Is Zero Rating Relief applicable to B2B Supplies of Healthcare Services?
The Federal Decree-Law on Value Added Tax and Executive Regulations provides that the zero-rating relief is available to “healthcare services” and related goods if the following condition is satisfied:
- The supply shall 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.
- The supply shall relate to the wellbeing of a person.
- The supply should not be an elective treatment for cosmetic reasons.
- The supply should not be for providing / incidental to the provision of holiday accommodation or for entertainment.
The Executive regulations further define “healthcare services” as any service necessary for the treatment of the “recipient.” In numerous scenarios, the recipient of the service may not be the beneficiary or patient, such as healthcare services or lab services outsourced by the hospital to the third-party service providers. In absence of clarification by Federal Tax Authority in determining the identity of the recipient, the interpretation of the word recipient is debated since the introduction of the Executive Regulations. Considering the requirement FTA clarified that the “recipient of supply should also be the “patient that receives the treatment” and where the patient and the recipient of supply are not same, the services should be subject to VAT at 5%
What does it mean?
Owing to the public clarification, any B2B supplies, even though provided by a healthcare body, institution or doctor licensed by the Ministry of Health, or by any other competent authority, is subject to VAT at 5% Noting that this is not a change in the law and just a clarification by FTA on the existing law, the interpretation is applicable from 01 January 2019. Any B2B transactions charged to/by Healthcare service providers at 0% in the past should now be rectified by way of voluntary disclosures.
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