With less than a month to go before VAT is implemented in both the Kingdom of Saudi Arabia and the United Arab Emirates, legislation and regulations have been finalised. As business across the GCC move into a new tax era, key decision makers must ensure that their people, their systems and their technologies are sufficiently prepared – and sufficiently agile – to deal with a new business paradigm.

 

What is VAT?

  • VAT is a tax on consumption, not income or profits.
  • The GCC countries have agreed a standard VAT rate of five percent (5%).
  • Supplies of goods and services are generally standard-rated but can also be zero-rated, exempt or out of scope.
  • Registered suppliers will account for VAT on the price of a good or service they supply and pay VAT to the tax authority on a regular basis.
  • Registered businesses should (where the supplies they make are either standard- or zero-rated or out of scope) be able to recover most of the VAT they incur in making those supplies.
  • Registered businesses that make supplies that are exempt from VAT will not be able to recover the VAT they have incurred in the course of making those supplies.
  • Registered businesses that make supplies that are predominantly zero-rated will usually be in a VAT refund position.

How will VAT affect the education sector?

  • GCC states have discretion in the VAT treatment of education supplies.
  • n many parts of the world, education is either exempt or zero-rated. However, in Saudi Arabia’s VAT implementing regulations, education services are subject to VAT at the standard rate (five percent).
  • While education service providers should be able to claim input tax incurred in the provision of their services, they must consider the impact of charging their customers VAT.
  • Education service providers will need to carefully watch their competition to see how they respond to VAT and to remain competitive.

 

 

 

 

 

 

 

What should education providers be doing now?
  • Consider VAT's impact on pricing.
  • Carefully examine place of supply issues, particularly in relation to overseas students from global campuses.
  • Review capital expenditure from a VAT perspective

Important note

Keypoint’s VAT briefs are based on a translation of the Unified VAT Agreement for the Cooperation Council for the Arab States of the Gulf (the GCC VAT treaty), Saudi Arabia’s VAT legislation, the UAE federal law, the Saudi implementing regulations, the UAE’s executive regulations and general VAT principles and are provided for information purposes only. Saudi Arabia and the UAE continue – as of the date of release of this brief – to work towards an implementation date of 1 January 2018. This brief is not a substitute for professional advice. You should seek appropriate professional advice from a tax advisor before making any decision relating to your particular circumstances.


Mubeen Khadir
Head of Tax Consulting
mubeen.khadir@keypoint.com

+973 17206879

+973 3222 6811


George Campbell
Associate Director
george.campbell@keypoint.com

+973 17206872

+973 3833 8641