VAT classification for Schools & Nurseries

Admin
23 May 2021

Do you run a school or nursery, or in the accounts department of the same? Are you aware of the different classifications for VAT for your school? The education industry is one of the industries which has all the 3 types VAT - Standard Rated ( 5% ), Zero Rated ( 0%) & Exempt. This makes the VAT treatment slightly more complicated.

If the right classification is not used when filing the VAT returns, you would need to go back and file Voluntary Disclosures for all the returns with these errors. This will lead to additional penalties that will obviously impact the profits in the Income Statement.

Bottom Line

A school, nursery, or pre-school has various types of income sources. You can see most of them classified below based on the VAT treatment. Make sure your Tax invoice mentions for each line item the different VAT treatments.

Standard Rated Sales (5%)

In this category, you charge 5% in addition to the actual charge. Some of the incomes that fall in this Tax category are as follows-

Any supplies made to persons who are not enrolled in your school, nursery, or pre-school,
Uniforms, electronic devices, food and beverages,
Field trips which are not directly related to the curriculum,
Extracurricular activities are provided for an additional charge, and
Supply of membership in a student organization

Zero Rated Sales (0%)

If the curriculum and the school, nursery, or pre-school are recognized by the competent federal or local government, then the education services are to be zero-rated. If the education services provided by a school, nursery, or preschool are zero-rated, then the following can also be zero rated-

Supply of goods or services where the supply is directly related to the zero-rated educational service; and
Supply of printed or digital reading material which are related to the recognized curriculum,

This means no additional VAT to be charged, i.e. this sale is taxable at 0% VAT. This way no additional tax burden will be on parents paying for the tuition fees.

Exempt Sales

It is very common for schools, nurseries, or pre-schools to provide additional transport services to its students, from home to the location of the educational institution and vice versa. This type of service will be treated as an exempt sale.

An important point to note in an exempt sale is that all the VAT on expenses associated with such a sale cannot be claimed. This will include petrol, bus rental, or even the maintenance of vehicles.