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VAT for Healthcare Services in Dubai, UAE

Traditionally healthcare services exempt from VAT in the GCC.  The VAT exemption in Dubai and UAE indicates the zero-vat application on the provision of healthcare services and the VAT incurred in connection with making these supplies can not be reclaimed. Vat exempted healthcare services comprises medical and dental services and extend to prescription drugs, room accommodation and meals and medical equipment supplied to patients. CDA is one of the leading VAT consultants in UAE, which offers premium VAT services to healthcare industries across the Emirates. 

VAT for Hospitals and Clinics

UAE values in providing high-quality healthcare services to all the residents through its professional and disciplinary approach in their provision of care. When in other countries healthcare services are exempt, UAE has made the majority of the healthcare services subject to zero-rate VAT. This makes the healthcare service providers in UAE eligible to recover the VAT incurred on the associated costs.

Exceptional cases where Tax Invoices are subject to the standard rate of 5%: Services that are not basic or preventive in nature like cosmetics treatment. The patient and the recipient of the services are not the same.

Healthcare Service Providers

These include hospitals, medical clinics and diagnostic centres – both government-owned and private players. According to an article published by Federal Tax Authority (FTA), a healthcare service may only be zero-rated if it is generally accepted in the medical profession as being necessary for the treatment of the ‘recipient of the supply’, including any preventive treatments.

Two scenarios where 5% standard rate VAT will be charged are as follows:

  1. A contract between the Hospital and the Diagnostic Centre for service on X-Ray or Blood tests. Here, the hospital is the ‘recipient of the service’. Hence, the service rendered would not be zero-rated.
  2. A hospital that sends its specialist doctor to another hospital on secondment. Here, the service is indirectly received by the patient and directly by the hospital. One hospital will charge the other hospital for the secondment. This service is a manpower supply, hence subject to 5% standard rate VAT in UAE.

Insurance

Health insurance is mandatory for a residency visa holder. Being mandatory for all the citizens and residents, almost 90% of the transactions of healthcare sectors are with insurance companies. When the patient approaches and receives the service directly from the hospital, the insurance company makes the co-payment on behalf of the patient. The recipient of the healthcare service is certainly the patient itself. Hence, the healthcare services provided to the patient will be zero-rated (other than any cosmetic treatment) The healthcare service provider will issue a zero-rated Tax Invoice to the patient and a copy of the invoice will be sent to the insurance company for payment. Where the services are subject to the standard rate of 5% VAT, the Tax Invoice will be issued in the name of the patient and a copy will be sent to the insurance company for payment.

Medical Equipment

Medical products and medical equipment are zero-rated only if such products are included in the Cabinet decision. Medications and Equipment not approved by the Ministry of Health and Prevention can qualify for zero-rating when it is necessarily supplied along with the zero-rated healthcare services. For a product to be qualified, it should have a biological effect on the human body. Samples or gifts are not considered deemed supply, if for a 12-month period:

  1. The value of the samples does not exceed AED 500 for each recipient.
  2. The total VAT payable by the supplier on all deemed supplies for each person does not exceed AED 2,000.

Deemed Supply: Article 11 of VAT Decree-Law states four cases that will be considered as deemed supply. In simple terms, one of the cases is the transfer of goods or services without consideration.

Property

Renting or purchasing a commercial property is subject to VAT at the 5% standard rate. The VAT paid by the healthcare entities is recoverable.

  1. Procurement of bare land is tax exempted
  2. Leasing of land can either be on a long-term basis without a transfer of right to build over the land or a ‘Musataha right’. Lease of bare land until any construction commences is exempt from VAT. For the period thereafter when the construction has reached above the ground level, the lessor of the land is obliged to charge VAT on the lease rental at the standard rate of 5%.

CDA VAT Services for Healthcare Sector

Each business transaction needs to be analysed, in order to ensure that they are classified correctly for VAT treatment. Our CDA experts help you to file your VAT returns timely. Our services include:

  • VAT registration: The entire process of VAT registration in UAE takes place on an online platform. In order to attain a tax registration number (TRN), CDA experts help to file the VAT registration form online and submit the essential documents required.
  • VAT calculations and return filing: Before calculating VAT, your business must comply with rules to avoid any penalty. VAT return depicts the tax amount due for a particular tax period. We prepare a VAT return filing on 201 form and submit it in the FTA portal on receiving the approval from the client.
  • VAT implementation and Compliance: Compliance with UAE VAT law is a complex task. Following each law concept and filing the tax for medical expenses and cosmetic services to avoid penalty.
  • VAT De-registration: it is the process of cancellation of TRN. Deregistration of VAT occurs when the taxable supplies fall less than the threshold limit as prescribed by FTA.
  • Filing reconsideration form for VAT penalties: Before submitting reconsideration forms you must pay the previous penalties and wrong filing fines. VAT penalties must be paid on time with FTA for smooth tax life.
  • Vat Reclaim / Refund services: We help the clients to reclaim their VAT amount paid

How a Tax Auditor / Tax Consultation will help a Hospital Sector?

Tax auditing helps the hospital sectors to maintain the records of financial statements along with a proper documentation system. It helps in compliance with the tax laws of FTA. A proper tax auditing enables the healthcare sectors to reclaim or refund VAT paid for various expenses.

CDA Client Portfolio

CDA experts are well experienced in hospital sector VAT services. We provide our services to a few numbers of clinics across the UAE. We highly recommend hospital sectors to adapt to a good accounting system and services to maintain transparency and accuracy in VAT filings.

Frequently Asked Questions[FAQ]

1. Who avails healthcare services?

In the context of transactions - patients, hospitals and the insurance company avail the services. The patient can get into a contract with the hospital and avail all kinds of services, can sue them if they deny any.

2. What is the date of the supply of healthcare services?

For healthcare, services come to an end or are considered to be complete when the patient is discharged from the hospital. Since the majority of the healthcare services in the UAE are zero-rated, the question of payment of tax is not a matter of concern, though this assumes significance while reporting the income in the VAT returns.

3. Can insurance companies recover the VAT charged by the hospitals?

As per the FTA outlines: The following principles should be applied in respect to determining which party may recover the VAT incurred:

  • If the insurer provides a payment to the insured which is in the nature of compensation for costs incurred by the insured, the input tax in respect of the costs will be recoverable by the insured.
  • If the insurer incurs the cost of acquiring goods or services itself, then the input tax in respect of the costs will be recoverable by the insurer. It is clear that unless the insurance company is the recipient of services, recovery of VAT is not allowed for the insurance company.

4. Does VAT is charged for manufacturing and import of healthcare goods?

The zero-rating of VAT shall apply at each stage of the supply chain, from manufacturing or import until the product is actually used by the patients. Import of zero-rated goods is not subject to any payment of VAT on imports, but they are required to be disclosed in the VAT returns under the reverse charge mechanism.

5. What are the additional services which are taxable at a standard rate?

The additional supply should be carefully classified and be subject to the standard rate of VAT. Such services include:

  •  separate beds and food services for the patient’s relatives
  • Parking fees in the healthcare region
  • Registration fee (when not adjusted against preventive healthcare services rendered)
  • Fees for health reports on CDs, etc.

6. What are the conditions under which the supply by the government is not taxable?

            Supply by a Government entity does not qualify as a taxable supply when:

  • The activity is performed in its sovereign capacity
  • The activity is not in competition and argument with the private sector.

7. How much do you charge for VAT services in the hospital sector?

Our charges purely depend on the: transactions complexity, accounting software used and skill required.

8. Are cosmetic treatments tax-free?

No, Cosmetic treatments are taxable at a standard rate of 5%.

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