FAQ for Education Sector - VAT edition
FAQ for Education Sector - VAT edition
07 Jun 2021Do 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 LineA 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.
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-
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-
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.
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.
Schedule a quick free consultation for professional advice on VAT consultation for your school, nursery, or pre-school.