Malta's aesthetic medical sector under threat from Inland Revenue

Malta - Healthcare in the Eastern Mediterranean

The Mediterranean island of Malta has a well established reputation for high quality and ethical medical treatment and education provided by its public sector hospitals and clinics, small private medical sector and thriving clinical schools. The small island of Gozo is host to the University of London's Queen Mary Campus Medical School and the nation is rated by the World Health Organisation to have the 5th top healthcare system globally. Our article about Malta's healthcare system summarises its achievements as a European healthcare hub.

Malta has built up an internationally recognised reputation for safe and effective aesthetic surgery and procedures with a thriving local and medical tourist market providing a large range of treatments and interventions including face lifts, botox injections, varicose vein treatment and teeth whitening.

Malta's main competitor in this market is Turkey which is estimated to hold 60% of the regional aesthetic procedure market. Turkey provides a significantly lower price range for treatments but a considerably higher rate of complications, many of which are severe and require surgical intervention. Much publicity has been given to the adverse outcomes for dental treatment in Turkey in recent years.

Inland Revenue - Redefinition of Medical Care and Addition of VAT

The Inland Revenue Department of Malta, the Office for the Commissioner for Revenue has produced a draft circular and is currently in discussions with the Medical Council of Malta to determine which medial and aesthetic services will be eligible for Value Added Tax (VAT). “Supplies not primarily for the benefit of the patient shall not be considered as supplies of medical care,” the draft circular reads.

At the current time, the Value Added Tax Act (VAT) of Malta specifies that the supply of medical care by a licensed healthcare professional should be VAT exempt. However the recent correspondence from the Inland Revenue Department implies that it intends to be more reserved in what it considers to be medical care. 

According to the guidelines, the department will be considering any service that is meant to protect human health and the diagnosis, treatment and cure of diseases or health disorders in people, including mental health as potentially eligible for VAT but particularly interventions mainly intended to improve a person’s appearance and not required for the preservation of health or treatment of a disease. However physicians contend that this is a grey area since some aesthetic procedures could be deemed essential for a person’s health or well-being.

If VAT charges are imposed, healthcare providers will be left with no option but to raise their prices in response. The proposed rate of VAT is 18% which is the standard rate in Malta. (Some goods and services charge reduced rates of 5 and 7%).

The Inland Revenue Department has told service providers of aesthetic procedures and cosmetic surgeries that it intends to enforce the payment of VAT on a number of services and VAT officers have been informing medical professionals to add 18% on their fees for so-called med-aesthetic services. This is the first time that doctors and specialists in Malta will be adding VAT to their bills and services.

Whilst this action may drive patients to Turkey for aesthetic and dental treatments at lower costs, it may create the unintended consequence of burdening the Maltese healthcare system with costly and often complicated procedures for the remediation of the frequent adverse outcomes of these low cost procedures. The VAT charge would appear to be ill conceived and short sighted.

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