Accounting for health services – how is the VAT exception handled?

Health services are outside the scope of VAT, not zero-rated – the clinic charges no VAT but gets no deduction either. Authorisation is not enough: it is the content of the work that decides. Where the clinic also does cosmetic treatment, product sales or letting, it becomes mixed activity with apportionment of shared purchases, and the NOK 50,000 threshold is measured only against the VAT-liable turnover.

Out of scope is not the same as 0%

Where a service is outside the scope of VAT, the turnover falls outside the VAT Act: the clinic charges no VAT but gets no deduction for input VAT on costs relating to that activity. Where the turnover is zero-rated, it stays in the system with the right to deduct intact. The difference decides whether the VAT on equipment, premises and software is a pass-through item or a real cost – see VAT exemptions for health, education and culture

Authorisation is not enough

The exception follows the service, not the title. Where a doctor supplies ordinary consultancy to a pharmaceutical company, gives a lecture or carries out work that is not health care in character, the service can be VAT-liable. That means the same person can have both out-of-scope and VAT-liable turnover – and that the engagement agreements have to be read before the invoicing is set up.

The VAT threshold applies only to VAT-liable turnover

This is often overlooked. The registration threshold of NOK 50,000 in a twelve-month period is measured against the VAT-liable turnover – not against the clinic's total income. A clinic with five million of out-of-scope treatment and NOK 60,000 of cosmetics sales can therefore become liable to register for the product sales, while the treatment stays out of scope – see VAT registration

Cosmetic treatment

For cosmetic surgery and treatment the general rule is that the procedure has to be medically justified and wholly or partly publicly funded to fall within the health exception. Purely cosmetic treatments without that basis normally have to be invoiced with 25% VAT. For a clinic doing both, that is exactly why the business becomes mixed.

Product sales, public reimbursement and grants

Product sales of skincare, supplements, lenses and similar are normally VAT-liable at 25%, regardless of the treatment being out of scope. HELFO settlements and patient contributions relate to the out-of-scope health service and do not make it VAT-liable. But they have to be reconciled as separate settlement flows, like a card acquirer settlement. Grants have to be assessed individually: a grant with no counter-performance is normally not turnover, while payment for a specific service can be.

Clinic collectives and cost sharing

This is where the largest risk sits. Several practitioners sharing premises, reception, equipment and administration often have an internal settlement. But «cost sharing» is not automatically outside VAT. Where one of the parties – or a shared operating company – supplies services to the others, that can be VAT-liable turnover even where the amount only covers costs. Pure onward invoicing of an external cost is treated differently from supplying administrative services. Settle the structure in the agreement. It is far cheaper than sorting it out afterwards.

Hiring out health personnel and equipment

Hiring out personnel is as a general rule a VAT-liable service, even where the personnel provide health care at the recipient. It is the hiring out that is assessed, not the work performed. Hiring out medical equipment is normally VAT-liable too. Where it is in reality hired labour rather than a service purchase, the hiring rules also apply – see Hiring in labour

Employed or self-employed practitioner?

Many clinics use self-employed practitioners. The classification follows the ordinary criteria, and under the presumption rule from 1 January 2024 an employment relationship is presumed unless the engager makes it clearly more likely than not that it is not. Where the practitioner is integrated into the clinic's operation, uses the clinic's equipment, follows the clinic's prices and bears no risk of their own, that points to employment – see Freelancer, contractor or employee?

Appointments and documentation

Appointments and prices should be documentable and match the registered turnover. Where the clinic uses a booking system, the data has to be retrievable afterwards. Discrepancies between bookings and turnover are among the first things an inspection looks at – and patient records cannot be used as turnover documentation.

Mixed activity and apportioning the deduction

Where the clinic has both out-of-scope and VAT-liable turnover, the costs have to be split three ways: costs only for the VAT-liable part give a full deduction, costs only for the out-of-scope part give none, and shared purchases give a proportionate deduction. Turnover can be used as the apportionment key where it reasonably reflects actual use. An important trap: 20% VAT-liable turnover does not automatically mean a 20% deduction on every cost. Direct costs are attributed directly. The 5% rule works both ways: where the VAT-liable turnover does not normally exceed 5% of total turnover, no proportionate deduction is as a general rule given on shared purchases – see VAT deductions

Common mistakes

Out of scope is treated as zero-rated with a right to deduct. The authorisation is used as proof that all turnover is exempt. The NOK 50,000 threshold is measured against total turnover. Product sales are invoiced without VAT. Cost sharing in a clinic collective is assumed to be outside VAT. Hiring out personnel is invoiced as a health service. The apportionment key is applied to every cost, including the direct ones. Greenleaf can establish which turnover is out of scope and which is VAT-liable, set up apportionment keys and handle the VAT reporting for a clinic.

This is general guidance, not advice on your specific case. Deadlines, rates and amounts change – always check the current rules, or get in touch with us.

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