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: 153241
Business Number: […]
February 5, 2016
Dear [Client]:
Subject: GST/HST INTERPRETATION
Independent medical evaluations
Thank you for your [correspondence], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of independent medical evaluations (IME). We apologize for the delay in providing a 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.
We understand the following:
1. You work in Ontario, Canada as a medical doctor in the capacity of a consultant. You are registered with the College of Physicians and Surgeons of Ontario to practice medicine in Ontario.
2. You reside in […][City 1, State 1], United States of America and have a home office in [State 1]. You do not have an office in Canada.
3. Almost all of your worldwide income is derived in Canada. You pay Canadian income tax and are registered for GST/HST purposes […].
4. […] you see patients in a hospital setting in […][City 2] or […][City 3], Ontario and perform consults whereby you produce a written consult note and often will write orders, being directly involved in patient care. These services are covered through the Ontario Health Insurance Plan (OHIP).
5. You also see patients […] for IMEs that are not covered through OHIP. As part of your consulting services you perform three types of IMEs:
i. As requested by insurance companies for victims of motor vehicle accidents: You see the patient either in a third party clinic or a rented office room in [City 2], Ontario for approximately […][# hours] where you interview and physically examine the patient. At your home office in [State 1] you spend approximately [#] hours reviewing medical documentation, dictating the report, and later editing the report. The insurance companies usually, but not always, ask for your opinion regarding the patient’s diagnosis, restrictions and limitations, and recommendations for treatment (e.g. what medications you would recommend they be prescribed, how much the patient can safely lift, or if they are medically fit to return to work). You are paid by third parties who arrange for the evaluations on behalf of insurance companies and provide office space 50-70% of the time. All of your billing and other office duties are performed in your home office in [State 1].
ii. As requested by lawyers for victims of motor vehicle accidents, and slips and falls: You see the patient in a rented office room in [City 2], Ontario for approximately [#] hours, where you conduct an interview and physical examination. The lawyers usually, but not always, ask for your opinion regarding the patient’s diagnosis, restrictions and limitations, and recommendations for treatment. At your home office in [State 1] you spend approximately [#] hours reviewing the medical documentation, dictating the report, and later editing and printing the report. All your billing and other office duties are performed in your home office in [State 1].
iii. “Paper reports” as requested by lawyers and insurance companies: These are reports and opinions offered on patients who you have not seen, or on patients seen months or years prior. Sometimes you are asked for your opinion regarding the patient’s diagnosis, restrictions and limitations, and recommendations for treatment. All the review of medical documentation, dictation, and editing of the report is performed in your home office in [State 1].
6. A large part of your services are IMEs for which you bill more than $30,000 per year. In the past, you did not charge the GST/HST on the supply of IMEs as the supply was exempt. You understand that there has been a change and doctors must now charge GST/HST for IMEs that are not for the “protection, maintenance, or restoration of the health of a person”. You have been collecting and remitting HST on the supply of your IMEs since you registered for GST/HST purposes […].
INTERPRETATION REQUESTED
You would like to know:
1. Do your treatment recommendations and recommendations respecting restrictions/limitations (e.g. what medications you recommend the patient be prescribed, how much the patient can safely lift, or if the patient is medically fit to return back to work) fall under the protection, maintenance, or restoration of the health of a person so that the supply of the IME would be exempt from the GST/HST?
2. As a non-resident who performs a majority of your consulting service outside Canada (i.e. review of the medical documentation, dictation, editing, and printing of the report […]), are you required to charge HST on the supply of IMEs?
3. If you are required to charge the HST, should you break down the charges on your invoice to the lawyers/insurance companies/third parties identifying an amount for time spent on the interview/examination in Canada and an amount for the work in [State 1] to produce the IME report?
INTERPRETATION GIVEN
GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, describes the circumstances in which the Canada Revenue Agency (CRA) will issue a ruling or an interpretation. A ruling is a written statement the CRA provides to a taxpayer that sets out the CRA’s position on how the relevant provisions of the legislation apply to a clearly defined fact situation of the taxpayer. An interpretation is a written statement which sets out the CRA’s view on how the ETA applies to a generic fact situation. The CRA will issue a ruling only when all of the relevant facts, contracts and other documentation pertaining to a particular transaction or series of transactions are provided. Therefore, we are providing you with an interpretation in respect of your request.
Question 1
Part II of Schedule V sets out the health care services that are exempt from the GST/HST.
Section 9 of Part II of Schedule V 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 OHIP). Accordingly, to the extent that a supply of a health care service is paid or reimbursed under OHIP, the supply is exempt under section 9 of Part II of Schedule V.
With the exception of supplies that are paid or reimbursed by a provincial or territorial health insurance plan (such as OHIP), health care services may be taxable or exempt under the provisions of Part II of Schedule V depending on their purpose.
