Bahrain Guide: What is VAT in Bahrain for Educational Services?
Educational services and related goods and services by kindergartens, pre-primary, primary, secondary, and higher education institutions are subject to zero rates. For the zero-rate to apply:
- The school or educational institution licensed by the competent authority in the kingdom of Bahrain, and
- Supplies are provided directly to an enrolled student in that school or institution.
Certain educational services are not subject to the zero-rate (and will be subject to the 5% rate), including:
- Professional education, and
- Vocational training, unless providing such vocational training by a polytechnic educational institution. The license by the competent authority in the kingdom of Bahrain.
What is the VAT Treatment in Bahrain of Goods and Services Related to Educational Services?
Goods and services related to educational services are mandatory will be taxable at zero rates. It includes:
- Subscription fees, application fees, or any form of administration fees,
- Printed and digital books and reading material that is educational and is directly related to the curriculum,
- Student accommodation supplied by the institution to enrolled students. Provided construction or adaption specifically for student use, and
- Activities and trips related to a specific educational curriculum organized by the educational institution
What are the Goods and Services not considered as Related to Educational Services in Bahrain?
Goods or Services not related to educational services, the VAT liability in Bahrain of each of the supplies on a case-by-case basis. Some of it will not be related to educational services and will therefore be taxable at the 5% standard rate are:
- School uniforms,
- Food and beverages supplied at the educational institution,
- Activities and trips organized by the educational institution for recreational purposes, and
- Supply of Electronic devices by the educational institution.
What is the VAT Recovery in Bahrain on Costs Incurred by The Educational Institution?
- VAT on costs related to a taxable activity of the school can be recovered in full, subject to the general input VAT recovery rules.
- VAT on costs relating to supplies that are exempt from VAT is irrecoverable.
- VAT on costs relating to educational activities and does not charge for that good / service to its students. The VAT can be recovered in full, subject to the general input VAT recovery rules.
What is the VAT treatment in Bahrain for Third-Party Consideration?
In some cases, education fees for a student paid by a third party.
- Issue of the VAT invoice to the student and not the third party who has paid the fees.
- The VAT cannot be recovered by the party making the payment as that party does not receive the supply.
What is the VAT treatment in Bahrain for School Donations and Fundraising Activities for Charitable Purposes
- Educational institute collecting donations on behalf of a charity for free – It is outside the scope of VAT.
- Educational institute organizing fundraising activities or providing goods or services in return for charitable donations. The VAT treatment of these goods or services is on a case-by-case basis.
What is the VAT treatment in Bahrain for Grants and Sponsorships Received?
In some instances, educational institutions may receive grants or sponsorships from third-party organizations. The VAT liability of the grant/sponsorship will depend on providing anything in return by the educational institution.
- If no supply by the Educational institute in return for the grant/sponsorship – It will be outside the scope of VAT.
- If a supply in return for the grant/sponsorship – The charging of VAT liability accordingly, where relevant.
What is the VAT treatment in Bahrain for School Transportation Services?
Local passenger transport from a location in Bahrain to another location in Bahrain will be zero-rated. The transportation by a business that is regulated or licensed by an authorized body in Bahrain.
Educational institutions will need to consider instances where any transportation services will be taxable at the standard rate of 5%. When there is a separate charge for transportation for a school trip:
- If that school trip is predominantly recreational – The charge for the transportation service will follow the VAT liability of the school trip. It will be taxable at the standard rate of 5%.
- If that school trip relates to the curriculum – The charge for the transportation service will follow the VAT liability of the school trip. It will be taxable at the standard rate of 5%.
What is the VAT treatment in Bahrain for Online Educational Courses?
The general VAT principles about educational services will also apply to online courses provided to students in Bahrain. The licensing of the supplier by the competent authority in Bahrain.
In case of not meeting the conditions for zero-rating set out in the VAT law in Bahrain. The educational provider must charge VAT at the standard rate on the online courses provided to students in Bahrain. It is on the basis that the student ‘uses and enjoys’ the educational services in Bahrain.
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