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Essential VAT Guide on Masks, PPE Kits in the UAE

The fight against COVID-19 is still raging across the world amidst the news of a second strain emerging, leading to a surge in demand for Personal Protective Equipment (PPE).  However, importers and suppliers need to be aware of how the UAE charges VAT on specific medical equipment used to fight the COVID-19 pandemic such as face masks, sanitisers, hand gloves etc. A temporary zero-rating is applied on specific medical equipment including the face masks with effect from September 2020.

The importers and suppliers need to take into consideration the date of supply and other rules specified in the Cabinet Decision No. 9/12 of 2020 and the public guidance VATP023 issued by the Federal Tax Authority (FTA). Accounting for VAT may be a bit burdensome for the importers and suppliers, but it can be easily navigated with the help of VAT consultants in Dubai, UAE. Read on to have detailed information about the temporary zero-rating on masks and other PPE kits imported into the UAE:

List of Medical Equipment Eligible for Temporary Zero Rating

The temporary zero-rating on medical equipment is legally validated by Cabinet Decision No. 9/12 of 2020. Furthermore, the Ministerial Decision No. 380 of 2020 issued by the Ministry of Health and Prevention on 6 December 2020 lists the medical equipment that is zero-rated in accordance with the Cabinet Decision. The following Medical Equipment are eligible for temporary 0% VAT:

1. Medical face masks that are not included in the Cabinet Decision No. 56 of 2017

2. Half-filtered face mask

3. Non-Medical “community” face mask made from textile

4. Single-use glove

Chemical disinfectants and antiseptics intended for use on the human body (excluding detergents, cosmetics & personal care products)

Suppliers and importers need to be aware of the items that are eligible for zero-rating while accounting for VAT in the UAE. They can consult with the best VAT consultants in Dubai to avoid any potential errors while determining their VAT obligations.

Circumstances Under Medical Equipment are Zero-rated

As per the Cabinet Decision No. 9/12 O of 2020, the medical equipment listed in the Ministerial decision become eligible for 0% VAT in the UAE under certain specific conditions. The importers and suppliers of the PPE kits must go through the following circumstances before applying VAT on medical equipment:

  1. In terms of supplies of medical equipment, a supply can be zero-rated when the medical equipment is delivered to the recipient or placed at the recipient’s disposal in the period between 1 September 2020 and 28 February 2021.
  2. The import of medical equipment becomes zero-rated when it is imported in the period between 1 September 2020 and 28 February 2021.

When Does Standard Rate Apply on Supply & Import?

In terms of supply of medical equipment, the standard 5% rate applies when the date of supply, or the date the medical equipment is delivered to the recipient or placed at the recipient’s disposal, falls outside the period from 1 September 2020 to 28 February 2021. In such cases, the businesses should report the 5% VAT rate in the UAE tax return filing of the relevant tax period. It may appear to be complicated, but the assistance of VAT consultants in Dubai may come in handy.

Similarly, a medical import is not deemed zero-rated when the date of import either precedes 1 September 2020 or succeeds 28 February 2021. In such circumstances, the importer of the medical equipment is required to account for VAT on import at 5%. It would be easier for the importers to account for VAT if they avail the best VAT consultancy services in Dubai, UAE.

Retrospective Application of VAT Rating

There may be cases when the supplier charged VAT at 5% on a supply that was already eligible for zero-rating under the Cabinet Decision. In such cases, if the identity of the recipient is known, the supplier can issue a tax credit note to the recipient to get a refund on the VAT overcharged on the supply. Furthermore, the supplier is allowed to reduce its output tax by the amount of the VAT given in the tax credit note.

This applies to the cases where the identity of the recipient is known to the supplier. However, suppliers such as supermarkets may find it hard to identify the recipient to issue and deliver a tax credit note. In such a case, the supplier is required to account for the collected VAT in the tax return relating to the tax period in which the supply was made. It may sound confusing, but the process can be made simple with the assistance of FTA-approved tax agents in Dubai.

Accounting for VAT Made Easier by VAT Consultants in Dubai

The UAE’s fight against the COVID-19 pandemic has been well appreciated by the WHO and other global organisations. The country has lent a helping hand for the healthcare businesses by temporarily subjecting face masks, sanitisers, disposable suits and other PPE to zero-rated VAT. The importers and suppliers need to consult with the best VAT consultants in Dubai, such as Jitendra Chartered Accountants (JCA) to comply with the Cabinet Decision on the VAT rating on PPE kits.

JCA’s tax agents in Dubai are approved by the FTA, and hence the process of accounting for VAT would no longer be a hassle for the businesses. The UAE VAT consultants provide able consultation in matters related to zero-rated, standard rated and exempt VAT supplies. JCA’s VAT consultancy services in Dubai include VAT registration, VAT training, VAT return filing, VAT Deregistration, VAT Reconsideration etc. Being one of the most experienced VAT consultancy firms in the UAE, JCA can easily resolve any VAT-related issues faced by the businesses.

 

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