Supplies made before March 22, 2013
Section 5 of Part II of Schedule V exempts a supply of a consultative, diagnostic, treatment or other health care service that is rendered by a medical practitioner to an individual.
The term "medical practitioner" is defined in section 1 of Part II of Schedule V, for purposes of Part II of this Schedule, to mean "a person who is entitled under the laws of a province to practise the profession of medicine or dentistry".
Where a supply is a cosmetic service supply or a supply in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes, the supply is deemed under section 1.1 of Part II of Schedule V not to be included in Part II of Schedule V and is therefore not exempt under section 5 of Part II of Schedule V. A cosmetic service supply is defined in section 1 of Part II of Schedule V to mean “a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes”.
A supply rendered by a medical practitioner of examining an individual is a health care service rendered to an individual for purposes of section 5 of Part II of Schedule V. The element of a health care service is present in an IME when the medical practitioner applies his or her medical expertise and makes a decision regarding this information on the individual's requirement for ongoing or future medical treatment. That the health care service is rendered to an individual is demonstrated by a physical examination of the individual and the medical practitioner’s judgment relating to the prognosis or treatment of the individual. Accordingly, the supply of an IME by a medical practitioner is exempt under section 5 of Part II of Schedule V for supplies made before March 22, 2013.
Supplies made after March 21, 2013
Amendments were made to provisions relating to the supply of health care services in Part II of Schedule V clarifying that GST/HST applies to supplies of reports, examinations and other property or services that are not made for the purpose of the protection, maintenance or restoration of the health of a person or for palliative care. The amendments apply to supplies made after March 21, 2013.
Section 1.2 of Part II of Schedule V has been added and provides that for the purposes of Part II of Schedule V, other than sections 9 and 11 to 14 (Footnote 1) , a supply that is not a “qualifying health care supply” is deemed not to be included in Part II of Schedule V and is therefore not exempt under any provision in Part II. Generally, supplies deemed not to be included in Part II of Schedule V would be taxable at the applicable rate of GST/HST.
The term “qualifying health care supply” has also been added to section 1 of Part II of Schedule V and 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.”
As a result of this amendment, services performed by health care professionals may be taxable or exempt depending on their purpose. This will particularly affect supplies of medical examinations, reports and certificates. In these cases it will be necessary to determine the purpose of the supply to determine its tax status.
Supplies of medical examinations, reports or certificates that meet the conditions of the exempting provision in section 5 of Part II of Schedule V will be exempt if the supply is made for a purpose found in the definition of qualifying health care supply. Specifically, paragraph (d) of the definition of qualifying health care supply includes supplies made for the purpose of assisting an individual (other than financially) in coping with an injury, illness, disorder or disability. This would include services provided directly to the individual to cope with the limitations or effects of an injury.
Supplies of medical examinations, reports and certificates that are made solely for other purposes, such as assisting a third party (e.g. insurance company or lawyer) in determining what benefits or the value of injuries for a settlement of a claim for damages the individual is entitled to receive for insurance or legal purposes, would be deemed not to be included in Part II of Schedule V and would be taxable for GST/HST purposes.
The purpose of a supply is the reason the supply is made. The fact that a physician uses his/her medical knowledge and skills to diagnose an individual or comment on treatments for his/her injuries (e.g. medications the patient may be prescribed, how much the patient can safely lift, if the patient is medically fit to return to work, or whether the proposed treatments are reasonable and consistent with injuries reported) does not automatically mean that the purpose for the supply is one of the purposes listed in the definition of “qualifying health care supply”. If a supply is made to provide an opinion in respect of a third party process such as determining eligibility for insurance benefits or quantifying injuries for a legal proceeding rather than for the provision of health care then it would not be a qualifying health care supply.
A supply of an IME that is not a qualifying health care supply, as defined under section 1 of Part II of Schedule V, is deemed under section 1.2 of Part II of Schedule V not to be included in Part II of Schedule V and is not exempt under any provision in Part II of Schedule V.
The supply of an IME made in Canada to a non-resident person may be zero-rated (taxable at the rate of 0%) under section 23 of Part V of Schedule VI provided none of the exclusions of that provision apply. For further information, refer to GST/HST Memorandum 4.5.3, Exports – Services and Intellectual Property.
Where no other exempting or relieving provision applies, the supply of the IME made in Canada is subject to GST/HST at the applicable rate (5%, 13%, 14% or 15%) depending on the province in which the supply is made.
For additional information, please refer to GST/HST Notice No. 286, Draft GST/HST Policy Statement - Qualifying Health Care Supplies and the Application of Section 1.2 of Part II of Schedule V to the Excise Tax Act to the Supply of Medical Examinations, Reports and Certificates.
Question 2
Pursuant to subsections 165(1) and 165(2), every recipient of a taxable supply made in Canada is required to pay GST/HST at the applicable rate (depending on the province in which the supply is made) on the value of the consideration for the supply.
