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Education and health care largely escape VAT price increase

The tax authority has confirmed that education and health care will not be taxed

Image Credit: Ahmed Kutty/Gulf News
students after schools are reopen the summer vaction.
Gulf News

Dubai: The Federal Tax Authority (FTA) delivered a piece of welcome news to UAE residents on Wednesday morning, when it confirmed that both education and health care will be zero-rated when the country introduces VAT next year.

There has been some confusion since August 2017, which the FTA blames on a mistranslation, as to whether or not private education would be subject to a 5 per cent rate hike on January 1, 2018.

According to the long-awaited draft of the FTA’s executive regulations on VAT, the supply of educational services shall be zero-rated if the following conditions are met: Firstly, the institution’s curriculum must be in accordance with the Ministry of Education, and secondly, the institution must be recognised by the Ministry of Education.

The supply of educational services, the executive regulations state, must be provided in accordance with “the curriculum recognised by the Ministry of Education, Ministry of Higher Education and Scientific Research, or the competent government entity regulating the education sector in the emirate in which the course is delivered.”

The regulations continues that the supplier of the educational services must also be “an educational institution which is recognised by the Ministry of Education or Ministry of Higher Education and Scientific Research, or the competent government entity regulating the education sector in the emirate in which the course is delivered,” in order to be zero-rated.

As for institutions of higher education, such as universities, the institution must either be “owned by the Federal or local government or receive more than 50 per cent of its annual funding directly from the Federal or local government.”

A separate Federal Decree-Law No. 8 of 2017, released towards the end of August, outlined, among other things, which goods and services will be exempt, or zero-rated, come January 1.

The Decree-Law, posted to the UAE Ministry of Finance’s website, highlighted some of the goods and services that are either exempt or zero-rated, including public transport, commercial airlines, precious metals, the supply of crude and natural gas, and certain types of education and health care.

Many of these goods aren’t taxed because they provide beneficial services to society, whilst others avoid tax simply because they are too complicated, such as financial services.

It was confirmed in Wednesday’s executive regulations that health care services would also be zero-rated.

The document, posted to the FTA’s website, stated that: “The phrase ‘health care services’ means any Service supplied that is generally accepted in the medical profession as being necessary for the treatment of the Recipient of the supply including preventive treatment.”

Experts say that the inclusion of preventive treatments is important, as it was previously not clear that things like diabetes tests and malaria shots would be zero-rated.

A supply of health care services shall be zero-rated, according to the executive regulations, on the condition that the supply is “made by a health care body or institution, doctor, nurse, technician, dentist, or pharmacy, licensed by the Ministry of Health or by any other competent authority,” or relating to the “well-being of a human being.”

Zero-rated health care goods that will be announced in a separate cabinet decision, according to the document.

The regulations go on to state that health care services do not include, among other things, elective treatments for cosmetic reasons, other than those prescribed by a medical professional for treating or preventing a medical condition.

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