One of the common issues raised by many education institutions in South Africa is inadequate funding. Historic challenges with tax compliance Educational services are an exempt supply under section 12(h) of the Value-Added Tax Act, 89 of 1991 (the “VAT Act”).
The main reason for the exemption of educational services is that many of the institutions providing educational services were government institutions and, to some extent, financed by the government. The exemption aimed to alleviate the financial burden and additional risks and compliance costs associated with VAT accounting and compliance. However, institutions providing educational services have changed drastically over the years, and a reduced number of institutions are subsidised in terms of government subsidies.
To aid government grants and increase income, these institutions have increased their taxable activities considerably. Furthermore, privately owned and semi-subsidised institutions are accountable for their costs and are not provided with limited government support.
