FTA’s second Business Bulletin – Higher Education Sector
The second Business Bulletin for the region’s taxpayers has been released by the FTA this week. Each publication of these Bulletins is expected to explain the tax treatment in a specific sector, with practical scenarios and examples.
As the Bulletins are issued as an infographic and written in a summarized format, thus reaching a larger audience, they ideally can be used for quick reference. While the first Bulletin (http://rethink-hq.com/ftas-first-business-bulletin-education-sector/) addressed the VAT treatment for the primary education sector, the second Bulletin focuses on tax treatment for the higher education sector (universities, higher education institutions).
Key takeaways from the Bulletin
- The supply of education services by Universities and higher education institutions is zero-rated, where
– it is owned or funded by the government by more than 50%; and
– both the curriculum and the institution are recognized by the competent federal or local government.
- Where education services by higher education institutions are zero-rated, the supply of goods or services directly related to the zero-rated educational service, or supply of printed or digital reading material related to the recognized curriculum is also zero-rated.
- The supply of services of transporting students from home to the location of the higher education institution and vice versa are exempt.
- The application/registration fees before students are enrolled in the higher education institution should be standard rated at 5% as the recipient is not considered enrolled at the time of submitting the registration application.
- The rental of grounds or conference halls in higher education institutions will be subject to VAT at 5%.
- The research services conducted by a higher education institute for external entities are subject to VAT at 5%.
- Where a higher education institution only makes zero-rated, an exception from VAT registration may be applied.
- Tax Invoice may not be issued where the supply qualifies to be wholly zero-rated, and there are sufficient records to establish particulars of the supply.
- Higher education institutions making zero-rated or standard-rated supplies are eligible for a full recovery of input VAT, except for blocked expenses such as entertainment expenditure, motor vehicle expenditure that are available for personal use.
- Where higher education institutions also provide exempt transportation, only a proportion of that input VAT is recoverable.
- The supply of extra-curricular activities can be zero-rated only where these are offered without any additional fee. However, where a fee is charged, this fee will be subject to VAT.
- A field trip is zero-rated if it is directly related to the curriculum, and it is not predominately recreational.
- The supplies from vending machines are subject to VAT. The date of supply is the date on which the funds are collected from the vending machines.
- The supply of foods and beverages in the canteen are subject to VAT. The supply of a monetary voucher for consideration up to the face value is disregarded for VAT purposes and the VAT liability appears only upon redemption of the voucher.
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