Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
Case Number: 84075
Business Number: XXXXX
Attention: XXXXX
November 24, 2009
Dear XXXXX:
Subject:
GST/HST RULING
XXXXX
This is in response to a letter dated XXXXX, from XXXXX, XXXXX. XXXXX letter concerned the eligibility of XXXXX to claim an 83% public service body (PSB) rebate of the Goods and Services Tax (GST) and the federal component of the Harmonized Sales Tax (HST) that became payable on or after January 1, 2005, on property and services acquired in the course of operating one of its three facilities and in its provision of supplies to individuals residing there. This letter is also in response to your XXXXX, asking that we consider whether XXXXX could be an "external supplier" entitled to an 83% PSB rebate. We apologize for the delay in this response.
All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.
The following statement of facts is based on our understanding of the information you provided and that available on the websites of XXXXX.
Statement of Facts
We understand that:
1. XXXXX is a registered charity within the meaning assigned by subsection 248(1) of the Income Tax Act. As such, it is a charity for GST/HST purposes.
2. XXXXX is a GST/HST registrant.
3. According to its Letters Patent issued XXXXX, XXXXX was incorporated as a not-for profit, without share-capital corporation in XXXXX. The Letters Patent state XXXXX:
"XXXXX."
4. XXXXX.
5. XXXXX holds a nursing home licence XXXXX issued under XXXXX to establish, operate and maintain a nursing home at XXXXX ("Facility"). XXXXX.
6. XXXXX.
7. XXXXX provides accommodation, meals, nursing services and other supplies to residents at the Facility. It also offers support services such as pastoral care, social work, and palliative care. The palliative care team is XXXXX an inter-disciplinary team consisting of members: nursing, dietary, recreation, social work, pharmacy, environmental, chaplaincy, volunteers, and physicians. In addition, XXXXX provides enhanced therapeutic services such as oxygen therapy, physiotherapy, and occupational therapy to residents at the Facility, when required.
8. On XXXXX, the Facility entered into an agreement with a physician to perform the services as "Medical Director" of the Facility. This agreement remains in effect for XXXXX. XXXXX the Facility XXXXX the Facility. Under the agreement, the Facility will pay a fee for the administrative services provided by the physician in the amount of XXXXX. The responsibilities of the Medical Director include the requirement to direct and organize the Facility's medical services; to visit the Facility regularly, XXXXX in order to carry out his/her responsibilities; to provide, or arrange for medical services to be provided for all residents who do not have an Attending Physician; and XXXXX.
XXXXX.
9. On XXXXX, the Facility entered into an agreement with XXXXX physicians to perform the services of "Attending Physician" of the Facility. XXXXX.
Under the agreement, XXXXX:
XXXXX.
10. XXXXX also employs nurses. XXXXX.
11. XXXXX.
12. XXXXX.
13. XXXXX:
• XXXXX
• XXXXX
14. XXXXX.
Ruling Requested
You would like to know whether XXXXX qualifies for an 83% PSB rebate available under section 259 on property and services acquired in its operation of the Facility and in its provision of supplies to residents at Facility. If XXXXX does qualify for an 83% PSB rebate, you would also like to know whether XXXXX is entitled to claim the rebate retroactively to XXXXX.
Ruling Given
Based on the facts set out above, we rule that XXXXX does not qualify for an 83% PSB rebate available under section 259 on property and services acquired in its operation of the Facility and in its provision of supplies to residents at the Facility.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is 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
To be eligible for an 83% PSB rebate available under section 259, an entity must be a "hospital authority", a "facility operator" or an "external supplier", as defined below. Eligible entities are entitled to claim an 83% PSB rebate for non-creditable tax charged that became payable on or after January 1, 2005, on supplies acquired in the course of operating a facility that constitutes a qualifying facility, or of making certain defined supplies.
XXXXX is not making facility supplies because any exempt supplies it makes as part of a medically necessary process of health care for residents at the Facility are not reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician as required by subparagraph (a)(ii) and clause (a)(ii)(A) of the definition of "facility supply". A detailed explanation of this determination, beginning with the relevant definitions and ending with our comments follows:
Relevant Definitions
Hospital authority
A "hospital authority" is defined in subsection 123(1) as "an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority" for purposes of the ETA.
