Parents find ‘minimal’ effect on family budget

The higher education private sector will remain attractive to families despite the five per cent value added tax on tuition fees, a VAT expert has said.

Khadija Rachdi, the head of legal and tax, compliance and regulatory affairs at Phoenix Management Solutions, said that the five per cent VAT is one of the “lowest” worldwide. She believes there will be only a “minimal” impact on family budgets because of the tax.

“The impact of VAT in the private sector of higher education is still unknown as of today,” she said. “We have to keep in mind that it is a very low rate compared to other countries such as United Kingdom, which apply a rate at 20 per cent.

“We expect minimal impact on the family budget. The private higher educational sector will be still attractive for the families at this low rate.

“VAT has been implemented to raise an additional source of revenue for the GCC (Gulf Cooperation Council) and it is expected to generate approximately Dh12 billion for the first year of application in the UAE and thereafter, shall generate more revenues.

“The introduction of the VAT in the UAE has been motivated by the government to diversify the income source and dependence of the revenues from the oil and other hydrocarbons as well as to maintain and provide the high-quality public services.

“After the first year of implementation, the expert shall probably be able to identify the real impact of the VAT in each sector and specifically in the private higher education sector.”

Besides tax on university fees, VAT is also applicable to uniforms and books in private schools across UAE. Rachdi said families are still seeking guidance when it comes to learning where and how the VAT will be applied in the education sector.

“As of today, it is still unclear which rate shall apply on specific supply of goods and services. Families are seeking more guidance on how VAT will be applicable in the education sector,” Rachdi said.

“Basically, zero per cent VAT is applicable to the private and public-school education sector and related goods and services provided by education sector.

“The same rate at zero per cent is also applicable for higher education provided by institutions owned or funded by the government, as well as the related goods and services provided by these institutions.

“However, for the education provided by the private higher educational institutions and related goods and services, a VAT rate at 5 per cent shall be applicable.

Further, the five percent VAT will also be applicable on items like school uniforms, stationary items, electronic equipment, renting school grounds for events, after-school activities for extra fee and school trips for recreation or not within curriculum.”

sarwat@khaleejtimes.com

We expect minimal impact of VaT on the family budget. The private higher educational sector will be still attractive for the families at this low rate.” Khadija Rachdi, head of legal and tax, compliance and regulatory affairs,

Phoenix Management Solutions