VAT for UAE schools, nurseries clarified

Abu Dhabi: The upcoming value-added tax (VAT) will not be applicable to nurseries and schools, a senior official said on Monday. VAT will be introduced in the UAE from January 1 next year.

“By mid-2018, the VAT law will detail how the tax will impact the universities and educational institutions across the country,” Saeda Al Qaddoumi, an adviser at the Federal Tax Authority, said.


Al Qaddoumi said schools and nurseries can get tax refunds for supplies and services, furniture and computers.

But schools will not be allowed to raise fees over VAT.

“UAE firms will be able to begin registering VAT from the middle of next month. Companies will be able to register for VAT through the Federal Tax Authority’s website from mid-September,” said Khalid Ali Al Bustani, the director-general of the Federal Tax Authority, last week.

While about 300,000-350,000 companies in the UAE will be impacted, the whole population of the country will be subject to the new tax system.

VAT is a consumption tax; thus, tax burden is expected to reflect on the prices and consumption. The impact of VAT on inflation and government revenue will vary depending on the proportion of consumption in the economy and how much of the consumption base is captured by VAT.

Al Qaddoumi said VAT will not be applicable to medicines and medical equipment. “A decision will be issued to detail all sort of medicines and equipments,” Al Qaddoumi said.

Al Qaddoum said employees will not be paying VAT because they are not practicing an independent activity.

Analysts say with some key components of the consumer price inflation basket in the UAE remaining either zero-rated or exempt will mean that the percentage point rise in inflation directly from VAT will be far less than the tax rate, especially as residential housing tends to have the largest weighing in on the inflation basket … they also said that the cost of living will likely go up slightly for a lot of people, but this will all depend on the individual’s buying preferences and lifestyle. If you keep on taking home things that are taxable and maintain an expensive lifestyle, expect your outgoings to increase.

Al Qaddoumi said VAT is not applicable to exports to countries outside the GCC. “Exporters are entitled to refund any taxes imposed on exports or material used in manufacturing these exports,” he said.

Although the final list of exempt items is not yet out, Al Qaddoumi said that most food items will fall under the 5 per cent VAT rate, including basic goods. Imported goods and services will also be taxed at 5 per cent. VAT will also be applicable to utility bills (electricity and water) as well as mobile telephone and internet bills.

Businesses collecting VAT can register online and subsequently file returns on a regular basis using the government’s e-services.



* By the third quarter of 2018, the Federal Tax Authority (FTA) will interpret the new law on VAT to determine whether universities and similar educational institutions will come under its ambit. If they come under the VAT domain, the authority will announce the quantum of tax applicable to them, the FTA said on Monday.


*. The authority has already made it clear that VAT is not applicable to schools.

International transportations by air and sea (aircraft and ships) are also not under the scope of VAT. Newly constructed buildings will not come under VAT for the first three years, the FTA said.


*. Stuart Holsts, an expert at the FTA, told the media on Monday, regarding the electronic collection of VAT, it will be collected from where the customer benefits from the product. For example, if a customer brings a product to the UAE, he or she has to pay the tax here. He also clarified that the income of individuals, including the salary of employees, is not under the tax regime now.

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