OVERVIEW
Overview
Because tuition at private academies is exempt from VAT, filing works differently than for ordinary businesses, and revenue must be reported each year through the business establishment status return. Instructor fees carry withholding and payment-statement obligations, and items that must be treated as taxable — such as course materials — are mixed in, so a misclassification leads directly to penalty tax. Setting up item-level revenue classification and revenue management from the start is essential.
VALUE Tax & Accounting first sets the criteria for splitting tuition, materials and other ancillary income between exempt and taxable supplies. We align instructor contracts with their economic substance so that withholding and the four major social insurance programs are handled consistently, and we manage the annual business establishment status return and the global income tax return so that both rest on a single revenue figure. Shuttle bus and facility costs are treated in a form that satisfies the requirements for recognition as a deductible expense.
KEY ISSUES
Key tax issues for private academies
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01
Exempt vs. taxable revenue
Tuition is exempt, but textbooks and supplementary materials must sometimes be treated as taxable, so the classification of each item has to be exact. Materials supplied to students at cost may qualify as incidental goods, whereas selling them at a margin makes them taxable and requires registration for mixed exempt and taxable business.
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02
Instructor fee withholding
Payments to instructors are classified as business income or employment income according to the substance of the contract, and each carries its own withholding and payment-statement obligations. Treating them inconsistently with their substance spills over into the four major social insurance programs and severance pay, so the contract form should be settled first.
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03
Consistency of reported amounts
The tuition reported under the academy establishment and operation rules must agree with the actual accounting records. Where the tuition filed with the education office, the payment-processor records and the sales in the books diverge, revenue is understated, so periodic reconciliation is necessary.
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04
Business establishment status return
Tax-exempt businesses must report the prior year's revenue by 10 February each year, and omissions can draw penalty tax. Because this filing forms the basis of the global income tax return in May, cash, card and bank deposits should be reviewed together to settle the revenue figure.
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05
Costs specific to academies
Recurring academy costs such as shuttle buses, rent and facilities must be managed so that they satisfy the requirements for recognition as a deductible expense. Vehicle costs in particular need evidence of business use, so it is worth reviewing both the mileage log and how ownership is held.
HOW WE HELP
How VALUE Tax & Accounting responds
Exempt vs. taxable revenue
We classify tuition, materials and special courses as exempt or taxable item by item, preventing filing errors.
Instructor fee withholding
We handle payments to each instructor, withholding and payment-statement filing on schedule.
Advance revenue review
Before the business establishment status return we reconcile cash, card and bank receipts, lowering the risk of a substantiation request.
FAQ
Private academy tax FAQ
Q Is VAT chargeable on academy tuition? expand_more
Educational services provided by an academy registered under the Act on the Establishment and Operation of Private Teaching Institutes are exempt from VAT. Exempt businesses still have filing duties, however, and must submit the business establishment status return each year.
Q Are textbooks and supplementary materials also exempt? expand_more
It turns on whether the item falls within what is ordinarily incidental to the educational service. Materials supplied to students at cost may be treated as incidental goods and exempt, but selling them separately at a margin makes them taxable and requires registration for mixed taxable and exempt business.
Q How are fees paid to instructors reported? expand_more
Withholding is on employment income where the person works under direction and supervision under an employment contract, and on business income where services are supplied independently. Treating it inconsistently with the substance spreads into the four major social insurance programs and severance pay, so settle the contract form first.
Q What are the consequences of omitting the business establishment status return? expand_more
Tax-exempt businesses must report the prior year's revenue by 10 February each year, and omissions can draw penalty tax. Because this filing forms the basis of the global income tax return in May, it is best to review the revenue figure at the same time.
Q Are academy vehicle running costs deductible? expand_more
A vehicle actually used to transport students is deductible. For business passenger cars, however, the deductible ceiling depends on whether a mileage log is kept, so it is worth reviewing from the outset in whose name the vehicle should be held.
OTHER INDUSTRIES