The UAE (United Arab Emirates) introduced its rate of VAT at 0% on the 1st of January, 2018, for health services which were specified. This indicates that in case specific criteria are adhered to, VAT will not be charged on provision of these services. In other cases, the standard rate of 5% will be applicable as per the official notification. You should thus have suitable VAT based systems in place to make sure that everything is in order. Not getting things right may lead to hefty FTA (Federal Tax Authority) penalties along with other undesirable implications.
GCC Filings is your best bet for VAT registration and filing in the UAE along with other procedures like accounting and auditing. This is a one-stop solution for maintaining all your VAT records and filing in a timely manner as per the provisions mentioned in the official guidelines. Health services cover aspects like diagnostics tests, consultation fees, charges for medicines and hospital room charges among others. Certain health services will have zero rated provisions which mean that VAT will not be charged although input tax credit may be claimed.
Assessing the impact of VAT on UAE health services
0% VAT rates will be applicable for the following:
- Preventive health care and vaccinations
- Healthcare services for human treatment, inclusive of dental services and medical services
- Medicines and medical equipment as listed out in the Cabinet decision
The VAT rate of 5% will apply for the following:
- Other healthcare services not for treatment purposes and not preventive in nature, i.e. cosmetic/elective
- Other medical supplies
- Medical equipment and medicines not listed in the Cabinet decision
The public clarification will help you decide on the applicable VAT rate in UAE if you are in the health services/medical space in the UAE. The healthcare service definition accepted in the UAE is any service which is supplied and generally acceptable in the medical profession while being deemed necessary for treating recipients of the supply inclusive of preventive treatment. Supply of healthcare services, as per this definition, will be zero rated on the basis of the article 45 (14) of UAE VAT Law and article 41 of executive regulation. Exceptions apply of course and these are listed above.
The taxation rate will stand at 5% in case the patient and recipient of supply is not the same person. The recipient of supply is required to be the patient who gets treatment. Zero rated VAT will only be applicable in such cases. Supplier of the healthcare service provider should be clear about the actual recipient of services. If the recipient is not the patient, supply will attract 5% VAT as mentioned above. For identifying recipient of supply, providers may take into account contractual agreements between all parties and particularly the party entitled contractually to services which are supplied.