Medical Doctors and VAT
Member Query
I need assistance with a client who is a doctor who worries that their services should not be taxable and should be exempt because medical aids do not want to pay them the VAT portion. All their income is from medical aids.
Our Response
Are Doctors’ Services VAT Exempt?
In terms of the Value-Added Tax Act No. 89 of 1991, services are only exempt from VAT if they are specifically listed under section 12 of the Act. Medical services are not included in Section 12 of the VAT Act. Chapter 6 of the VAT 404 Guide (paragraph 6.2) confirms this, including “professional services – doctors, private hospital services…” as examples of standard-rated supplies, meaning they are subject to VAT at the rate of 15%.
Chapter 7 of the VAT 404 Guide, which lists all exempt supplies under section 12 of the VAT Act, does not include medical or health care services in any form.
Medical Aid Reimbursement Does Not Affect VAT Liability
The fact that medical aid schemes refuse to reimburse the VAT portion does not affect whether VAT must be charged.
VAT is a legal obligation based on the nature of the service and registration status of the supplier, not the payer.
If the doctor is registered for VAT, and the services do not qualify as exempt, VAT must be charged on all invoices, whether payment comes from a patient or a medical aid.
If the doctor absorbs the VAT (i.e., doesn’t add it to the fee), it still applies and is treated as VAT-inclusive.
VAT Registration Requirements
If the doctor earns more than R1 million in any 12 months from their practice, they must register for VAT under section 23(1) of the VAT Act.
Once registered, they must charge VAT on all standard-rated services, including those billed to medical aids.
Conclusion
There is no exemption in the VAT Act that allows doctors to treat their services as VAT-exempt. All professional medical services are standard-rated taxable supplies, and VAT must be charged if the practitioner is a registered vendor.
The refusal by medical aids to reimburse VAT is a commercial issue between the doctor and the scheme but does not override the legal VAT obligation.
