Impact of VAT on Education Sector in Bahrain

Education Sector is a very important sector for any country. Under the Common framework of GCC VAT Agreement, it is stated to make education sector either Exempt or Zero Rated. Based on this common framework, State of GCC can make Education Sector as Exempt or Zero Rate of Tax. The Kingdom of Bahrain has opted to make Education Sector Zero Rated under the VAT regime. The advantage to have Goods or Services or Both under zero rated is to claim VAT paid on tax on supplies received by the registered person. As per Clause 12 of Article 53 of Bahrain VAT Law Zero Rated Supplies shall apply to , “Supply of educational services and related goods and services to kindergartens, pre-primary education, basic, secondary and higher education.” As per the Regulations the educational institutions must be licensed by a competent authority in Bahrain and the educational services must be provided to a student who is enrolled in that school or institution. It means that supply of education services and its related goods and services for kindergartens, pre-primary education, basic, secondary and higher educations shall be zero rated. Now the question will arise, what shall be the meaning of “Related Goods and Services” which shall qualify for Zero Rate of Tax. Below are the list of related Goods and services which shall qualify for zero rate of tax for education sector: Subscription fees, application fees or any form of administration fee along with printed and digital books and reading material which are educational in nature and are directly related to the curriculum. The list also would include student accommodation supplied by the educational institution to students enrolled with the educational institution provided that such accommodation has been constructed or adapted specifically for use by students. Activities and trips organised by the educational institution for its students if these form part of the curriculum and are not predominantly recreational in nature. There are certain other goods or services, or both provided by educational institute which are categories under standard rated supplies. These are: The provision of school uniforms, Stationery, recreational trips, Food and beverages supplied at the educational institution, Electronic devices supplied by the educational institution, education services by Non-Licensed Institute and professional education or vocational training except provided by a licensed-polytechnic educational institute. Based on above analysis, Educational Institutions need to bifurcate their goods or services or both based on rate of tax i.e. Zero rate or Standard rate and consider the impact on fees charged to students.

Education Sector is a very important sector for any country. Under the Common framework of GCC VAT Agreement, it is stated to make education sector either Exempt or Zero Rated. Based on this common framework, State of GCC can make Education Sector as Exempt or Zero Rate of Tax. The Kingdom of Bahrain has opted to make Education Sector Zero Rated under the VAT regime. The advantage to have Goods or Services or Both under zero rated is to claim VAT paid on tax on supplies received by the registered person. As per Clause 12 of Article 53 of Bahrain VAT Law Zero Rated Supplies shall apply to , “Supply of educational services and related goods and services to kindergartens, pre-primary education, basic, secondary and higher education.” As per the Regulations the educational institutions must be licensed by a competent authority in Bahrain and the educational services must be provided to a student who is enrolled in that school or institution. It means that supply of education services and its related goods and services for kindergartens, pre-primary education, basic, secondary and higher educations shall be zero rated. Now the question will arise, what shall be the meaning of “Related Goods and Services” which shall qualify for Zero Rate of Tax. Below are the list of related Goods and services which shall qualify for zero rate of tax for education sector: Subscription fees, application fees or any form of administration fee along with printed and digital books and reading material which are educational in nature and are directly related to the curriculum. The list also would include student accommodation supplied by the educational institution to students enrolled with the educational institution provided that such accommodation has been constructed or adapted specifically for use by students. Activities and trips organised by the educational institution for its students if these form part of the curriculum and are not predominantly recreational in nature. There are certain other goods or services, or both provided by educational institute which are categories under standard rated supplies. These are: The provision of school uniforms, Stationery, recreational trips, Food and beverages supplied at the educational institution, Electronic devices supplied by the educational institution, education services by Non-Licensed Institute and professional education or vocational training except provided by a licensed-polytechnic educational institute. Based on above analysis, Educational Institutions need to bifurcate their goods or services or both based on rate of tax i.e. Zero rate or Standard rate and consider the impact on fees charged to students.