The United Arab Emirates (UAE) implemented a 0% VAT rate for certain healthcare services on January 1, 2018. This means that if specific conditions are met, no VAT will be charged on the provision of such services; otherwise, the usual rate of VAT of 5% would be applied. The right to use the 0% rate for healthcare is subject to certain restrictions. As a result, it's critical to have solid VAT processes and systems in place to ensure that the proper VAT treatment is applied. Failure to get this right could result in Federal Tax Authority (FTA) assessments and penalties, as well as costly business consequences.Let’s read about the VAT implications what Dhanguard is going to acknowledge us with this summarised blog. As a result, Dhanguard has created an overview of the VAT implications for the UAE's healthcare sector.
The provision of healthcare services in Dubai will be zero-rated under the following conditions:
Health-care organisation or institution
Physician or a Nurse
A technician, dentist, or pharmacy that is licensed by the Ministry of Health or another competent authority that is associated to a person's well-being
The services have been considered exempt by many healthcare providers around the world. Healthcare services, on the other hand, are not exempt in the UAE. VAT paid on sales and expenses would be rendered void by exempt services.
The UAE's decision to tax healthcare services, either zero-rated or standard-rated, allows the healthcare sector to refund its input costs. As a result, the healthcare industry incurs no additional costs.
Conditions of VAT Purposes for the Zero-Rating of Healthcare Services
Healthcare services may be zero-rated provided certain conditions are met, according to 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"). The term "healthcare services" is defined by the FTA as
"Any service provided that is generally recognized in the medical profession as necessary for the treatment of the supply recipient, including preventive therapy."
According to the criteria above, the patient who receives the treatment must also be the recipient of the supply. If the patient and the recipient of the supply are not the same person, the services will be subject to 5% VAT.
The following services are divided into two categories: zero-rated and standard-rated:
Zero Rated (0%)
Preventive health programs that include vaccinations
Health-care institutions for humans - health-care and dental-care services Medicines and medical supplies, as mentioned in the cabinet decision
The FTA has produced a business guideline that provides more clarification on the exact circumstances in which a provision of healthcare services is either zero-rated or standard-rated for VAT purposes. Each of these special conditions is critical for healthcare operators' VAT compliance, and tax agents from reputable VAT advisory services in the UAE may be of assistance to them in these cases.
These are three scenarios to be considered:-
In some cases, a doctor will sign a contract with a hospital to see the patients there. Even though the patients profit from the doctor's services, the services are not considered healthcare services in this scenario. Because the doctor's contractual obligation is with the hospital, the service is not zero-rated. The hospital, on the other hand, is providing "healthcare services" to the patients, and hence these can be zero-rated.
When a hospital refers a patient to a laboratory for medical testing, the laboratory and the patient enter into a separate arrangement for VAT reasons. Despite the fact that the patient was referred to the laboratory by the hospital, the service is offered directly to the patient by the laboratory. As a result, the laboratory's supply meets the FTA's definition of a "healthcare service."
A hospital that is needed to perform a specific procedure for a patient may be forced to contract the treatment out to another hospital. Because the specialist hospital is providing services to the second hospital rather than the patient, the services are not considered healthcare and cannot be zero-rated. The second hospital, on the other hand, that is treating the patient, will be judged to be delivering zero-rated healthcare services.
Following are the considerable significance to be acknowledged
Instead of making them exempt products, the government of the United Arab Emirates has agreed to charge 0% VAT on some health-care services. Multiple linked facilities, on the other hand, are subject to a 5% VAT. This might be problematic for service providers in the healthcare industry.
Medical equipment and drugs are considered zero-rated when products are covered by a Cabinet decision. Certain things are frequently zero-rated if they are provided to a person with zero-rated healthcare facilities.
"Any medical equipment that qualifies for zero-rated VAT under the Cabinet Decision "Medications and Medical Equipment is Subject to Zero Rate,"must meet the following criteria:
It should be registered with the Ministry of Health and imported with the consent of the authorities.
The terms "Medication" and "Medical Equipment" should have the same meaning as the items.
If your business is in the healthcare industry, be aware that certain services you provide will be considered zero-rated (e.g., ward accommodation for your patients). Some services, on the other hand, will be regarded as both taxable and exempt. Housing for non-patients is subject to a standard VAT of 5%.
Similarly, since the supply of a zero-rated health-care program is reimbursed, administration expenditures are frequently known to be zero-rated. Premiums paid to taxable healthcare service providers, on the other hand, are subject to a regular VAT rate of 5%.
The Value Added Tax (VAT) has had a revolutionary influence on the UAE economy for more than two years since its establishment. Even if it is too early to assess the VAT's influence on the UAE economy, the regime has strengthened the economy's resilience. To ensure correct care for all of your services and regular transactions for a business supply, you should call a company like Dhanguard. A small change in this scenario can have a big impact, so spare yourself the trouble and hire an expert to help you manage and assure compliance with your VAT requirements.
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