With less than a week to go, the GCC countries including the UAE are all gearing up for the soon introduction of VAT this January 1st, 2018. Despite the VAT authority in the UAE exempting Life Insurance from this taxation, other insurance service providers and users will feel the effect of the VAT beginning of this new year.
Residents of the UAE received warmly the official statement of the VAT Authority, Healthcare Services and Products and the Related Products and Services will be unaffected by the introduction of VAT in 2018. Healthcare related products and services can be anything from the prescribed drugs and medical equipment to the patient room accommodation and meals provided.This extends to products, services, and treatments offered by both private and public healthcare facilities registered under the DHA including but not limited to hospitals, clinics, pharmacies and healthcare centers.
The Difference Between Healthcare Services and Health Insurance Services
The effect of VAT on Healthcare Services and Health Insurance Premiums was one of the frequently asked questions that were asked by the residents of the UAE. It is important to understand that the two should not be confused with each other and are not considered to be the same. While Healthcare Products & Services will see no price hike, Health Insurance Premiums paid by residents to be covered against the risk of illness or diseases will see a 5 percent price increase. This is mainly because Health Insurance is not considered to be a related service of Healthcare which as announced by the FTA will not be affected by the upcoming VAT system.
To clarify if you were to pay AED 599 for a Family Dependant Health Insurance up until the end of 2017. Starting off 2018 you will be paying an approximate AED 630 for the same insurance policy. It is important to highlight that individuals who apply for and receive their policies before the 31st of December 2017 will be able to save a considerable amount of money in doing so before the application of VAT. On another side note Dubai Health Authority has released an announcement earlier last week that starting 2018 individuals who fail to renew their Health Insurance on time will not only be unable to renew their UAE Residency Visa but will also receive a fine of AED 500 that will need to be paid along with their residency renewal fees.
Zero Rated and Exempted Healthcare Products and Services
The two are often confused with each other as well by the general public. In the case of the UAE Mandatory Health Insurance, individuals can rest assured that they will be covered for both the Zero Rated and Exempted Products and Services, however, the difference will be felt by the healthcare providers. In the case of Zero Rated Products and Services, healthcare facilities will be able to recover the overhead and input taxed related costs incurred in the process to deliver this product or service to patients. Facilities will be required to register with the Federal Tax Authority to file for a tax return and be redeemed for the costs incurred over their supply of Zero Rated Healthcare Products or Services which the list of is yet to be announced by the FTA. On the other hand, healthcare facilities supplying exempted products or services will not be entitled to recover the taxed costs incurred to supply these products in the market and providers will have to pay the applicable tax on each aspect of the delivery process of these products to the patients.