Pursuant to paragraph 142(1)(g), a supply of a service is deemed to be made in Canada if the service is, or is to be, performed in whole or in part in Canada. Conversely, under paragraph 142(2)(g), a supply of a service is deemed to be made outside Canada if the service is, or is to be, performed wholly outside Canada. Where the supply is made or deemed to be made outside Canada, the supply is not subject to GST/HST.
Where any activity related to the performance of the service is performed in Canada, the supply of the service is considered to be made in Canada. In the case where a patient is examined in Canada and the report is prepared outside Canada, the supply of the service is deemed to be made in Canada pursuant to paragraph 142(1)(g), as the services are performed in part in Canada. Accordingly, where the supply of the IME is made or deemed to be made in Canada and is not a qualifying health care supply, the supply is taxable for GST/HST purposes at the applicable rate.
Where the services consist of reviewing medical documentation, dictation, editing and printing a report on the findings and those services are performed entirely outside Canada, the supply of the service is deemed to be made outside Canada pursuant to paragraph 142(2)(g) and not subject to the GST/HST. The supplier does not collect the GST/HST on supplies made outside Canada.
A taxable (other than zero-rated) supply made in Canada is subject to GST at the rate of 5% if it is made in a non-participating province, and is subject to HST at the applicable harmonized rate if it is made in a participating province.
Whether a supply made in Canada is made in a participating province or non-participating province is determined by section 144.1 and Schedule IX, and where applicable, the New Harmonized Value-added Tax System Regulations (the Regulations). Section 144.1 provides that a supply is deemed to be made in a province if it is made in Canada and is, under the rules set out in Schedule IX, made in the province. Further, a supply made in Canada that is not made in any participating province is deemed to be made in a non-participating province.
Pursuant to section 3 of Part IX of Schedule IX, a supply of property or a service is made in a province if the supply is prescribed to be made in the province.
Generally, pursuant to subsection 13(1) of the Regulations, a supply of a service is made in a province if in the ordinary course of its business the supplier obtains an address in the province that is:
a) if the supplier obtains only one address that is a home or business address in Canada of the recipient, the home or business address in Canada obtained by the supplier,
b) if the supplier obtains more than one such address, the home or business address in Canada of the recipient that is most closely connected with the supply, or
c) in any other case, the address in Canada of the recipient that is most closely connected with the supply.
Therefore, the province in which the supply of the services is made would be determined by these rules. For example, where in the ordinary course of your business you obtain an address in Canada of the recipient (e.g. lawyer or insurance company), the fee for the supply of your services is subject to the rate of GST/HST of the province in which the address is located.
For information regarding the place of supply rules, please refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of supply rules for determining whether a supply is made in a province.
Question 3
In cases where a health care service, such as an examination or assessment, is supplied together with a report or certificate it is necessary to determine if the supplier has made single or multiple supplies. This distinction is important in cases where a combination of services and/or property is supplied by a person under an agreement, some of which would be taxable at 5%, 13%, 14% or 15%, depending on the place of supply, some of which would be zero-rated, and some of which would be exempt from or outside the scope of the GST/HST if supplied separately.
Whether a person is making a single supply or multiple supplies is a question of fact. The common law principles of single supply and multiple supplies are described in GST/HST Policy Statement P-077R2, Single and Multiple Supplies. The characterization of a transaction as a single supply or multiple supplies considers the interrelationships among the various elements of the agreement, the purpose of an agreement, the needs of the customer, and the economic reality of the transaction. There is a single supply where one or more elements constitute the supply and any remaining elements serve only to enhance the supply. Where the essential elements are part of a single composite supply, that single supply cannot be artificially split into separate supplies.
In addition, an important question to consider is what has been supplied for the payment made. Policy Statement P-077R2 also explains that the way in which the consideration for a transaction is set out does not in itself determine whether there are one or more supplies. A single consideration does not automatically mean that there is one supply. Equally, separately identified consideration for certain elements do not necessarily mean that there are two or more supplies. Thus, one cannot rely solely on the break down of charges in an agreement or on an invoice to conclude that a supplier is making multiple supplies of different goods and/or services.
An IME is the service of providing an expert opinion contained in a written report that is prepared by a medical practitioner acting in the course of the practice of medicine. The service consists of an examination of the patient, reviewing medical documentation, dictation, editing and printing a report on the findings. These essential elements are part of a single composite supply of an IME that cannot be artificially split into separate supplies. In this case, the charges to the recipient are all part of a single supply of the IME and take on the same tax status. This applies whether the charges are invoiced separately or included in a single fee for the IME.
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 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 905-308-8853. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Maria Forte-Long
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
1 Section 9 of Part II of Schedule V exempts supplies of properties and services covered by a provincial health insurance plan, section 11 exempts supplies of food to a health care facility, section 13 exempts supplies of home care services and section 14 exempts supplies of various training services.
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