Impact of UAE VAT on Business-to-Business supplies of Healthcare Services

The Federal Tax Authority (FTA) in UAE recently issued a public clarification on business-to-business supplies of healthcare facilities & services. According to it, healthcare services that are necessary to be supplied to patients in need will be subjected to zero-rated VAT in UAE. Below conditions must be fulfilled in order to treat supply of healthcare services at zero rate: –

  • Services must be made by a healthcare body or institution, doctor, nurse, technician, dentist, or pharmacy, licensed by the Ministry of Health or by any other competent authority.
  • Relate to the wellbeing of a human being.

However, VAT @zero rate on healthcare services is applicable only if the provider is supplying its healthcare services directly to the patient. If in any case, the “recipient of supply” of healthcare services are different people other than end patient then the supply will no longer be qualified as zero-rated and a standard rate of VAT will be charged.

 Let’s understand a little better about VAT implications on healthcare services:

As per the UAE VAT law, healthcare services are defined as any service supplied that is accepted in the medical profession for the treatment of the patients or “recipient of supply” of the treatment. It also includes preventive healthcare services. The recipient of the healthcare services must be the patient receiving the treatment and if that’s not the case then 5% VAT will be levied on the supply of these services. As a result of this, healthcare providers need to make sure who is on the receiving end of the treatment to determine if the supply shall be zero-rated, else a standard rate of VAT will be charged.

Here are some of the examples of different health scenarios to help you better understand under what conditions will the supply of healthcare services be zero-rated. Each supplier of healthcare services should consider the VAT rules while supplying their healthcare services.

1st situation: A doctor has contracted with the hospital to provide its healthcare services to the patient within the hospital premises. This will involve two kinds of supply/transaction situation-

 A) Supply by the doctor to the hospital: The doctor is seen supplying its services to the hospital and not directly to the patient. Even though it’s related to the health of patients, it won’t be treated as “healthcare services” taxable at zero rate. Now, as the doctor has contracted with the hospital to provide its services to the patients, the services will be subjected to 5% UAE VAT

 B) Supply by the hospital to the patients: The hospital is supplying its healthcare services directly to the “recipient of supply” of the services. Therefore, these are subjected to zero-rated VAT.

  1. A hospital suggests a laboratory to a patient for conducting its medical test. As a result, the patient enters into a separate and direct contract with the laboratory for the supply of medical tests. Because the laboratory is directly supplying its services to the “recipient of the supply” it will be subjected to zero-rated VAT as per the UAE VAT laws.
  2. A hospital needs to perform a specialized test/procedure on its patient and therefore enters into a contract with another hospital to perform the test/procedure. It will involve two different supply situations:

 A) Supply of services by hospital 2 (specialist hospital) to hospital 1: The hospital 2 is supplying its specialist healthcare services to hospital 1 and not the patient directly so the cannot be marked as “zero-rated”.

 B) Supply of services by hospital 1 to the patients: Hospital 1 is treating the patient directly so the supply of services from it to the patient will be constituted as a part of the definition of “healthcare services” as defined by UAE law of VAT and therefore will be treated as “zero-rated”.

To get the best tax consultants in UAE contact Shuraa Tax Consultants and Accountants which is the leading tax agency of Dubai. Their team of dedicated experts promise to resolve all VAT related queries of various businesses. Speak to our tax agents and consultants and get professional guidance and support on managing taxation and VAT issues at affordable rates. Contact us today:


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