public institutions and private institutions but I cannot give any specific speculations at this stage,” she said.

Medicines and Exports

Al Qayoumi said the UAE’s exports to non-GCC countries, along with some medicines and medical equipment, would also be subjected to a zero rating for VAT.

“VAT on the Emirati direct and indirect exports to outside the GCC will be at a zero rate for the sake of enhancing and supporting the competitiveness of the Emirati exports to the foreign markets,” Al Qayoumi said.

Al Qayoumi also confirmed what the ministry of finance announced on its website last July that international transportation and certain investments in precious metals will be also be subjected to a zero percent VAT.

She said that some financial services, local transport services and empty lands will be exempt from VAT, which means that they will not charge VAT for the services they provide, but unlike zero-rated VAT businesses, they cannot reclaim VAT on their own input costs.

Sunday’s workshop followed one held on Saturday on VAT’s impact on the real estate sector that was also organised by the Abu Dhabi Chamber and the Federal Tax Authority, according to Emirates News Agency, WAM.

A third workshop to spread general awareness about the VAT is expected to be held in Sharjah on August 23. It will be organised by the Sharjah Chamber of Commerce and Industry and the Federal Tax Authority, WAM said.

© Zawya 2017