Majority of healthcare and related supplies of goods and services in UAE, including basic and primary healthcare services, diagnostic services ,as per Article (45) of UAE VAT Law, are zero rated for VAT implying that such services are subject to VAT at 0% but the associated VAT on input costs can be recovered.
For a healthcare service to be zero rated, the service should be accepted in the medical profession as being necessary for the treatment of the ‘recipient of the supply’, including any preventive treatment.
Ambulance services are provided by hospitals and related medical institutions .Though the healthcare services are zero rated for VAT purposes, provision of local passenger transport service is exempt from VAT as per UAE VAT Law Article (46), clause (4).
This zero rating of healthcare services on one side and VAT exemption of passenger transport services on the other side results in a debate as to how the ambulance services provided by healthcare institutions should be treated – whether ambulance transport should qualify as healthcare service or passenger transport?
For more clarity on this ambiguous matter, relevant excerpt from UAE VAT Executive Regulation no.(42) w.r.t Exemption of local passenger transport services is quoted below:
"…a supply of local passenger transport Services in a qualifying vehicle,…shall be exempt from Tax" , where :
'Local passenger transport services' means the service of transporting passengers by road, rail, water or air from one place to another in the State
'Qualifying Vehicle' means a motor vehicle, including a taxi, bus, railway train, tram, monorail or similar means of transport, designed or adapted for transport of passengers.
An ambulance, though it is a mode of transporting patients from one place to another, is also a motor vehicle. This qualifying means of transport is designed to provide medical assistance to patients while transporting them. The primary objective of hiring an ambulance is to provide medical assistance to the patient, on the way, to the hospital. In other words, an ambulance provides medical assistance inside the motor vehicle to patient while transporting him/her to healthcare facility. If the intention is to transport the patient only from one place to another, then any kind of motor vehicle can be used, whereas an ambulance is a specialised vehicle which provides medical assistance as well while transporting the patient.
The above analysis implies that if Ambulance is treated as passenger transport vehicle only, then it will be exempt from VAT whereas treating it as a healthcare services vehicle will make it zero rated. Though both healthcare services and passenger transport facility do not levy any VAT on the customers in any manner, it changes the hospital’s eligibility to recover VAT on associated costs should the ambulance services qualify as VAT exempt passenger transport services.
One more school of thought can be to treat an “ambulance” as a passenger transport vehicle only in case no medical assistance is provided to the patient while transporting , thereby implying VAT exemption whereas if medical assistance is provided on the way, then it can qualify as a zero rated healthcare facility. But ascertaining whether medical assistance is provided or not during transportation will become a challenge.
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