Public Clarification VATP023

The Federal Tax Authority (FTA) of the United Arab Emirates (UAE) published its new Public Clarification on Temporary Zero-rating of Certain Medical Equipment (VATP023) which clarifies the temporary application of VAT at the 0% rate on certain supplies and imports of medical equipment following the Cabinet Decision No. 9/12 O of 2020 (“Cabinet Decision”) and Ministerial Decision No. 380 of 2020 (“Ministerial Decision”) issued by the Minister of Health and Prevention on 6 December 2020.

It should be noted that the zero-rating of supplies and import under 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 Clarification (VATP023) specifies the “medical equipment” to which the temporary zero-rating rules apply:

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).

The supply or import of the medical equipment mentioned in the Ministerial Decision is zero-rated only where the date of supply or date of import (determined in accordance with Articles 25 and 26 of the Federal Decree Law No. 8 of 2017 on Value Added Tax) is in the period from 1 September 2020 to 28 February 2021 (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 28 February 2021.) .

Retrospective application - The rules allowing for zero-rating of medical equipment under the Cabinet Decision are effective from 1 September 2020. Accordingly the following two scenarios may occur for supplies made from 1 September 2020:

Where a supplier is aware of the identity of the recipient to whom it has charged VAT at 5% on a supply which was eligible for zero-rating under the Cabinet Decision, the supplier shall issue and deliver a tax credit note to the recipient in order to refund the VAT overcharged on the supply. Furthermore, where a tax credit note has been issued and delivered to the recipient as per above, the supplier may reduce its output tax by the amount of the VAT shown in the tax credit note.
Where a supplier is unable to identify a recipient of the supply for the purpose of issuing and delivering the tax credit note (for example, a supermarket is unlikely to know who purchased qualifying medical equipment), the supplier should ensure that it accounts for the collected VAT in the tax return relating to the tax period in which the supply was made.

It is not specifically addressed in the Clarification whether the adjustment is required in relation to imports of the medical equipment which was subject to 5% VAT whereas it was eligible to the application of 0% VAT under the Cabinet Decision.