VAT Implications on UAE Healthcare

The UAE health authorities are dedicated to providing high-quality healthcare services, leading to better lives for all residents. As part of this commitment, most healthcare facilities in the UAE are subject to zero-rated VAT.

 However, there are also certain healthcare services that are subject to a 5% VAT. Healthcare facilities encompass services widely accepted for treatment, including preventive medicine. If patients find themselves paying VAT on healthcare services, it could significantly affect the UAE’s image as a premier healthcare destination.

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VAT on Healthcare Services

In Dubai, the supply of healthcare services is zero-rated under specific conditions:

– Provided by a healthcare body or institution

– Rendered by a licensed doctor, nurse, technician, dentist, or pharmacist

– Related to the well-being of an individual’s health

While many global healthcare systems exempt healthcare services from VAT, the UAE’s decision to tax these facilities at either a zero or standard rate helps the healthcare industry recover production costs without incurring additional charges.

Zero-Rated and Standard-Rated Services

 Zero-Rated (0%)

– Vaccine-inclusive preventive health programs

– Human-treatment health facilities, including medical and dental services

– Medicines and medical supplies as specified in the Cabinet Decision

 Standard-Rated (5%)

Non-preventive healthcare programs, such as cosmetic procedures

– Medicines and medical devices not included in the Cabinet Decision

– Certain medical materials

Record-Keeping and Implementation Challenges

Healthcare providers must maintain records and documentation for at least five years. Failure to do so can result in penalties. Defining and segregating standard and zero-rated services can be challenging and time-consuming. Although most services are zero-rated, healthcare providers can apply for a VAT refund, which may impact the company’s cash flow.

Practical Scenarios

– VAT on marketing, advertising costs, office furniture, and procurement is claimable in proportion to the number of taxable supplies.

– Hospitals typically do not recover 100% of VAT suffered, which can affect pricing.

– Consultation fees for doctors are excluded from VAT.

– When a healthcare provider contracts with another provider or laboratory, a 5% VAT applies, as the service is provided to the healthcare service provider rather than directly to the patient.

 Examples:

  1. When a physician contracts with a hospital to consult visiting patients, the hospital charges zero-rated VAT on consultation payments collected from patients. However, any fees paid to the hospital by the doctor are subject to a 5% VAT.
  2. If a hospital refers a patient to a laboratory without any direct arrangement, the laboratory’s service to the patient is zero-rated.

VAT Impact on Healthcare Services

The UAE’s decision to opt for 0% VAT on some healthcare services instead of making them exempt products helps in VAT recovery. However, multiple related facilities are subject to a 5% VAT, making it challenging for healthcare service providers.

Medical Exemption from VAT

According to the Value Added Tax Consolidation Act 2010, certain medical facilities are exempt from VAT, including:

– Specialist medical services defined by the Ministry of Health (excluding optical and dental services)

– Services provided by dieticians, psychologists, orthoptists, physical therapists, chiropodists, osteopaths, and chiropractors

Pharmacist Services

Pharmacist services are subject to VAT in the UAE. However, certain medical facilities, as approved by the Ministry of Health, are excluded from VAT. Exempt facilities include flu vaccines, pneumococcal vaccines, and zoster vaccines. Medical consumables such as syringes and bandages are zero-rated, while other products not included in the prescribed list are subject to a 5% VAT.

Suppliers of Medical Equipment & Medicine

The supply of medical equipment and pharmaceuticals listed in the Cabinet Decision is zero-rated. Items supplied to individuals receiving zero-rated healthcare facilities are also considered zero-rated.

Purchase of Land/Lease for Infrastructure

Infrastructure and property are significant costs in the healthcare sector. Service providers can either buy land for development or develop on leased land. The purchase or lease of commercial property is subject to VAT, which can be recovered.

 Options:

  1. Purchasing bare land: VAT is excluded.
  2. Bare land lease: Development on leased land (Musataha Right) is excluded from VAT until the building’s surface area level is reached.

Proper VAT Classification for Business Transactions

Accurate classification of healthcare services into zero-rated, standard-rated, and exempt categories is crucial for determining VAT liability. Some services, such as ward accommodation for patients, are zero-rated, while others, like housing for non-patients, are subject to a 5% VAT.

Impact of VAT on the Healthcare Sector

VAT Rate

Preventive healthcare services or facilities, including vaccinations: 0%

Healthcare services focused on treating humans, including medical and dental services: 0%

– Other non-treatment healthcare services, such as elective and cosmetic procedures: 5%

– Medicines and medical equipment listed in Cabinet Decision: 0%

– Drugs and medical equipment not listed in Cabinet Decision: 5%

– Other medical supplies: 5%

More than two years since its implementation, VAT has transformed the UAE economy, making it more resilient and streamlined. The healthcare sector is no exception, but companies must ensure VAT compliance to avoid fines from the Federal Tax Authority (FTA).

How Unicorn Global Solutions can Assist You

For businesses looking to navigate the complexities of VAT in the UAE healthcare sector, professional assistance is invaluableUnicorn Global Solutions offers expert VAT consulting services, ensuring proper VAT care for all your transactions and helping you achieve full compliance with VAT regulations.

If you’re planning to set up a business in the UAE and need VAT-related services, contact Unicorn Global Solutions for comprehensive support. Our team of experts is here to help your business grow and thrive in the UAE’s dynamic market.

For more information or VAT assistance, reach out to Unicorn Global Solutions, and we’ll guide you through the process smoothly. Text us on WhatsApp or call us today  to get started.

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