The General Authority of Zakat and Tax (GAZT), in collaboration with the Ministry of Health (MoH) and Saudi Food and Drug Authority (SFDA), issued notes of Value Added Tax (VAT) treatments of the healthcare sector, ahead of VAT implementation in Saudi Arabia on January 1st, 2018.
Each of the Ministry of Health and SFDA published on their official websites the list of medicines (human drugs and vitamins) as well as medical equipment that will be zero-rated with VAT. All other medical supplies not included in the list will be subject to the standard 5% VAT rate.
GAZT further clarified that private healthcare services in the Kingdom will be subject to the standard 5% VAT noting that all zero-rated medical supplies should be listed separately in the issued tax bills.
GAZT encouraged all businesses in the healthcare sector to fully understand the requirements for VAT implementation related to their operations and business activities in order to ensure their readiness before VAT implementation on January 1st, 2018.
The VAT Implementing Regulations outline the treatment of economic activities, whether taxable at the standard 5% rate, zero-rated, exempt, or outside the VAT scope. Registered businesses conducting economic activities subject to VAT, whether standard rated or zero-rated, are entitled to deduct input tax, whereas registered businesses conducting VAT-exempted economic activities are not entitled to deduct these amounts.
To support the preparations for VAT implementation, GAZT had previously organized an introductory workshop about VAT for the healthcare sector, in line with its initiatives aimed at educating the various sectors about VAT and facilitating their compliance to its requirements.
GAZT urges all businesses to be fully ready for VAT ahead of its implementation on January 1st, 2018, and advises them to visit the official VAT website, VAT.GOV.SA, which contains a VAT manual with a simplified explanation of the basic steps businesses need to undertake to implement VAT, as well as a wide range of tools and information to support businesses in achieving readiness.
One can access the list of medicine and medical equipment issued by KSA Ministry of Health and SFDA via the following link: https://www.vat.gov.sa/en/vat-rate