VAT is impacting private healthcare


Saudi Gazette

— The cost of healthcare services offered by THE private sector has been slightly escalating with the implementation of value added tax (VAT). While medicines, a key component in healthcare, are exempted, most of other medical services are being brought under VAT.

Hospitals, clinics, dental and eye care facilities and allied services in the private sector have started collecting 5 percent VAT from visiting patients.

The insurance companies are paying the 5 percent VAT on the consultation fee, diagnostic and other clinical procedures on behalf of the patients but it is not clear how long they would do so.

The dental, optical, cosmetic and fertility consultancy and procedure charges, which are not covered by insurance companies, are likely affect the patients.

Most people who visit hospitals for the treatment of diabetes and other chronic diseases face no problem with the new taxation.

According to experts premium on medical insurance would certainly go up because the costs of healthcare providers are rising with most suppliers adding VAT on goods being supplied to hospitals.

"Also, input cost of hospitals has been increasing due to the increase in costs of housekeeping and maintenance," a hospital source explained.

"There are some medicines that are zero rated, which the hospitals can claim later but increasing costs of inputs like stents, catheters, chemicals and equipment also matter," the source said.

In a major relief to patients, the authorities have exempted almost all medicines from the tax ambit.

The General Authority of Zakat and Tax (GAZT) has exempted 73,335 pharmaceutical medicines and also some 371 vitamins and some thousands of other drugs required for treatment in consultation with Saudi Food and Drug Authority (SFDA). It also exempted devices, such as blood pressure gauge, from VAT.

The average per capita spending on medicines in the Kingdom is SR700 and the total annual turnover is estimated at more than SR15 billion.