How Introduction of VAT will Impact Health Care Sector in UAE
The UAE healthcare authorities focus on providing high-quality healthcare services to all the residents that contribute to their better living. As a result, UAE has made the majority of the healthcare services subject to zero-rated VAT. There are also healthcare services that are 5% standard rated. Healthcare services are any services supplied, that are generally accepted as being necessary for the treatment including preventive treatment. If patients find themselves paying VAT on healthcare services in UAE, it will have a major impact in perceiving UAE as an associate in nursing overall enticing destination for healthcare services. Supply of healthcare services in Dubai shall be zero-rated on the conditions made by:
- Healthcare body or institution
- Doctor or nurse
- Technician, dentist, or pharmacy licensed by the Ministry of Health or by the other competent authority and related to the well-being of a person's being
VAT on Healthcare Services
Much of the healthcare services around the world have considered the services to be exempt. But, healthcare services are not considered exempt in the UAE. Exempt services would make the VAT incurred on purchases or expenses irrecoverable. UAE deciding to tax the services of healthcare, either zero-rated or standard-rated enables the healthcare sector to recover the input expenses. Hence there are no extra costs incurred by the healthcare sector.
Below are services that are segregated into zero-rated and standard-rated:
Zero Rated (0%)
- Preventive health care services inclusive of vaccines
- Healthcare services for human treatments - medical and dental services
- Medicines and medical equipment as mentioned in the cabinet decision
Standard Rated (5%)
- Other healthcare services like cosmetics, that are not preventive
- Medicines and medical equipment that is not listed in Cabinet Decision
- Other medical supplies
To state another impact on the introduction of VAT in UAE, would be record-keeping. It is considered essential to maintaining records and documents for a minimum of 5 years. Failure to keep the required records and information would lead to penalties. Even if this impact disciplines the records of hospitals or clinics, at the same time is considered to be time-consuming. Healthcare sector might also face difficulty in identifying and differentiating services to standard-rated and zero-rated in certain cases. As much of the services are zero-rated, the healthcare sectors can claim back for the input VAT spent by applying for VAT Refund. This might have an impact on the cash flows of the company.
- VAT on marketing or advertising expenses, utilities, purchase of office furniture and goods are claimable in proportion to the number of taxable supplies.
- Experience shows that hospitals do not recover 100% of all VAT incurred. Hence, these additional costs might have an impact on pricing.
- Doctors consultation fees are exempt under the VAT.
- When the provider of healthcare services enters into a contract with another healthcare service provider or a laboratory, this invites a standard 5% VAT on the service. This is due to the service being rendered to the healthcare service provider rather than to the patient. In terms of VAT, the recipient of the service should be the same recipient who receives the treatment too to be liable for zero-rate VAT.
Some practical instances are:
- Consider a doctor contracting with a hospital to consult the visiting patients. The consultation charges received by the hospital from the patients are subject to zero-rate VAT. While any fees charged by the doctor to the hospital for the service rendered are subject to a 5% standard rate VAT.
- If a hospital or a clinic refers a patient to a laboratory and if no contract exists between the laboratory and the clinic, this would be a direct service rendered to the patient by the laboratory. Hence zero-rated VAT is levied on the service.
CDA VAT Services
CDA offers tax consultancy services and tax reclaim services at a really cheap charge. Having a large number of clients, CDA is acclaimed as a number one platform that has been addressing VAT services in UAE of start-ups and established businesses across the Emirates.
CDA additionally provides accounting & bookkeeping services, accounts outsourcing services, internal auditing services and heaps a lot of alternative business and finance services associated with the business within the UAE. If you're searching for any services associated with VAT in UAE, be free to contact CDA, our vat consultants are going to be forever there for your help to produce the simplest VAT solutions across the Emirates.