How is grant income or sponsorship received for education taxed?
Educational institutions may receive grant income or sponsorships from the government or third parties. The VAT treatment of grant or sponsorship income depends on whether the institution provides the donor with a benefit in return for the funding received.
Some examples of benefits are naming an event after a sponsor, giving free or reduced-price tickets in return for the sponsorship, and displaying the sponsor’s logo in a prominent place on flyers.
- If the donor receives a benefit, the grant income or sponsorship is subject to VAT. The supply of services to the donor is taxable.
- If the donor receives no significant benefit, the grant income or sponsorship will be treated as outside the scope of VAT.