The new VAT exemption for hospital construction work
Work on construction or modernization of hospital facilities according to the new version of Article 294 par.
(5) (a) from the Tax Code as regulated by Law No. 88/2023 is since 11.6.23 exempt from VAT with the right of deduction as follows:
(5) The following are exempt from the tax: a) services for construction, rehabilitation, modernization of hospital units of the state public network, as well as services of
construction, rehabilitation, modernization of hospital units provided to non-profit organizations registered in the Public Register organized by ANAF…”
According to the point the implementing regulations of Law 88 issued by HG No. 653/2023 only on 3.8.2023 under the point “65^1. (1) Justification of the tax exemption provided for in Article 294 par. (5) (a) from the Tax Code for services of construction, rehabilitation,modernization of hospital units of the state public network, for which the beneficiary is the hospital department of the state public network or, as the case may be, the central public institution/authority or local government, which guarantees its financing, according to the law, occurs with the documentation on the basis of which such services are provided, such as contracts concluded withthe beneficiary .”
In conclusion, direct or indirect billing (beware that it is always a public entity that is the funder) of the work specified in the regulations and having a public hospital facility as the beneficiary is exempt from VAT with direct to tax deduction.
The legislation thus formulated leaves totally uncovered the issue of recovering the tax from direct contractors who to date are forced to wait for the ordinary timeframe of refunds by not taking advantage of either a special refund procedure or the possibility of claiming VAT exemption on invoices received from subcontractors.
Any contract for public hospital construction and modernization work must therefore be carefully evaluated from the perspective of applying the new tax regulations.
