Alchemist- An accounting and consulting firm for your assistance.

VAT on Medical Services in the UAE: Some Insights

global

The UAE’s National Agenda 2021 focuses on making the nation a world class healthcare destination and thus lays an emphasis on the healthcare sector. When VAT was introduced in the UAE in 2018, healthcare service companies had a relative sense of ease due to the zero-rate of taxes for a majority of the healthcare services. Even after the zero-rate VAT on medical services, it is critical for companies to make use of the relevant technology and manage its tax compliances. Since the complexity and volume of the taxation data needs specialised expertise as well as knowledge of use of ERPs through different POS systems. Using the right resources for tax management is very important and thus needs careful consideration.

VAT on Medical Services in the UAE

The National Agenda also aimed at emphasising on the significance of preventive medicine and increasing awareness of healthy lifestyle. This required a robust healthcare infrastructure and system that can shape the way the way healthcare and medical tourism is viewed in the country. While the UAE has clearly defined VAT on medical supplies and services as zero-rate, the standard rate of VAT in other sectors is 5%. VAT advisors and consulting services can further simplify this division of rates for businesses and medical service providers.

VAT Law and Legislation

What the zero-rated VAT on medical services also implies is that while VAT is at 0%, there is a provision to recover the VAT that is incurred on the associated costs, if eligible. It is important to note that those healthcare services, that are neither basic nor preventive, and are more cosmetic in nature, are legible to the standard rate of VAT. The FTA is responsible for the management, implementation, monitoring and auditing of all the taxpayers in the UAE. The federal-level ministry authorities regulate health standards across the Emirates and provide permissions and licences to healthcare services so that they are always in accordance with the international standards. Companies and service providers need to ensure that their licences, audits, approvals, inspections and regulations are always up to date and in line with the rules.

Ensuring Compliance of VAT

Some important requirements to keep in mind when filing VAT on medical services and supplies are the registration, date, time and place of the supply, as well as the invoicing formats, returns and due dates. A resident of the UAE or any VAT-implementing state needs to obtain registration, if the total value of the supplies exceeds the mandatory monetary threshold. The application has to be filed within 30 days.

As per Article 25 of the UAE VAT law, in case of periodic or consecutive invoices of payment, the date of supply should not exceed more than one year from the date of provision of goods or services. Similarly with invoices, there are certain particulars (as mentioned under Article 59 of the UAE VAT ER) that are required to be mentioned on the invoices if one wishes to input tax credit.

Since the basic and preventive healthcare services are rated at 0%, the service providers are eligible to recover the input VAT. It is important that institutions have clarity on the returns and refunds, and can also use the help of VAT consulting services or VAT advisors for simplifying their tax processes.