Notes on Business-to-Business Supplies of Healthcare Services

(as per FTA Clarification VATP016)

Most goods and services supplied in the UAE by a taxable person are subject to VAT at 5%. A hospital may have contracted with a laboratory or another hospital for conducting tests or medical procedures for the hospital’s patients. The question comes to the fore is – Whether such business-to-business healthcare services are eligible for zero-rating.

When Supply of Healthcare services be eligible for Zero rating in UAE VAT

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

Zero-Rated VAT treatment of healthcare services

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

  • The Recipient of the supply must also be the patient that receives the treatment.
  • The hospital & the laboratory makes a supply directly to the Patient, the supply of such services directly given to patient were treated as Zero-rated
  • Once the Leasing of premises is finalized then the Business Entity needs to be registered and a Trade License has to be obtained. If the business entity is owned by more than one person then the Shareholders Agreement, Memorandum of Association and Articles of Association have to be executed as the case may be. These contracts can be executed only in the presence of the Notary Public. The Contract between the Shareholders/Partners is required for getting the Trade License and also for registering the entity with the Chamber of Commerce.

Standard Rated VAT treatment of healthcare services

  • Where the patient and the recipient of the supply are not the same person, the services should therefore be subject to VAT at 5%.
  • A hospital may have Contracted with a laboratory or another hospital for conducting tests or medical procedures for the hospital’s patients, such services are subject to VAT at 5%.
  • The doctor is providing services to the hospital. Even though the services benefit, and relate to the health of, patients, they are not “healthcare services” because the doctor’s contractual obligations are to the hospital. As a consequence, the services cannot be zero-rated.
Note: A supply of healthcare services may only be zero-rated if the recipient of the supply is also the person who receives the treatment.

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