Introduction

Education is recognized as a critical social service, and Kenya’s VAT legislation provides specific exemptions to ensure accessibility. It is therefore important to clarify the VAT treatment of educational services and ancillary services provided by educational institutions, including the scope and limits of the statutory exemption.

Definition of Educational Services

According to Paragraph 3 under Part II of the First Schedule to the VAT Act, 2013 education services means education provided by the following institutions:

1. A pre-primary, primary, or secondary school;
2. A technical college or university; or
3. An institution established for adult, vocational, or technical education.

Core tuition fees and curriculum-linked instruction fall squarely within the definition of educational services for VAT purposes. For the exemption to apply, the education must be delivered through a recognized programme or curriculum approved by the relevant authorities. Accordingly, core tuition fees relating to such approved programmes are exempt from VAT.

Importantly, the VAT exemption is not lost where a school charges additional fees that are compulsory, curriculum-linked, and integral to the delivery of education, such as mandatory textbooks or learning materials, laboratory and practical fees, examination and assessment charges, and curriculum-required field trips. In these cases, the additional charges do not constitute separate supplies but form part of the overall exempt supply of educational services.

Ancillary Services Provided by Educational Institutions

These are services provided in addition to the core educational program, which support or facilitate the delivery of education but are not themselves instructional.

Common examples of ancillary services in schools include:

1. Accommodation (boarding fees)
2. Food provided to students within the school
3. Transport services (school bus pickups and drop offs)
4. Extra-curricular activities not linked directly to curriculum (e.g., music, sports, swimming clubs)

These services are not educational in nature and are therefore not automatically VAT-exempt simply because they are provided by educational institutions. However, they may or may not be exempt depending on their nature as provided under specific provisions of the VAT Act, 2013 as outlined below:

1. Accommodation and Food Services

Paragraph 13(a) provides that accommodation and restaurant services provided within the premises of an educational training institution, approved by the Cabinet Secretary responsible for education, for the use of the institution’s staff and students, are exempt from VAT.

This provision therefore covers school boarding facilities such as student dormitories, hostels and other on-campus accommodation operated by the school for the exclusive use of its staff and enrolled students.

2. Transport

Paragraph 7 provides that transportation of passengers by any means of conveyance excluding international air transport or where the means of conveyance is hired or chartered.

This provision creates a stand-alone VAT exemption for passenger transport, independent of who provides the service. School bus pick-up and drop-off services qualify as exempt supplies because they constitute transportation of passengers.

3. Extra-Curricular Activities

Paragraph 12 provides that certain entertainment services are exempt from VAT, including stage plays and performances conducted by educational institutions approved by the Cabinet Secretary responsible for education where such activities are undertaken as part of learning. The exemption also applies to sports, games, or cultural performances conducted under the supervision of the Ministry responsible for culture and social services.

Accordingly, extra-curricular activities such as sports, music, drama, swimming and other cultural or performance-based programmes offered by educational institutions may qualify for VAT exemption where they are curriculum-linked, form part of the learning programme, or are conducted under an approved Ministry framework.

Conversely, optional or purely recreational extra-curricular activities offered on a commercial basis, or those not integrated into the learning programme, fall outside this exemption and may be subject to VAT.

Practical Guidance for Schools

VAT applies to supply of services that fall outside the statutory definition of educational services. To comply with VAT law, schools should take the following measures:

1. Segregate Fees: Clearly separate tuition fees from ancillary services in the fee structure, invoices/receipts and accounting records.
2. VAT Registration: Even if a school is exempt on tuition, some ancillary services, depending on their nature, may require the school to register for VAT.

• Documentation: Maintain detailed records showing which services qualify as exempt educational services versus taxable ancillary services.

1. Policy Awareness: Be aware of evolving policy discussions and guidance from the National Treasury and KRA regarding services bundled with education.

Conclusion

The VAT Act, 2013 provides clear exemptions for core educational services, ensuring that tuition fees are not subject to VAT. Ancillary services require careful consideration because some may be exempt under specific provisions of the VAT Act, while others that do not meet these criteria may be subject to VAT. Proper segregation of services and adherence to statutory requirements are therefore essential for compliance.

Written By:

Irene Masecko

Senior Tax Advisor

irene.masecko@ke.andersen.com