Facility operator
A "facility operator" is defined in subsection 259(1) as meaning "a charity, a public institution or a qualifying non-profit organization (other than a hospital authority), that operates a qualifying facility".
Qualifying facility
Subsection 259(2.1) sets out the criteria that must be met in order for a facility or part to be a qualifying facility, other than a hospital, in a fiscal year, or any part of a fiscal year. A facility or part of a facility will be considered a qualifying facility if:
(a) supplies of services that are ordinarily rendered during that fiscal year or part to the public at the facility or part would be facility supplies if the references in the definition of "facility supply" in subsection (1) to "public hospital or qualifying facility" were references to the facility or part;
(b) an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part; and
(c) an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.
Qualifying funding
Subsection 259(1) defines "qualifying funding" of the operator of a facility for all or part of a fiscal year of the operator as meaning a readily ascertainable amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the operator in respect of the delivery of health care services to the public for the purpose of financially assisting in operating the facility during the fiscal year or part, as consideration for an exempt supply of making the facility available for use in making facility supplies at the facility during the fiscal year or part or as consideration for facility supplies of property or services that are made available or rendered at the facility during the fiscal year or part and is paid or payable by
(a) a government, or
(b) a person that is a charity, a public institution or a qualifying non-profit organization
(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and
(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.
Facility supply
Subsection 259(1) defines the term "facility supply" as an exempt supply (other than a prescribed supply) of property or a service in respect of which:
(a) the property is made available, or the service is rendered, to an individual at a public hospital or qualifying facility as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease or diagnosing or treating an injury, illness or disability or providing palliative health care, which process
(i) is undertaken in whole or in part at the public hospital or qualifying facility,
(ii) is reasonably expected to take place under the active direction or supervision, or with the active involvement, of
(A) a physician acting in the course of the practice of medicine,
(B) a midwife acting in the course of the practice of midwifery,
(C) if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner acting in the course of the practice of a nurse practitioner, or
(D) a prescribed person acting in prescribed circumstances, and
(iii) in the case of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, requires or is reasonably expected to require that
(A) a registered nurse be at the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,
([B]) a physician or, if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,
([C]) throughout the process, the individual be subject to medical management and receive a range of therapeutic health care services that includes registered nursing care, and
([D]) it not be the case that all or substantially all of each calendar day or part during which the individual stays at the public hospital or qualifying facility is time during which the individual does not receive therapeutic health care services referred to in clause (C), and
(b) if the supplier does not operate the public hospital or qualifying facility, an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.
A "physician" is defined in subsection 259(1) of the ETA as a person who is entitled under the laws of a province to practice the profession of medicine.
External supplier
Subsection 259(1) defines the term "external supplier" as meaning a charity, a public institution or a qualifying non-profit organization (other than a hospital authority or a facility operator), that makes ancillary supplies, facility supplies or home medical supplies.
Ancillary supply
Subsection 259(1) defines the term "ancillary supply" as meaning:
(a) an exempt supply of a service of organizing or coordinating the making of facility supplies or home medical supplies in respect of which supply an amount, other than a nominal amount, is paid or payable to the supplier as medical funding, or
(b) the portion of an exempt supply (other than a facility supply, a home medical supply or a prescribed supply) of property or a service (other than a financial service) that represents the extent of the property or service that is, or is reasonably expected to be, consumed or used for making a facility supply and in respect of which portion an amount, other than a nominal amount, is paid or payable to the supplier as medical funding.
Home medical supply
Subsection 259(1) defines the term "home medical supply" as meaning an exempt supply (other than a facility supply or a prescribed supply) of property or a service
(a) that is made
(i) as part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease or diagnosing or treating an injury, illness or disability, or for the purpose of palliative health care, and
(ii) after a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances, has identified or confirmed that it is appropriate for the process to take place at the individual's place of residence or lodging (other than a public hospital or a qualifying facility),
(b) in respect of which the property or service supplied is made available or rendered to the individual at the individual's place of residence or lodging (other than a public hospital or a qualifying facility), on the authorization of a person who is responsible for coordinating the process and under circumstances in which it is reasonable to expect that the person will carry out that responsibility in consultation with, or with ongoing reference to instructions for the process given by, a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances,
(c) all or substantially all of which is of property or a service other than meals, accommodation, domestic services of an ordinary household nature, assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the individual, and
(d) in respect of which an amount, other than a nominal amount, is paid or payable as medical funding to the supplier in respect of the supply.
