Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 154731
Dear [Client]:
Subject: GST/HST RULING
Tax status of psychological services
Thank you for your [correspondence] of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the psychological services you render to individuals. We apologize for the delay in our response.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand from your fax the following:
1. You are currently rendering psychological services to clients in your private practice […].
2. You have a […][level of education] in Clinical Psychology […]. [However] […], you are not registered with the […][Regulatory body for the profession of Psychology] in […][Province A] ([…][Provincial Regulatory Body]).
It is understood that you do not hold yourself out to be a psychologist and that you are required to demonstrate you have the relevant training and experience to offer psychological services.
You understand that your services are not likely covered by the medical insurance plan of [Province A]. You are not registered for GST/HST.
3. The profession of psychology in [Province A] is regulated under […][the appropriate provincial legislation and the Provincial Regulatory Body].
4. [The Provincial Regulatory Body] is the regulatory body for the profession of psychology in [Province A]. […]. [The Provincial Regulatory Body] sets the standards for the practice of psychology [in Province A].
5. [The Provincial Regulatory Body] is established under […][describes the legislative authority].
6. […][The Regulatory Body has] a class of registrants for a registered psychologist and a registered psychological associate.
7. […][Specifies authority for] a full registrant […][to be] entitled to practise psychology.
8. […][About the] use of the titles by registrants of [the Provincial Regulatory Body]. […].
RULING REQUESTED
You would like to know whether a supply of services rendered by a person who is not licenced by [the Provincial Regulatory Body] [in Province A] to practise the profession of psychology in [Province A] is exempt from GST/HST under section 7 of Part II of Schedule V.
RULING GIVEN
Based on the facts set out above, we rule that a supply of services rendered by a person who is not licenced by [the Provincial Regulatory Body] to practise the profession of psychology in [Province A] is not exempt from GST/HST under section 7 of Part II of Schedule V. Therefore, the supply of services is subject to GST/HST.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
EXPLANATION
Generally, most supplies of property and services made in Canada are subject to GST/HST, unless they are specifically exempt under Schedule V. Part II of Schedule V sets out the health care services that are exempt from GST/HST.
Section 7 of Part II of Schedule V exempts a supply of a psychological service rendered to an individual by a practitioner of the service. Section 7 states:
A supply of any of the following services if the service is rendered to an individual by a practitioner of the service:
(a) optometric services;
(b) chiropractic services;
(c) physiotherapy services;
(d) chiropodic services;
(e) podiatric services;
(f) osteopathic services;
(g) audiological services;
(h) speech-language pathology services;
(i) occupational therapy services;
(j) psychological services;
(k) midwifery services;
(l) acupuncture services; and
(m) naturopathic services.
Section 1 of Part II of Schedule V defines a “practitioner” to mean:
in respect of a supply of optometric, chiropractic, physiotherapy, chiropodic, podiatric, osteopathic, audiological, speech-language pathology, occupational therapy, psychological, midwifery, dietetic, acupuncture or naturopathic services, means a person who
(a) practises the profession of optometry, chiropractic, physiotherapy, chiropody, podiatry, osteopathy, audiology, speech-language pathology, occupational therapy, psychology, midwifery, dietetics, acupuncture or naturopathy as a naturopathic doctor, as the case may be,
(b) where the person is required to be licensed or otherwise certified to practise the profession in the province in which the service is supplied, is so licensed or certified, and
(c) where the person is not required to be licensed or otherwise certified to practise the profession in that province, has the qualifications equivalent to those necessary to be so licensed or otherwise certified in another province.
In addition, if a supply falls within an exemption under Part II of Schedule V, it is necessary to determine if the supply is excluded from the exemption because the supply is a cosmetic service supply or because the supply is not a qualifying health care supply pursuant to sections 1.1 and 1.2 of Part II of Schedule V.
The GST/HST exemption in section 7 of Part II of Schedule V applies to a psychological service rendered to an individual by a practitioner of the service. The ETA does not define the term “psychological service”. It is our view that the term “psychological service” is a broad concept that encompasses any service relating to human mental functioning and behaviour. A psychological service may be rendered in a variety of practice settings by a wide range of qualified health care professionals including a psychologist, nurse, counsellor, therapist, and social worker. Psychological services include the assessment and diagnosis of a disorder, individual or group therapy, counselling, and referrals.
[…][Describes type of services provided by the individual]. It is our view that these services are psychological services for purposes of the ETA.
