Mechanism for collecting VAT in education sector explained

The General Authority of Zakat and Tax (GAZT) has announced the mechanism by which the government will bear the value-added tax (VAT) on behalf of Saudis benefiting from services provided by the private education sector.

According to VAT implementing regulations, private sector education services are subject to the standard tax rate of 5 percent. The regulations also explained the procedures and mechanisms of tax collection, including the issuance of tax invoices that include the tax amount due.

In light of the Royal Decree A/86 dated 18/4/1439 AH, GAZT set up a new mechanism in coordination with the Ministry of Education for tax collection. As per the mechanism, private education institutions registered in the VAT system are required to issue tax invoices to Saudi citizens on the amount due for the education services provided to them, but without VAT. The institutions must also confirm the identity of the recipients of the service and include their national identity information on the tax invoices issued to them.

As for the educational services provided to non-Saudis, the institutions are required to issue tax invoices including the 5 percent VAT, as per VAT law and regulations.

When filing their tax returns through the VAT website, GAZT said, private sector institutions should enter transactions related to non-Saudi recipients of the services which are subject to the standard 5 percent rate in the “Local Sales Subject to the Standard Rate” section.

Transactions related to Saudis, meanwhile, should be entered in the "Sales to citizens (private health services/ private education/first residence)".

Like other sectors, the private education institutions registered with VAT are entitled to deduct the tax due on inputs, as outlined by VAT law and regulations.

To explain the new mechanisms in-depth, GAZT plans to organize a series of awareness workshops in cooperation with the concerned agencies in coming days, said a statement issued by the authority.