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Some Brief Observations by VAT Consultants in Bahrain on the Healthcare Sector

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VAT is an indirect tax on consumer spending. It is collected on supplies of goods and services as well as on imports of goods and services in Bahrain. Generally, VAT applies at 5% if a supply of goods and services is made by a taxable person in Bahrain and the supply is not specifically exempted from VAT or subject to the zero-rate. As a tax on consumption, VAT is paid and collected at every stage of the supply chain, with end consumers of goods and services bearing the cost. Key decision makers in the UAE, Saudi Arabia and Bahrain need to ensure their processes and systems are - and remain - VAT-compliant, and in such instances, the guidance of VAT consultants in Bahrain can be of a lot of help.

VAT in the Healthcare Sector

The GCC framework allows each GCC country to exempt or zero-rate healthcare supplies. Certain medicines and medical goods may be zero-rated and each GCC country is expected to publish their own list. For instance, essential healthcare services in the UAE have been zero-rated, while the healthcare services are standard-rated in Saudi Arabia, although public healthcare is out of scope. In Bahrain 'basic and preventative' healthcare services are to be zero-rated. The UAE, Saudi Arabia and Bahrain have all zero-rated specific medicines and medical equipment which means that both VAT on medical supplies and VAT on medical services is liable to be affected. In Bahrain, the supply of preventive and basic healthcare services and associated goods and services is zero-rated. Healthcare services include all preventative and basic medical services a patient receives in hospitals, health centres, medical clinics and other medical facilities, but exclude services provided by these bodies which are of a commercial or investment nature.

In order to benefit from the zero-rate VAT on medical services, they must be qualifying medical services provided by qualified medical professionals or qualified medical institutions to a patient during the course of the treatment. Goods and services related to a supply of healthcare services provided to a patient during the course of the treatment are also zero-rated. The provision of healthcare services by government hospitals and medical institutions are outside the scope of VAT when they are provided free of charge.

The Next Step by Healthcare Providers

Healthcare service providers need to distinguish between standard-rated and zero-rated products, charges and services. They should consider the resulting impact of VAT on pricing and ensure that all processes are in place to capture additional information about the patient before applying any relief. Another important actions is to examine any long-term contracts spanning the date of implementation and decide whether VAT can - or should - be charged to customers. They must also establish the VAT treatment of combined supplies of healthcare services and medical products - are these mixed or composite supplies? Healthcare providers in the GCC should also consider the potential impact that VAT exemption of their products and services might have on their costs, in terms of non-recoverable VAT on purchases and expenses, and for that they may also employ the help of VAT consultants in Bahrain.