Medical funding
The term "medical funding" of a supplier in respect of a supply is defined in subsection 259(1) as meaning an amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the supplier in respect of health care services for the purpose of financially assisting the supplier in making the supply or as consideration for the supply by
(a) a government, or
(b) a person that is a charity, a public institution or a qualifying non-profit organization
(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and
(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.
Comments
Since the Minister of National Revenue has not designated XXXXX as a "hospital authority", it is therefore necessary to determine whether it is a "facility operator" or an "external supplier".
Facility operator
To be a "facility operator", the first requirement that XXXXX must meet is that it must be a charity, a public institution or a qualifying non-profit organization (other than a hospital authority).
As XXXXX is a registered charity, it meets this requirement. To meet the second requirement in the definition of "facility operator", XXXXX must operate a "qualifying facility".
Subsection 259(2.1) describes the criteria that must be met to be a qualifying facility. The first criterion requires that the supplies of services that are ordinarily rendered during that fiscal year or part to the public at the facility or part would be facility supplies, if the references in the definition of that term in subsection (1) to "public hospital or qualifying facility" were references to the facility or part.
To be a "facility supply", the supply must be an exempt supply (other than a prescribed supply).
Section 2 of Part II of Schedule V exempts a supply of an institutional health care service made by the operator of a health care facility if the service is rendered to a patient or resident of the facility, but not including a supply of a service related to the provision of a surgical or dental service that is performed for cosmetic purposes and not for medical or reconstructive purposes. Section 1 of Part II of Schedule V defines "institutional health care service" and "health care facility".
Section 1 of Part V.1 of Schedule V exempts supplies of property or a service made by a charity, unless specifically excluded under paragraphs (a) to (n) of that section.
As a registered charity, section 2 of Part II and section 1 of Part V.[1] of Schedule V would generally apply to exempt supplies made by XXXXX.
Accordingly, exempt supplies made by XXXXX to residents at the Facility may constitute facility supplies if the other requirements set out in the definition of "facility supply" were met.
Paragraph (a) of the definition of "facility supply" requires that the exempt property be made available or the exempt service be rendered to an individual at the public hospital or qualifying facility. Therefore, only the exempt property made available or exempt services rendered by XXXXX to residents at the Facility would meet this requirement.
Paragraph (a), subparagraphs (a)(i) and (a)(ii) and clause (a)(ii)(A) of the definition of "facility supply" further requires that the exempt property made available or exempt service rendered at the public hospital or qualify facility be part of a medically necessary process. This process must be undertaken in whole or in part in the public hospital or qualifying facility and reasonably be expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of practise of medicine (or in certain circumstances, a midwife, a nurse practitioner or a prescribed person in prescribed circumstances). Where the medically necessary process of health care for the individual is a process of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, the process must require, or reasonably be expected to require, the additional elements of health care described in clauses (a)(iii)(A) to (D) of the definition of "facility supply".
The Facility has entered into a separate agreement with XXXXX physicians. The XXXXX agreement between the Facility and a physician as Medical Director is for the supply of administrative services. The supply of these administrative services by the physician is not a "facility supply" because they are not supplied as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease or diagnosing or treating an injury, illness or disability or providing palliative health care, as required under paragraph (a) of the definition of facility supply.
XXXXX.
XXXXX, there is no indication in the information available that the medical problems and level of care required of residents at the Facility is such that the process of health care is reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician.
The services rendered by XXXXX to residents at the Facility are provided on an as-need basis, in accordance with XXXXX. There is no requirement that the physician visit a resident daily, weekly or even monthly. XXXXX.
XXXXX. Although physicians are available to provide this on-call coverage to the Facility, the level of their involvement in the process of health care for residents at the Facility is not provided to the same extent as that contemplated by the use of the phrase "active direction or supervision, or active involvement" of a physician, in the definition of "facility supply".
