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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 202245
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Subsection 259(7) - selected public service body recovering costs from other selected public service bodies.
Thank you for your letter of [mm/dd/yyyy], concerning the application of subsection 259(7) of the Excise Tax Act (ETA). Specifically, you would like us to confirm that subsection 259(7) of the ETA can apply for the purpose of determining the public service bodies’ rebate rate […](the Corporation) is entitled to use in calculating its rebate of the non-creditable tax charged for eligible purchases and expenses in respect of supplies made to other hospital authorities.
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 ETA unless otherwise specified.
STATEMENT OF FACTS
We understand:
The Corporation is a registered charity within the meaning of that term under subsection 248(1) of the Income Tax Act that operates a number of public hospitals in […][Ontario].
The Corporation was designated as a hospital authority for purposes of Part IX effective [mm/dd/yyyy], therefore it is a selected public service body as that term is defined under subsection 259(1). As a [registered] charity for income tax purposes that is a hospital authority, the Corporation is a public institution under subsection 123(1). The Corporation is registered for GST/HST purposes.
Effective [mm/dd/yyyy], the Corporation signed […](the Services Agreement) with […] (each a Party and collectively the Parties).
You […][state that] the Parties are:
- […][public hospitals operating in Ontario]
- […][“hospital authorities” as defined in subsection 123(1)]
- […][“registered charities” within the meaning of that term under subsection 248(1) of the Income Tax Act]
- […][“public institutions” as defined in subsection 123(1)]
- […][“selected public service bodies” as defined in subsection 259(1)]
- […][resident in Canada],
- […][resident only in Ontario], and
- […][registered for the GST/HST]
The Services Agreement allows the Parties to work co-operatively in procuring […]([…][the property]) […]. Each Party will use [the property] in the course of providing GST/HST exempt medical services.
Pursuant to the Services Agreement, the Parties have agreed for the Corporation to act on the Parties’ behalf to contract with [the property] provider for the provision of […][elements of the single supply of the property. The Corporation entered into such an agreement with [the property] provider ([the property] Agreement).
Under [the property] Agreement, the Corporation is the sole Party liable to pay the consideration and the taxes associated with the procurement of [the property] from [the property] provider. […].
Pursuant to the Services Agreement, the Corporation is entitled to recover from the other Parties their share of the Regional Costs. Regional Costs are expenditures that are to be shared among all of the Parties on an equitable basis, […].
You have stated that the supply of [the property] by the Corporation to the other Parties is an exempt supply pursuant to section 2 of Part VI of Schedule V.
[…]
The Parties have agreed that nothing in the Services Agreement shall constitute any Party as the agent of the other Parties or as having the authority to bind the other Parties, but that the Services Agreement is a commercial arrangement between the Corporation and each of the other Parties for the provision of services by the Corporation to those other Parties.
The Corporation is acquiring [the property] primarily for use by the other Parties as its own use of [the property] comprises less than 50% of the total use. Moreover, the other Parties will use [the property] exclusively in the course of operating a public hospital, of operating a qualifying facility for use in making facility supplies or of making facility supplies, ancillary supplies or home medical supplies (hereinafter referred to as “hospital authority activities”).
RULING REQUESTED
You would like to confirm that the Corporation is eligible to claim the higher hospital rebate on the acquisition of [the property] for use by it and the other hospitals.
RULING GIVEN
The Corporation is entitled to claim a public service bodies’ rebate of 83% of the federal non-creditable HST charged, and 87% of the provincial non-creditable HST charged, on the acquisition of [the property].
EXPLANATION
The Corporation is a public institution and a selected public service body; therefore, pursuant to subsection 259(4.1), the rebate payable to the Corporation under subsection 259(3) is equal to the amount determined in the prescribed manner in section 5.4 of the Public Service Body Rebate (GST/HST) Regulations (the Regulations).
Subsection 5.4(2) of the Regulations sets out the formula that the Corporation uses to apportion its rebate claims between its activities engaged in as a hospital authority and its other activities. The Corporation is entitled to an 83% rebate of the federal non-creditable tax charged on property or services to the extent, expressed as a percentage, that the Corporation intended to consume, use or supply those property or services in the course of its activities engaged in as a hospital authority. The Corporation is entitled to a 50% rebate of the federal non-creditable tax charged on property or services to the extent, expressed as a percentage, that the Corporation intended to consume, use or supply those property or services in the course of its other activities. The rebate rates used to apportion the provincial non-creditable tax charged between activities engaged in as a hospital authority and other activities are 87% and 82% respectively.
Generally, the Corporation would not be able to claim a public service bodies’ rebate using the hospital authority rate on all the HST payable on the acquisition of [the property]. Under subsection 259(7), however, for any property or service acquired by the Corporation primarily for consumption, use or supply in the course of activities engaged in by the other Parties, the Corporation is deemed to be engaged in those activities for the purpose of determining the public service bodies’ rebate for the Corporation in respect of the property or service for any claim period.
In this case, the acquisition of [the property] by the Corporation is primarily for consumption, use or supply in the course of activities engaged in by the other Parties. Further, the other Parties intend to use [the property] exclusively in the course of their hospital authority activities. Accordingly, the Corporation would be entitled to claim a public service bodies’ rebate of 83% of the federal non-creditable tax charged and 87% of the provincial non-creditable tax charged on the acquisition of [the property].
[…], this ruling specifically addresses the ruling requested in the incoming letter, that is, the eligibility of the Corporation to claim the public service bodies’ rebate on the acquisition of [the property]. The incoming letter and the attached agreements make reference to supplies of services that may be acquired by the Corporation from [the property] provider and for which the Corporation will seek reimbursement from the other Parties. It is unclear from the information provided what exactly these services entail and whether they are elements of an overall single supply of [the property] or if they are supplies in their own right. To the extent that these other elements of the transaction do not form part of the single supply of [the property], this ruling will not apply to those supplies.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7941. 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,
Trent MacDonald
Charities and Non-Profit Organizations Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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