B2B Healthcare Services Clarification

Public Clarification VATP016 on VAT treatment of B2B Healthcare Services in UAE

The Federal Tax Authority (FTA) in UAE has released a new public clarification on Healthcare Services (VATP016) bringing clarity on whether B2B provision of such services can be zero-rated. 

In accordance with Article 41 of the Executive Regulations, a healthcare service can be zero-rated where:

a. Service provided is a medical service generally accepted for the treatment of a person  (including preventive treatment); and

b. Service provided is for the treatment of the recipient of the service.

In accordance with the above, Healthcare Services can be zero rated only where service provided is for the treatment of the recipient of the service.

The above would exclude B2B transactions in the healthcare sector between two hospitals or laboratories where the service recipient is not necessarily the patient.For example:

Where a hospital A contracts with another hospital B to carry out specialized procedure for its patient in the premises of B, the supply involved would be broken down into two i.e

1. 1st supply where B provides specialized services to A for treating the patient (which would carry 5% VAT); and
2. 2nd supply is services between A and its patient (which would be zero rated).

The above treatment would also apply where a hospital engages a laboratory to carry out tests for its patients and it needs to be determined as to contractually who the actual recipient of services of laboratory arei.e whether it is the hospital or the patient.

The clarification also impacts doctors who are contracted to see patients in a hospital (on contractual basis and not as an employee of the hospital). Here even though the doctor is treating the patients, the primary service is between the doctor and the hospital hence same would not qualify for zero rating.

Healthcare Services providers should therefore carefully evaluate supplies on case to case basis to ensure correct VAT treatment rather than applying the zero rating provision across all of their services.

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