The Ultimate Guide to Zero Rated and Standard Rate VAT on UAE Healthcare Industry
VAT services in health care industry include a variety of separate transactions which have different tax treatments for themselves based on the nature of the services and parties involved. A general statement that ‘all healthcare services are zero rated’ is not possible considering the various aspects for such services to be reviewed before finalizing their applicability of tax and tax rate.
What are the conditions to be met for zero rated health care services?
Health care services comprise the supply of services which involves treatment to cure a disease or a treatment which is preventive in nature. For health care services, to become eligible as a supply under zero rate, the recipient of the service should be the patient or the person who receives the treatment. Also, the type of service under zero rated category shall be emphasized to be of nature to cure a disease or to prevent disease and there are few services like cosmetics which are still taxable at the standard rate.
Apparently, we cannot generalize and say that all the health care services are zero rated, instead, a detailed review of each type of such service transaction is required to determine whether the conditions specified as above are met and which tax rate to be applied.
Are there services in health care sector which are standard rated?
The tax treatment depends upon the end user of the health care service supplied and as specified by the regulation the end user shall be the patient who receives treatment. There can be scenarios especially when agreements are entered between two health care service providers, where the end user of the service covered under the agreement is a service provider itself, which will attract VAT at the standard rate.
For example, a doctor provides consultation services in a hospital based on an agreement between him and the hospital. Hospital pays professional fees to the doctor on a monthly basis as per the agreement and collects consultation fees from the patients coming to hospital for consulting the doctor. In this case, the bills issued by the hospital to patients for consulting fees will be at zero rate and the invoice raised by the doctor to the hospital for his monthly professional fees will have tax at the standard rate.
Are the medical tests performed in laboratories zero rated transactions?
The first step to analyze the eligibility is to check whether the type of medical test performed by the laboratory is a part of the treatment for curing a disease or for preventing disease. Once this is confirmed, then the end user of the transaction to be determined. Tax invoices issued for medical tests performed by laboratories will be either addressed to the hospital or to the patient. This will depend upon whether the laboratory is operating independently of its own or is it a unit within the hospital itself.
- If the laboratory is operated independently and the medical test bill is raised addressing the patient, then this will come under the eligible category for zero rated supply.
- In other cases where the laboratory is a unit working for the hospital and the invoices raised by the laboratory is addressed to the hospital, then tax will be applicable at standard rate. However, the hospital in this case may issue a separate invoice to the patient for the medical tests which will be zero rated.
CDA Tax Experts in UAE
CDA has dedicated subject matter experts for UAE VAT, who can discuss with you and guide you on the challenges you might be facing in interpreting or implementing the tax regulation. It is important to organize the tax related processes in a controlled environment to achieve compliance with the tax laws and to ensure proper governance. You may encounter complex transactions which can cause the entire process of unwinding the various aspects of the regulation overwhelming. CDA has been providing one-hour free consultation to entities to give an insight into its value adding services and we suggest you take leverage of this opportunity to clarify your tax related concerns.
Hope you have a clear idea of the implications of VAT on health care industry in UAE. Still, have queries regarding VAT services for healthcare industry? Contact CDA, our tax experts can assist you in clarification of the VAT related queries and application of VAT treatments.