Prior to the amendment made to section 259, hospital authorities were generally entitled to claim an 83% PSB rebate for non-creditable tax charged in respect of property or services used to operate a public hospital. The amendments made to section 259 extended the application of the 83% PSB rebate to public institutions, such as hospital authorities, and to charities and qualifying non-profit organizations providing certain health care services traditionally performed in hospitals such as those provided in cancer clinics, day surgery clinics, community health centres rendering primary health care services, and facilities offering high-level therapeutic care.
The services of the Attending Physician(s) at the Facility are not supplied on a continual and on-going basis, as would be the case of a physician rendering services in one of the facilities referred to above (e.g., ambulatory hospitals; cancer clinics) that an 83% rebate was intended to apply. For example, in a public hospital a physician is actively involved in a medically necessary process of health care for the individual (e.g., diagnosing and treating an injury, illness or disability; performing surgery; providing radiation treatment; actively monitoring the individual's condition) because the medical condition and the level of care required of the individual in these situations requires it.
In order for an exempt supply of property or an exempt supply of a service to be a "facility supply", it must meet all of the requirements set out in its definition. While exempt supplies made by XXXXX may be part of a medically necessary process of health care for residents at the Facility, they are not facility supplies because they are not reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician, as is required under subparagraph (a)(ii) and clause (a)(ii)(A) of the definition "facility supply".
As the exempt supplies made by XXXXX to residents at the Facility are not facility supplies, the determination of whether the additional requirements set out in clauses (a)(iii)(A) to (D) have been met with respect to chronic care residents at the Facility has not been undertaken. In addition, because XXXXX does not make facility supplies, the facts respecting the receipt of government funding has not been considered for purposes of establishing whether it meets the requirements described in subsection 259(2.1) for qualifying facilities.
External supplier
XXXXX meets the first part of the definition of "external supplier" because it is a charity. As it does not make facility supplies, it must provide an "ancillary supply" or a "home medical supply", as these terms are defined, in order to be an "external supplier" entitled to an 83% PSB rebate.
XXXXX provides accommodation, meals, nursing and personal care services as well as other services to residents at the Facility that it operates. These supplies are not ancillary supplies, as described under paragraph (a) or (b) of the definition of "ancillary supply". Therefore, in order for XXXXX to be an external supplier, it must make a home medical supply.
To be a "home medical supply" all of the requirements set out in its definition must be met. First, subparagraph (a)(i) of the definition requires the exempt supply to be part of a medically necessary process of health care for the individual, for the purposes described therein. Second, subparagraph (a)(ii) requires that a physician or a person prescribed by regulation identify or confirm that it is appropriate for the process to take place at the individual's place or residence or lodging. Third, paragraph (b) requires the property to be made available or the service to be rendered at the individual's place of residence or lodging and on the authorization of a person who is responsible for coordinating the process of health care or palliative care that the individual is receiving. Fourth, paragraph (c) requires all or substantially all of the exempt supply that is made which is of property or a service to be other than meals, accommodation, domestic services of an ordinary household nature, assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the individual. Fifth, paragraph (d) requires an amount, other than a nominal amount, to be paid or payable as "medical funding" to the supplier in respect of the supply.
In order for an exempt supply to be a "home medical supply", paragraph (c) of its definition requires all or substantially all of the elements of the supply to be health care. As the nursing services provided by XXXXX are part of a supply of accommodation, meals and personal care and this supply has a significant element of property or services that are not health care, it would not constitute a "home medical supply". Paragraph (c) was intended to ensure that where all or substantially all of an exempt supply is of property or services that are elements of health care, it would not be excluded from the definition of "home medical supply" where it has some element of personal or domestic care. For example, if an element of an exempt supply is a nursing service rendered to a patient and that service includes some household or personal task, the nursing service would not be excluded from the definition of home medical supply provided that all or substantially all of the services rendered as part of the supply were elements of health care.
In summary, the exempt supplies made by XXXXX to residents at the Facility are not facility supplies or home medical supplies. As such, XXXXX is not a facility operator or an external supplier entitled to claim an 83% PSB rebate on property and services it acquires in its operation of the Facility and in its provision of exempt supplies to residents at the Facility. As a registered charity, XXXXX is entitled to claim a 50% PSB rebate of non-creditable tax charged pursuant to section 259.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4395.
Yours truly,
Lynn Fournier Renner
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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