However, the exemption in paragraph 7(j) of Part II of Schedule V is not available to a person solely on the grounds that the person renders a psychological service. To be included in the exemption, the psychological service must be rendered to an individual by a “practitioner” of the service. Section 1 of Part II of Schedule V defines the term “practitioner” in respect of a psychological service to mean a person who (a) practises the profession of psychology and either is (b) licenced or certified if required in the province in which the service is supplied; or (c) if licensing or certification is not required in the province in which the service is supplied, the person has the qualifications equivalent to those necessary to be licensed or certified in another province.
The inclusion of the expression “practises the profession of psychology” in paragraph (a) of the definition of “practitioner” restricts the exemption to circumstances where psychological services are rendered by a person who has attained the qualifications to practise the “profession of psychology”.
In [Province A], the profession of psychology is regulated […]. [The Provincial Regulatory Body] is the […] regulatory body established by provincial legislation for the profession of psychology in [Province A]. Therefore, what constitutes the profession of psychology is defined by the scope of the mandate established by [the Provincial Regulatory Body] in accordance with the provincial legislation.
As the profession of psychology is regulated in [Province A], paragraph (b) of the definition of “practitioner” applies and a person must be licensed by (i.e., be a member of) a provincial organization responsible for the regulation of the profession as recognized by provincial legislation to be a practitioner under the ETA. In [Province A], this means that the person must be a member of [the Provincial Regulatory Body].
[The Provincial Regulatory Body] provides two classes of registrants; a registered psychologist and a registered psychological associate. Therefore, only a registered psychologist and a registered psychological associate (Footnote 1) are practitioners under the ETA. As such, only supplies of psychological services rendered by a registered psychologist and a registered psychological associate are exempt under section 7 of Part II of Schedule V.
As the services you supply are not exempt under Part II of Schedule V, it is not necessary to determine if the services you supply are a cosmetic service supply or are not a qualifying health care supply. Therefore, a discussion on these issues has not been included.
ADDITIONAL INFORMATION
Registration for GST/HST
Subsection 240(1) provides, in part, that every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada must register for the GST/HST, except where the person is a small supplier.
In general, under section 148, a small supplier is a person whose total revenue from taxable supplies (other than supplies of financial services, sales of capital property and goodwill attributable to the sale of a business) in the previous four consecutive calendar quarters, or in a particular calendar quarter, and those of associated persons, does not exceed $30,000.
However, once the small supplier's total taxable revenue exceeds $30,000 in the previous four consecutive calendar quarters, or in a particular calendar quarter, they are no longer considered to be a small supplier and are required to register for the GST/HST. As the wording in the legislation includes the expression “four consecutive calendar quarters”, exceeding the $30,000 threshold must be verified every calendar quarter.
Effective date of registration
The effective date of a person's GST/HST registration depends on when they exceed the small supplier threshold. Subsection 240(2.1) states that a person required under subsection 240(1) to be registered shall apply to the Minister of National Revenue for registration before the day that is thirty days after the day the person first makes a taxable supply, otherwise than as a small supplier.
If a person's revenues are over the threshold amount in one calendar quarter, the person is a registrant and must collect the GST/HST on the supply that made them exceed the threshold amount. The person's effective date of registration is the day the supply was made that exceeded the threshold amount. The person must register for GST/HST within 29 days from that day.
If a person is under the threshold amount in one calendar quarter, but the person is over the threshold during four (or fewer) consecutive calendar quarters, the person is considered to be a small supplier for those four calendar quarters and a month following those quarters. The person’s effective date of registration would be the day the first supply was made after the person ceased being a small supplier. The person has 29 days from this day to register for the GST/HST. Once a person is registered for GST/HST they must charge and collect GST/HST on every taxable supply made.
Additional information on registration requirements and small suppliers can be found in our publications GST/HST Memorandum 2.1, Required Registration and GST/HST Memorandum 2.2, Small Suppliers. Further information on your obligations and entitlements may be found in GST/HST Guide RC4022, General Information for GST/HST Registrants.
ITC entitlement
Generally, GST/HST registrants are entitled to claim ITCs for the GST/HST paid on purchases to the extent that the goods or services purchased are used in making taxable supplies (including zero-rated supplies). Section 169 governs the claiming of an ITC which, depending on the circumstances, may be a full or apportioned ITC. These purchases can relate to operating expenses, capital personal property and capital real property. There are special rules regarding entitlement to claim ITCs for capital personal property and capital real property.
For more information on different allocating methods, refer to GST/HST Memoranda Series 8.3, Calculating Input Tax Credits.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-7952. Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Alison Jones
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
1 This would include a person who goes by the title psychologist or psychological associate.
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