Temporary Zero-rating of Certain Medical Equipment

Temporary Zero-rating of Certain Medical Equipment

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The temporary zero-rating on medical equipment was legally validated by Cabinet Decision No. 9/12 of 2020. Furthermore, the Ministerial Decision No. 380 of 2020 (“Ministerial Decision”) issued by the Minister of Health and Prevention on 6 December 2020 (with effect from 1 September 2020) specifies the medical equipment that are zero-rated in accordance with the Cabinet Decision.

The “medical equipment” to which the temporary zero-rating rules apply are personal protective equipment which are used for the protection from Covid-19, and which contain the features and meet the specifications determined and specified by the Ministerial Decision.

Eligible such medical equipment is limited to the following items:

  1. 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).
  2. Half-filtered face masks.
  3. Non-medical “community” face masks (made from textile).
  4. Single-use gloves.
  5. Chemical disinfectants and antiseptics intended for use on the human body (but excluding detergents, cosmetics, and personal care products).

Circumstances Under Medical Equipment are Zero-rated.

As per the Cabinet Decision No. 9/12 of 2020, Under certain conditions the medical equipment listed in the ministerial decision become eligible for 0% VAT in UAE. Such circumstances are mentioned below:

  1. In respect of supplies of medical equipment, a supply can be zero-rated where the date of supply takes place, and the medical equipment is delivered to the recipient or placed at the recipient’s disposal in the period from 1 September 2020 to 31 December 2021.
  2. In respect of imports of medical equipment, an import can be zero-rated when the medical equipment is imported in the period from 1 September 2020 to 31 December 2021.

When Does Standard Rate Apply on Supply & Import.

A supply or import outside the referred period i.e., from 1 September 2020 to 31 December 2021 is subject to VAT at a rate of 5% and this VAT must be reported in the tax return of the relevant tax period.

Retrospective Application

In a scenario where the supplier charged VAT at 5% on a supply that were eligible for zero rated under Cabinet Decision. In such situations, whereas:

  1. If the supplier knows the identity of the recipient, then the supplier shall issue a credit note to them to get a refund on the overcharged VAT on that supply. Accordingly, the supplier may reduce its output tax by the amount of the VAT shown in the tax credit note.
  2. If the supplier is unable to identify a recipient for the purpose of issuing and delivering the tax credit note, then the supplier should ensure to report, and remit collected VAT amounts to the tax authority.

If you have any queries or need any assistance with your VAT on medical equipment or filing of VAT then

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Read More:

Types of Supplies under VAT Law

Zero Rate on Covid Combating Medical Supplies

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