The federal tax authority of the United Arab Emirates (UAE) issued a clarification (VATP025) concerning value added tax (VAT) and the temporary zero-rating of VAT for certain medical equipment, which replaces the earlier clarification (VATP023)
The clarification (VATP025) prescribes that the supply or import of certain personal protective equipment during the period from 1st September 2020 to 31 December 2021 and used for protection from the coronavirus (COVID-19) disease is considered to be medical equipment subject to VAT at a zero-rate (0%).
Eligible medical equipment are following,
- Medical face masks that are not included in the Cabinet Decision No. 56 of 2017 on Medications and Medical Equipment Subject to Tax at Zero Rate (of approved standards 14683 and UAE.S ASTM F2100);
- Half filtered face mask (UAE.S EN 149);
- Non-Medical “community” face mask made from textile (UAE.S 1956);
- Single-use gloves (UAE.S ISO 374-2);
- Chemical disinfectants and antiseptics intended for use on the human body, but excluding detergents, cosmetics and personal care products (UAE.S EN 1276, EN 1650, and EN 14476:2013+A2).
A supply or import of certain medical equipment may be zero-rated where the supply or import occurs within the period from the effective date, i.e. 1st of September 2020, of the Cabinet Decision until 31 December 2021.
It should be noted that that the zero-rating of supplies and imports under the Cabinet Decision is separate, and in addition to, zero-rating of any other medical equipment in accordance with Cabinet Decision No. 56 of 2017 on Medications and Medical Equipment Subject to Tax at Zero Rate.
The “medical equipment” to which the temporary zero-rating rules apply are personal protective equipment used for the protection from Covid-19, and which contain the features and meet the specifications determined and specified by the Ministerial Decision.
Such medical equipment are limited to the above mentioned list.
The zero-rating rules do not apply in respect of any supply of medical equipment where the date of supply, or the date the medical equipment is delivered to the recipient or placed at the recipient’s disposal, falls outside the period from 1 September 2020 to 31 December 2021. In such situations, the supply of medical equipment is subject to VAT at 5% and this VAT must be reported in the tax return of the relevant tax period (or periods) where the date of supply occurs.
Similarly, medical equipment cannot be zero-rated where the date of import is either before 1 September 2020 or 31 December 2021. In these cases, the importer would be required to account for VAT on the import at 5% in accordance with the normal procedures for payment of import VAT.
As this decision, though issued in April 2021, applies retrospectively, a credit note may be issued where a supply was made during this period and tax charged at Standard Rate (5%).