February 8, 1995
XXXXX
This is in response to your memo of September 7, 1993, in which you enquired about the taxable status of a number of services provided by a medical practitioner to XXXXX I apologise for the delay in replying to your request.
Facts
1. Pursuant to an agreement in writing, a medical practitioner agrees to provide medical and consultative services to XXXXX
2. The medical and consultative services are comprised of:
• medical assessment of candidates prior to employment, and of employees in numerous circumstances;
• assessment and monitoring of all sick leave certificates, and claims on various income replacement plans;
• first aid services for employees with minor injuries;
• consultative services to the Director, Occupational Health, Safety and Benefits; and
• consultation and referral services to employees referred by supervisors.
3. In the course of providing the above mentioned services, the practitioner:
• liaises with the medical community on behalf of the commission;
• supervises, counsels and supports two nurses;
• oversees the design and execution of all occupational health programs;
• provides quarterly reports to the Director of Health, Safety and Benefits, and
• prepares and gives evidence at judicial and quasi-judicial proceedings where medical assessments of XXXXX employees are at issue.
4. XXXXX pays XXXXX per month to the medical practitioner in respect of the above mentioned services.
5. XXXXX provides secretarial services to the medical practitioner.
6. Pursuant to the agreement, XXXXX will attempt to provide sufficient space to the medical practitioner to perform the duties specified in the agreement.
7. The medical practitioner is to perform the services described in the agreement on the premises of XXXXX
QUESTION
You asked if the different elements provided by the medical practitioner to XXXXX are part of a single supply or constitute separate supplies. In your opinion, these elements are part of a single supply and is an exempt health care service.
ANSWER
To make this determination, we have used the factors included in the policy on single and multiple supplies.
First, we have to determine whether the contract itself explicitly provides that a single supply or multiple supplies are made. Based on the provisions of the contract, it may be argued that the medical practitioner is making a single supply of occupational health care services to XXXXX and that the elements mentioned above are all part of that supply. However, this interpretation is not without doubt. Given that the provisions of the contract are not specific enough to make a determination, it is therefore necessary to use other criteria included in the above-mentioned policy.
In this regard, a number of elements are identified in the contract between the medical practitioner and XXXXX and it has to be determined whether these elements are outputs, i.e. things being provided by the practitioner to XXXXX , or inputs, things being used by the practitioner in the making of a supply. If it is determined that some of the elements are inputs used by the medical practitioner to make a supply(ies), these elements could not be considered as supplies in themselves. It would only be necessary to pursue the analysis in respect of the other elements that are actually provided to XXXXX
The following elements are identified in the contract between the medical practitioner and XXXXX
1. Medical assessment of employees and candidates.
2. First aid services.
3. Consultation and referral services to employees.
4. Assessment and monitoring of sick leave certificates and claims.
5. Provision of consultative services to the Director, Occupational Health, Safety and Benefits.
6. Liaison with the medical community.
7. Supervision of two nurses.
8. Monitoring of occupational health programs.
9. Submission of quarterly reports to the Director, Health, Safety and Benefits.
10. Provision of evidence at judicial and quasi-judicial proceedings.
In our opinion, these elements may be considered as outputs or things being provided to XXXXX by the medical practitioner, given that they are all provided to XXXXX and are not actions that are to be performed by the medical practitioner in order to provide another element. It is therefore necessary to determine whether each of these elements constitutes a separate supply or whether they all are part of a single supply. To make this determination, we used the three following questions included in the policy on single and multiple supplies.
1. If the customer did not receive all of the elements would each, in itself, be, in the context of this transaction, of any use to the customer? [if yes, likely multiple supplies, if no, a single supply]
No. XXXXX wants to ensure that their employees are in good health condition in order to perform their duties and all the tasks to be performed by the practitioner are for the purpose of satisfying this need. In itself, each of the elements provided by the medical practitioner would not satisfy XXXXX needs. If the practitioner only assessed the employees' health condition and did not submit any report to the company; the medical assessment would not be of any use to the company. Similarly, the reports to the company could not be provided and, consequently, would be of no use if they were not based on medical assessments. As well, all the other elements are provided by the practitioner for the purpose of ensuring that the employees are in good health and do not have a separate use. Therefore, in the context of this transaction, none of the elements included in the contract between XXXXX and the medical practitioner would satisfy all XXXXX needs.
Given that none of the elements has a separate use, the answer to this question indicates that all the elements may be considered to be part of a single supply.
2. Is the provision of a particular element contingent on the provision of another element? [if yes, likely a single supply, if no, multiple supplies]
No. It is reasonable to consider that the agreement entered into by the practitioner and XXXXX was negotiated to suit the needs of XXXXX and that XXXXX was not required to acquire all of the elements from the practitioner. The latter would have provided some of the elements to XXXXX without the other elements if XXXXX wanted to acquire only those elements.
The answer to this question indicates that all the elements may constitute separate supplies.
3. Is the customer made aware of the specific elements (in detail) that are part of the package? [if yes, likely multiple supplies, if no, single supply]
No. For instance, at the time of the agreement, XXXXX does not know in detail how many medical assessments the medical practitioner will perform and which employees will be assessed. Similarly, it does not know if and when first aid services will be needed, with whom within the medical community and when the practitioner will liaise, and the type of advice it will provide to the Director, Occupational Health, Safety and Benefits.
The answer to this question indicates that all the elements may constitute a single supply.
On balance, based on the answers to the three above questions, all of the element being provided by the medical practitioner to XXXXX constitute a single supply.
We have consulted with our Special Sectors Division and they have determined that the main element provided by the medical practitioner is the medical assessment of the XXXXX employees and candidates. All the other elements are provided to allow the practitioner to make these assessments. Consequently, they agree with your conclusion that the medical practitioner is making a single supply and that this supply is exempt pursuant to section 5 of Part II of Schedule V of the Excise Tax Act.
However, on page 2 of your proposed answer, you mention that the exemption only applies if the practitioner "supplies" himself/herself the service to the individual. Please note that, under the above-mentioned provision, the service has to be "rendered" to an individual. In this regard, in rendering a service to an individual, a medical practitioner may make a supply to another person who is the recipient of the supply, i.e. a person who has an obligation to pay the consideration, for instance XXXXX In addition, we do not believe that it is appropriate to discuss the application of section 138 of the Act, given that this provision is not applicable in this situation and is not an issue raised by the registrant.
Supplies made by XXXXX
In addition to the supply made by the practitioner, it appears that the secretarial services and the space provided by XXXXX in themselves constitute supplies made by XXXXX to the medical practitioner.
The consideration paid by the medical practitioner in respect of these supplies is part of the value of the services provided by him to XXXXX It may be estimated by the fair market value of the secretarial services and the space provided by XXXXX to the practitioner. XXXXX should therefore charge tax on the value of the consideration payable by the practitioner in respect of the supplies of the secretarial services and the space provided to the practitioner.
I hope that this information will be useful to you. Should you wish to discuss this issue further, please contact Mr. Serge Bernier at 952-9580.
H.L. Jones
Director
General Tax Policy XXXXX
| c.c.: |
Goods/Health Unit
Imposition team XXXXX |
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