Connecting the Public Clarifications on Business-to-Business Supplied of Healthcare Services and linkage with Disbursement & Reimbursements

CA Rajiv HiraCA Rajiv Hira    10 January 2020
Connecting the Public Clarifications on Business-to-Business Supplied of Healthcare Services and linkage with Disbursement & Reimbursements

UAE VAT - Connecting the Public Clarifications

Decode VAT Public Clarification, on Business-to-Business Supplied of Healthcare Services and linkage with Disbursement & Reimbursements.

A supply of healthcare services may only be zero- rated if the recipient of the supply is also the person who receives the treatment. 

Most goods and services supplied in the UAE by a taxable person are subject to VAT at 5%.

In accordance with Article 41 of Cabinet Decision No. 52 of 2017 on the Executive Regulations of the Federal Decree-Law No 8 of 2017 on Value Added Tax (“Executive Regulations”), healthcare services may be zero-rated if certain conditions are met. For the purposes of the Article, “healthcare services” are defined as: 

any Service supplied that is generally accepted in the medical profession as being necessary for the treatment of the Recipient of the supply including preventive treatment.” 

The above definition makes it clear that the recipient of the supply must also be the patient that receives the treatment. Where the patient and the recipient of the supply are not the same person, the services should therefore be subject to VAT at 5%. 

Example :

A hospital is required to perform a specialised procedure for its patient. The hospital contracts with another hospital to perform the procedure. 

1st Supply: The specialist hospital provides its specialist services to the hospital which is treating the patient. Since the recipient of this supply is not the patient, the services are not “healthcare services” and the supply cannot be zero-rated.

2nd Supply: The hospital which is treating the patient is providing zero-rated “healthcare services” to the patient. 

Taking above clarification & below stated example,nowletsdo the interpretation of “Disbursements & Reimbursements” Public clarification and link the same:

A hospital ("Hospital A") is required to perform a specialised procedure ("Specialsied Hospital") for its "Patient". The "Hospital A" contacts with Specialised Hospital to perform the procedure, however to ensure that billing to the Patient is centralized (i.e. by "Hospital A") & does not create VAT element, hospital's used below process 

i.e. billing by “Specialised Hospital” is created on "Patient" where “Hospital A” makes payment on behalf of Patient.

Above provided example attracts “disbursement” clause and VAT will not be applicable in complete transaction. Subject to below conditions are taken care:

  • Patient should be the recipient of the goods / services; 
  • Patient should be responsible for making the payment to the “Specialised Hospital”;
  • Patient should have received a tax invoice on its own name from the “Specialised Hospital”; 
  • Patient should have authorized “Hospital A” to make the payment on his/her behalf to "Specialized Hospital"; 
  • The goods / services paid for should clearly be additional to the supplies “Hospital A” made to the Patient; 
  • The payment should separately be shown on the Tax-invoice and “Hospital A” should recover the exact amount paid from the Patient, without a mark-up. 

Yes, this will help you to remove any VAT element from the transaction, however, are you ready to be transparent with your Patients (Social & Commercial Decision). 

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