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.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 247167
Dear [Client]:
Subject: GST/HST interpretation - Supplies of uninsured activities by a medical practitioner
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to an exchange communication arrangement you offer to your patients. […].
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. 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.
We understand from your correspondence […], that:
1. You are registered with the […][provincial regulatory body] to practise medicine in […][a province].
2. You work as an unincorporated family doctor.
3. You perform certain activities that are not covered by the […][provincial health care plan] (the uninsured activities).
4. These activities include renewing patient’s medications, writing letters for physiotherapy, chiropractic care and massage therapy as part of treatment recommendations, preparing sick notes, completing medical reviews for patients’ life insurance plans.
5. Your patients have also the option to pay an annual fee […] that allows them to ask you medical questions by email. Sometimes you will respond with a short email and other times, it involves asking the patient to come in for an appointment. This arrangement (also referred to as a block fee arrangement) allows the patient to ask you any number of questions each year. You indicated that this activity is an uninsured activity.
6. […], the patients can be located anywhere […].
7. In the ordinary course of your medical practice, you obtain the addresses of your patients. […].
8. Approximately 95% of the time you spent on uninsured activities is spent on reading and responding to emails from your patients.
9. […].
10. […].
11. You do not provide cosmetic service supplies or supplies in respect of a cosmetic service supply.
INTERPRETATION REQUESTED
You would like to know if the supply of the block fee arrangement is subject to the GST/HST and if you need to be registered for GST/HST purposes and are required to collect the GST/HST on the block fee.
INTERPRETATION GIVEN
Generally, all supplies of property and services made in Canada are taxable unless an exemption from the GST/HST applies. Taxable supplies are supplies made in the course of a commercial activity and may be taxable at the rate of 0% (zero-rated supplies), 5%, 13%, or 15% on the value of the consideration for the supply depending on the province in which the supply is made. Exempt supplies are not subject to the GST/HST and are included in Schedule V. Part II of Schedule V provides that the supplies of certain health care services are exempt from the GST/HST.
Specifically, section 9 exempts a supply (other than a zero-rated supply) of any property or service but only if, and to the extent that, the consideration for the supply is payable or reimbursed by the government of a province under a plan established under an Act of the legislature of the province to provide for health care services for all insured persons of the province (such as the [provincial health care plan]). Accordingly, to the extent that a supply of property or a service is paid or reimbursed under the [provincial health care plan], the supply to the patient is exempt under section 9.
Any other supply of health care services may be taxable or exempt under other provisions of Part II of Schedule V.
In particular, section 5 (subject to sections 1.1 and 1.2 explained below) exempts a supply of a consultative, diagnostic, treatment or other health care service that is rendered by a medical practitioner to an individual.
“Medical practitioner” is defined to mean a “person who is entitled under the laws of a province to practise the profession of medicine or dentistry”. Since you are registered with the [provincial regulatory body] to practise medicine in [a province], you are considered a medical practitioner.
Therefore, when you make a supply of uninsured services that are consultative, diagnostic, treatment or other health care services the supply is exempt under section 5 if :
- The supply is not a “cosmetic service supply” (section 1.1)
- The supply is a “qualifying health care supply” (section 1.2)
Section 1.1 and 1.2 are intended to restrict the scope of certain of the exemptions described in Part II of Schedule V.
A cosmetic service supply and a supply in respect of a cosmetic service supply that is not made for medical or reconstructive purposes cannot be exempt from the GST/HST under Part II of Schedule V (including section 5). A “cosmetic service supply” is defined as “a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes”. You indicated that you do not provide cosmetic service supplies.
A “qualifying health care supply” is defined to mean
“a supply of property or a service that is made for the purpose of:
a) maintaining health;
b) preventing disease;
c) treating, relieving or remediating an injury, illness, disorder or disability;
d) assisting (other than financially) an individual in coping with an injury, illness, disorder or disability; or
e) providing palliative health care.”
For more information on qualifying health care supplies, please refer to GST/HST Policy Statement P-256, Qualifying Health Care Supplies and the Application of the GST/HST to Supplies of Medical Examinations, Assessments, Reports and Certificates.
It should be noted that section 5 only exempts the supply of services, but not the supply of property (including intangible property). As explained below, a block fee arrangement is considered the supply of intangible property and is therefore not covered by section 5.
