The United Arab Emirates (UAE) is home to various businesses and industries of different sizes. One of the industries with various dynamics across the entire town is the health care services industry. The medical system is well-planned and scattered through different regions. However, these bodies must understand the implications and intricacies of VAT in the UAE. Medical tools and equipment supplies are treated differently than ordinary business imports, and we are here to discuss this point. Walk with us to know how VAT is charged on health care services in the UAE.
VAT Implication on Health Care and Medical Services in UAE:
The medical supplies are generally considered under zero-rated VAT activities by the Federal Tax Authority (FTA). However, there are instances when standard VAT is applied to medical suppliers and transactions. We will elaborate on these different situations and scenarios explaining these cases. Understanding these situations is trickier for health care professionals, and they must read this piece to crack it. Keep scrolling!
1. Zero-rated activities:
The Federal Tax Authority (FTA) has declared a few medical care activities to be zero-rated. The decision is made per Article 41 of cabinet decision NO – 52 of 2017. It was taken on the Executive Regulations of the Federal Decree-Law No. 8 on Value Added Tax. FTA has set some criteria for medical supplies to be zero-rated.
The FTA has defined health service 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 the preventive treatment.”
As per the above definition, the supply will be treated as zero-rated if the recipient is a patient. However, if the recipient is not a patient, the supply would be subject to a 5% standard VAT rate, according to FTA. Understanding these implications is hard without taking professional VAT consultants on board.
Following is a list of activities that are zero-rated according to the FTA rules.
- Medical equipment listed in the cabinet decision
- Medicines that are listed in the cabinet decision
- Preventive health care services
- Health care services for humans treatment
- Medical and dental services
2. Standard rated activities:
As per the health care services definition by the FTA, if the recipient of the service is not a patient, the activity will be standard-rated. The condition is set and must be followed by all. Once you have understood the zero-rated activities with the set conditions and criteria, understanding the standard-rated activities is easier. Moreover, if the patient and the recipient are not the same, a standard VAT rate of 5% will be applied to the activity.
Following are a few activities/cases where the FTA will impose a standard VAT rate of 5% on the activities. These activities are:
- Medicines that are not approved by the Ministry of Health and Prevention
- Medical tools and equipment that the Ministry of Health and Prevention does not approve
- Health care services that are not for treatment
- Medical services that are not preventive
- Medicines that are not listed in the cabinet decision
- Medical tools that are not listed in the cabinet decision
- Other medical supplies are subject to a 5% standard VAT rate
Scenarios for VAT Rating:
The FTA has always been in front of helping business entities to understand VAT scenarios and conditions. It has issued a helpful guide for industries illustrating different conditions for different VAT rates. Another useful technique businesses can use to understand these impositions better is hiring the best VAT consultancy. Following are a few scenarios you should give a quick look at.
When a doctor/health care professional signs a contract with a hospital for patient diagnosis in the hospital. The services provided by the doctor will not be considered zero-rated, although the recipients are patients. The reason is that the doctor has contractual obligations with the hospital, which makes the services standard rated.
However, according to Article 41 (1) of the executive regulations, the health care services provided by the hospital are zero-rated. The difference must be known to all hospitals and doctors before taking any decision.
When a hospital refers a patient to a laboratory for tests, the supply and the services provided by the lab to the patient satisfy the “health care” definition of the FTA. Despite the referral, the agreement between patient and lab is considered separate by the FTA. Therefore the supply and services of the lab will be considered zero-rated.
Opt for VAT Consultancies to Make your Business Compliant!
Adherence to the VAT rules and implications in UAE will require you to go through various stages. Understanding the implications is never easy unless you connect with the best VAT consultants. Consider hiring them to make your business VAT compliant!