VAT & Healthcare sector

VAT Basics

All businesses having turnover exceeding AED 375,000 shall register for VAT. They must charge their customers VAT on the invoice amount, file quarterly returns and pay the VAT collected to the Authority within the stipulated time. Standard rate of VAT in UAE is 5%. In addition, some supplies are Zero rated and some others, exempted. Basic healthcare services are exempted.

VAT & Healthcare sector
Exempt categories:
• Doctors fee
• Registration fee incidental to consultation
• Room charges for patients
• Meal for patients
Standard rated categories:
• Cosmetic surgery & other elective treatments
• Traditional & alternative medicines
• Rental of clinics to doctors
• Room & food for non-patients/attendants
• Car parking and other elective services

Health care sector is exempted, why they must register for VAT?

Though the basic healthcare services are exempted from VAT, the elective services fall under the gamut of VAT. In the practical scenario, most of the healthcare providers will be providing tax exempt services as well as taxable services. The VAT paid on expenses related to taxable services can be claimed whereas the VAT paid on exempt services cannot be claimed. This will increase the cost of the operations. This creates additional complexity of apportioning the VAT paid by the clinics and hospitals.

VAT Impact

The basic healthcare services are exempted from VAT. This means the healthcare provider cannot claim the tax paid on their expenses, which will increase the operational cost. In addition, some of the services are taxable and the tax paid on such expenses can be claimed, which requires the services of an expert. Additionally, tax collected has to be remitted within the specified time, which might affect the cash flow of the healthcare provider

Compliance requirements

The businesses must maintain proper accounting records for 5 years and invoices issued should contain the required information. Qualified accounting staff also required to maintain the accounting and tax compliance.