VAT and Private Schools?
13 September 2018
By Yumna Dajee and Seelan Muthayan
The need for affordable quality education stimulated an increase in the number of private schools in South Africa.
The provision of educational services and the supply of ancillary goods and services directly related thereto and necessary to provide educational services are exempt from VAT. Private schools should therefore not be liable to register for VAT. Sounds simple, but it isn’t really.
Private schools with other income streams may not be VAT exempt. These could include sponsorships, rentals, sale of uniforms, textbooks, stationery and sporting equipment, tuckshop sales, and income from fund raising events and activities. Very often these activities are overlooked for VAT purposes as they are carried out by persons other than the management of the schools on behalf of the schools (e.g. fund raising committees). These activities may constitute taxable supplies for VAT purposes.
Although these income streams may seem minute or insignificant, if considered individually, they may cumulatively and over time exceed the R1 million compulsory VAT registration threshold. This will render such schools liable to register for and account for VAT to SARS.
As SARS can go back 5 years or more, depending on the circumstances, to assess an entity’s VAT liability, this liability which would likely include penalties and interest, could have a significant impact on the business of the private school.
BDO will be hosting a workshop which addresses the VAT and Income Tax consequences for PBOs on 20 September 2018. For more information or to register for the event, please email firstname.lastname@example.org
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