Email communication exchanges offered on a block fee basis
It is the Canada Revenue Agency’s (CRA) position that email communication exchanges offered under a block fee arrangement between a medical practitioner and a patient is a supply of intangible personal property and does not constitute the supply of a service. A block fee arrangement is the right to obtain a predetermined set of uninsured services in consideration for a flat fee. The ETA only exempts the supply of certain health care services (and not the right to obtain these services), and property and services that are paid or reimbursed by the [provincial health care plan]. Therefore, the consideration under a block fee arrangement that is not covered by the [provincial health care plan], for the right of exchanging by email with a medical practitioner is subject to the GST/HST.
The purpose of the patients paying the block fee is to acquire the right to use predetermined services. Patients may choose to pay the block fee even if they rarely or never exercise their right to seek medical advice by email with the medical practitioner. It is determinative that the block fee arrangement is not dependent on any services actually being, or to be, provided to the patient - there may be no services, very few services, or there may be extensive services performed in connection with the block fee arrangement. The supply made by the medical practitioner of being available to respond to patients’ questions by email does not contain, at that time, a service element comprising of the medical practitioner skills and experience because at the time the block fee is charged, no service is rendered to the patient.
In addition, block fee arrangements cannot be directly linked to any particular service to be provided, as they are not dependent on the actual services, if any, that may be provided. In effect, the block fee arrangement is comparable to the purchase of a plan that covers a menu of services that a patient has the right, at their discretion, to request. A right is not a supply of a service but of intangible personal property.
Accordingly, the consideration paid by a patient under a block fee arrangement that is not covered by the [provincial health care plan] is subject to the GST/HST at the applicable rate depending on the province in which the supply is made. Since the rights granted under the block fee arrangements can be used virtually from anywhere by the patient, the rate of tax applicable would be the rate applicable in the province of the patient address obtained in the ordinary course of the medical practitioner’s practice.
Determining if you need to register and collect the GST/HST
Every person who makes a taxable supply in Canada in the course of a commercial activity in Canada is required to register for GST/HST purposes except where the person is a small supplier or the person's only commercial activity is the making of supplies of real property by way of sale otherwise than in the course of a business.
A “commercial activity” of a person includes a business carried on by the person, or an adventure or concern of the person in the nature of trade, except to the extent it involves the making of exempt supplies by the person. It also includes making a supply (other than an exempt supply) of real property, including anything done by the person in the course of or in connection with the making of the supply.
In general, a person is a “small supplier” if the total amount of revenues from their worldwide taxable supplies and any associates is $30,000 or less in any single calendar quarter and in the last four consecutive calendar quarters. In determining the total amount of revenues from taxable supplies (including zero-rated supplies) of property and services made inside and outside Canada, revenues from supplies of financial services, sales of capital property, and goodwill from the sale of a business are not included.
In general, block fees arrangements and the consideration for uninsured services that are not qualifying health care supplies will need to be taken into consideration for the purposes of calculating the $30,000 threshold. Other amounts may also be included in the calculation of the threshold depending on other business activities you may be engaged in.
A person must make a determination at the end of each calendar quarter as to whether they continue to qualify as a small supplier.
A person that no longer qualifies as a small supplier because they exceeded the $30,000 threshold in a single calendar quarter must collect the tax on the first taxable supply they make otherwise than as a small supplier. The person must apply to be registered for the GST/HST before 30 days after they made the first taxable supply otherwise than as a small supplier.
A person that is under the threshold amount in one calendar quarter, but is over the threshold during four (or fewer) consecutive calendar quarters, is considered to be a small supplier for those calendar quarters and for the month following those quarters. The person must begin collecting GST/HST on taxable supplies made the next day following the day they cease to be a small supplier and must apply for registration before the twenty nineth day after the day they cease to be a small supplier.
A person who makes taxable supplies and who qualifies as a small supplier may choose to become a GST registrant.
A GST/HST registrant (that is, a person who is registered or required to be registered for GST/HST purposes) is responsible for collecting the GST/HST on all taxable supplies (other than zero-rated supplies) of property and services in Canada.
For more details regarding the rules applicable to small suppliers, please refer to our publication GST/HST Memorandum 2.2, Small suppliers.
Claiming ITC
If you register and begin collecting the GST/HST you may be eligible for input tax credits. For more information on input tax credits and other information on the GST/HST, please refer to GST/HST Guide RC4022, General Information for GST/HST Registrants.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 438-304-4971.
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.
Sincerely,
Robert Demers
Industry Sector Specialist
Health Care Sectors Unit
Public Service Bodies and Governments Division
GST/HST Rulings Directorate
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