Value Added Tax (VAT) on Health Care Services in the UAE
The UAE is home to many healthcare businesses and boasts of a well-planned medical system. However, it is imperative for the various healthcare operators to understand the intricacies of the VAT regime and how it impacts the healthcare sector. The Federal Tax Authority (FTA) generally considers the supplies of the healthcare services subject to the zero VAT rate. The healthcare services are subject to the zero VAT rate if it is aimed at treating the patients to cure a disease. Only preventive healthcare services are deemed zero-rated by the FTA and other services like cosmetics are subjected to the standard VAT rate. Also, the recipient of the healthcare services should be the patient to be eligible for the zero VAT rate.
However, even within the preventive healthcare services, there are certain cases where the standard 5% VAT rate is applicable. This could be a tricky situation for the healthcare operators and they would need to understand under what scenarios the supplies come under the standard rate, for which the guidance of efficient VAT consultancy services in the UAE is recommended.
Conditions for the Healthcare Services to be Zero Rated for VAT Purpose
In accordance with Article 41 of Cabinet Decision No. 52 of 2017 on the Executive Regulations of the Federal Decree-Law No 8 of 2017 on Value Added Tax (“Executive Regulations”), healthcare services may be zero-rated if certain conditions are met. The FTA defines the healthcare services” as
“Any Service supplied that is generally accepted in the medical profession as being necessary for the treatment of the Recipient of the supply including preventive treatment.”
As per the above definition, the recipient of the supply must also be the patient that receives the treatment. If the patient and the recipient of the supply are not the same, the services would be subject to VAT at 5%.
Healthcare Services that are Zero-rated
- Preventive healthcare services including vaccinations
- Healthcare services for treating humans (Medical services and dental services)
- Medicines and medical equipment listed in the Cabinet Decision
Supplies of Healthcare sector that are Standard Rated
- Healthcare services that are not for treatment and are not preventive (e.g. elective, cosmetic, etc)
- Medicines and medical equipment not listed in Cabinet Decision
- Other medical supplies 5%
- Medications that are not approved by the Ministry of Health and Prevention
Top Scenarios to Determine if Healthcare Supplies are Standard Rated or Zero Rated
The FTA has issued a guideline for the businesses that offer better clarity on the specific circumstances in which a supply of healthcare service is deemed zero-rated or standard-rated for the VAT purpose. Each of these specific circumstances is of crucial importance for healthcare operators for VAT compliance and tax agents from reputed VAT consultancy services in the UAE may come in handy for the healthcare operators in such situations.
There are situations in which a doctor signs a contract with a hospital to see the patients there. In this case, the services are not considered as healthcare services even though the patients are benefiting from the service of the doctor. Here, the service is not zero-rated as the doctor’s contractual obligation is with the hospital. However, the hospital is providing “healthcare services” within the meaning of Article 41(1) of the Executive Regulations to the patients and therefore these can be zero-rated.
When a hospital refers a patient to a laboratory to perform medical tests, it is considered as a separate agreement between the laboratory and the patient for VAT purposes. Even though the patient went to the laboratory on the reference of the hospital, the service is being provided by the laboratory the patient directly. Hence, the supply made by the laboratory satisfies the FTA definition of the ‘healthcare service’.
Sometimes, a hospital that is required to conduct a specialist procedure for its patient may be forced to contract another hospital to perform the procedure. Since the specialist hospital is giving its services to the second hospital, and not the patient, the services don’t come under the definition of healthcare service and can’t be zero-rated. On the other side, the second hospital which is treating the patient will be considered as providing zero-rated healthcare services.
VAT Consultants in the UAE
More than two years since its introduction in the UAE, the Value Added Tax (VAT) has brought a transformative impact on the economy in the UAE. The VAT regime has made the economy more sound even if it is too early to assess the impact of VAT on the UAE economy. However, the requirement of ensuring VAT compliance has made the operations of businesses across various sectors more streamlined and transparent. And the healthcare sector in the UAE is no exception to this. However, every business in the UAE still ignores the basic tenets of VAT compliance and gets fined by the FTA. It is in such situations that a prominent VAT Consultant like Jitendra Chartered Accountants (JCA) becomes unavoidable assistance to the businesses. JCA’s highly qualified tax agents are well-versed in all the regulations regarding the VAT and the VAT Law in the UAE. The JCA tax agents can assist the businesses in VAT Compliance, VAT filing, and also save them from being fined by the FTA.