Following on from the release of the GCC VAT framework, Saudi Arabia’s General Authority
of Zakat and Tax (GAZT) has released a draft version of the law as well as a bilingual version of its VAT implementing regulations. All businesses must now be actively preparing for
VAT - 1 January 2018 is less than 100 working days away.

 

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.
  • Goods and services can be exempt, zero-rated or standard-rated.
  • Registered suppliers will add VAT to the price of a good or service they supply, collect the tax and pay it to the tax authority on a regular basis.
  • Registered businesses should (where the supplies they make are either standard or zero-rated) be able to recover the VAT they have incurred in the course of 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 refund position.

How will VAT affect the education services sector?

  • GCC states have discretion in the VAT treatment of education supplies. 
  • In many parts of the world, education is either exempt or zero-rated. However, based on the draft VAT implementing regulations which have been released by Saudi Arabia’s GAZT, education services will be 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?
  • What is defined as education?
  • Will education materials be subject to VAT?
  • 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
Based on VAT regimes in other jurisdictions, schooling and university education is likely to be zero-rated.  However, we may have to wait for further clarifications on this, including the treatment of vocational training and private tuition. 

Important note
These briefs are based on a translation of Saudi Arabia’s draft VAT laws and general VAT principles and are provided for information purposes only. This document 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