In accordance with the UAE Federal Decree-Law No. (8) of 2017, and GCC Common VAT agreement, most of the supply of goods and services in Healthcare industry will be subject to either the zero-rate or exempted.
Zero-ratedmeans it is either/or: No VAT charged to customers but can recover input tax (claim credit); or/and, b) Zero-rated traders usually in a repayment position.
Exempt means: it means either/or: 1) No VAT charged but no input tax recovery; or/and, b) Exempt traders have a higher cost base and often increase prices as a result.
Accordingly, private hospitals and clinics will need to register for VAT. As a registered business that supply goods and services subject to VAT at standard rate or zero-rate are usually entitled to claim a ‘credit’ from their input VAT on most of their normal business expenses. However, in the case of supply of exempt goods and services such as prescribed healthcare services, no input tax credit will be available. Therefore, the VAT cost will be borne by these organizations.
Many other related services will be subject to VAT. This may include cosmetic surgery, traditional and alternative medicines and therapies (such as reflexology, acupuncture, naturopathy, Chinese medicine), rental of clinics to doctors, room and food for non-patients, car parking fees and televisions rented to patients.
In summary: an assessment of the capabilities of existing infrastructure and resources such as accounting policies and transactions, financial reporting, IT systems is critical in order to generate VAT compliant outputs. In many cases, significant changes will be required to IT platforms and present workflows and processes. It is essential that your staff are fully cognizant of VAT. It will be difficult to ‘systemize’ the VAT rules for all supplies made by you: nuances in the VAT law or slight changes in fact scenarios can lead to varying VAT outcomes.