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Implications of VAT on Medical Services in the UAE

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In 2018, the United Arab Emirates (UAE) introduced a zero rate (0%) of VAT on medical services and other specified healthcare. This implies that where certain criteria are met in the UAE, VAT will not be charged on such services; otherwise in on general instances the default 5% standard rate of VAT will apply. However this entitlement to apply the 0% rate of VAT on medical supplies and services is subject to strict conditions and rules. It is imperative that businesses have robust VAT processes and systems in place to ensure that the correct VAT treatment is applied on their transactions.

VAT on Medical Services in the UAE

Failing to comply to the set regulations this right could lead to assessments and penalties from the Federal Tax Authority (FTA), as well as other costly commercial implications that could harm the operations and reputation of the businesses.

Areas of VAT on Medical Services and Supplies

VAT on medical supplies and healthcare services which include necessary and preventive treatments come under 0% tax rate. These services however are subject to the condition that they must be provided to the recipient of the supply rather than the B2B suppliers. In that case, the supplies will not be constituted under healthcare services. The same goes for medications and medical equipment. Only those specific ones registered or approved by the Ministry of Health and Prevention are liable for 0% VAT.

For other elective treatments and relative services such as cosmetic surgery, alternative medicines, non-approved medicines, upgraded rooms, etc. are taxed at 5% under VAT in the UAE. 5% VAT is also charged in non-patient revenue such as the accommodation and food for non-patients in the hospitals and clinics, the manpower supply services to healthcare facilities, rental and car parking fees, and similar other services.

It is important to determine the VAT liability on different medical treatments which can be either 0% or 5?pending on the circumstances. Various different processes are required to identify the diagnosis and the liability. The recovery of input tax is also subject to some stringent rules and there is a window of two tax periods to claim input tax via VAT return, post which there may be a voluntary disclosure.

Non-compliance may also lead to substantial financial penalties and exhaustive tax audits on businesses by the Federal Tax Authority. Therefore it is important to keep track of all the data required to prepare accurate VAT returns, charge the correct VAT rate, and generate valid VAT invoices.

How VAT Consultancy Services can Help

VAT consultancy services in the UAE provide businesses with a dedicated VAT advisor or consultant who, with their extensive commercial and technical experience in the healthcare sector, can share best practices as well as the latest insights on VAT and other industry matters. VAT consultancy services can also do an assessment on the robustness of the current VAT compliance and related processes, and identify areas of potential optimization and risk mitigation.

They can also provide a lot of information regarding VAT on medical services in the UAE, including its treatment, tax authority ruling requests and audit support. They can also review the VAT treatment applied to the sale and purchase transactions based on the latest tax authority guidance and law as well provide an assessment to check the accuracy and efficiency of the business’s VAT reporting.