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: 222029
Dear [Client]:
Subject: GST/HST RULING
83% Public Service Body rebate eligibility
Thank you for your letter of March 15, 2021, with accompanying documents, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the services provided by […](the Corporation).
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.
STATEMENT OF FACTS
Based on the information obtained from your letter and […](Footnote 1) and […](Footnote 2) , we understand that:
1. The Corporation is a registered charity within the meaning assigned to that expression by subsection 248(1) of the Income Tax Act and is a charity for GST/HST purposes.
2. The Corporation was given the Business Number […] and is not registered for GST/HST purposes.
3. […][Information about the Corporation’s incorporation]
4. […]
5. The Corporation […] operates […] (the Hospice). The Hospice is located in […][the Province].
6. The Corporation provides palliative care services to its residents at the Hospice.
7. […][More information about the Hospice]
8. […].
9. The Corporation has a licence issued by […][the relevant provincial health authority] that authorizes the Corporation to operate the Hospice […].
10. Residents are admitted to the Hospice for palliative and respite care.
11. […]
RULING REQUESTED
You would like to know whether the Corporation is entitled to claim an 83% public service body (PSB) rebate of the GST and the federal part of the HST as a facility operator making facility supplies at a qualifying facility (the Hospice).
RULING GIVEN
Based on the facts set out above, we rule that the Corporation is a facility operator making facility supplies at a qualifying facility, that is, at the Hospice.
As such, pursuant to section 259, the Corporation is eligible to claim an 83% PSB rebate of the GST and the federal part of the HST for non-creditable tax charged (Footnote 3) in respect of eligible purchases of property or services for operating the part of the Hospice that is a qualifying facility (Footnote 4), to the extent that the property or services are for consumption, use or supply in activities engaged in by the Corporation in the course of operating the Hospice for use in making facility supplies, or in the course of making facility supplies, ancillary supplies or home medical supplies.
EXPLANATION
To be eligible for an 83% PSB rebate of the GST and the federal part of the HST, a person must be a “hospital authority”, a “facility operator” or an “external supplier”.
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 GST/HST purposes.
The Corporation does not operate a public hospital and is not designated as a hospital authority.
Therefore, to determine whether there is eligibility for the 83% PSB rebate, it is necessary to determine whether the Corporation is a “facility operator” or an “external supplier”.
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”.
As the Corporation is a charity, it meets the first requirement of the definition. In order to meet the second requirement, the Corporation must operate a “qualifying facility”.
Qualifying facility
Subsection 259(2.1) sets out three criteria that must be met for a facility, or part of a facility, other than a public hospital, to be a qualifying facility, for a fiscal year, or any part of a fiscal year, of the operator of the facility or part.
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 259(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.
The requirements contained in (a) to (c) above must be met in order for a particular facility, or part of the facility as in this case, to be a “qualifying facility” for purposes of section 259. A discussion of these requirements follows.
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, 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 practise of medicine,
(B) a midwife acting in the course of the practise 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 practise 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, (…) 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) as “a person who is entitled under the laws of a province to practise the profession of medicine”.
The definition of “facility supply” is to be applied on a supply-by-supply basis. To be a “facility supply”, the property made available or the service rendered to an individual at the public hospital or qualifying facility must be an exempt supply (other than a prescribed supply). Exempt supplies are listed in Schedule V to the ETA.
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 (p) of that section. As the Corporation is a charity, the supplies it makes to the patients would generally be exempt under section 1 of Part V.1 of Schedule V.
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. The terms “institutional health care service” and “health care facility” are defined in section 1 of Part II of Schedule V. Section 2 of Part II of Schedule V may also apply to exempt supplies of services that the Corporation makes.
Of note, if a supply is of an institutional health care service that falls within section 2 of Part II of Schedule V, it is necessary to determine if the supply is excluded from the exemption because the supply is a cosmetic service supply or because the supply is not a qualifying health care supply, pursuant to sections 1.1 and 1.2 of Part II of Schedule V (Footnote 5) .
The combination of paragraph (a), subparagraphs (a)(i) and (a)(ii), and clause (a)(ii)(A) of the definition of “facility supply” further requires that the exempt supply of property be made available, or the exempt supply of a service be rendered, at a public hospital or qualifying facility and be part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative care. This process must be undertaken in whole or in part at 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).
It is our understanding that palliative care differs from chronic care. Therefore, it is not necessary for elements referred to in clauses (a)(iii)(A) to (D) of the definition of “facility supply” to be met in order for a supply to qualify as a “facility supply”, where only palliative care is being provided, as in the present case.
The decision of the Tax Court of Canada in Elim Housing Society v The Queen (2013-148(GST)G) addressed the question as to whether Elim Housing Society (Elim), operator of a long-term care facility, was a facility operator operating a qualifying facility. In this decision, the judge made the determination that Elim was entitled to claim the 83% PSB rebate as a facility operator operating a qualifying facility. After comparing the services and the care provided residents at the Hospice to the relevant elements described in the Elim case, we are of the view that facility supplies are made at the part of the Hospice that is a qualifying facility (explained below) by the Corporation.
To the extent that the health care services provided at the part of the Hospice that is a qualifying facility are exempt supplies that are part of a medically necessary process of health care for the individual for purposes described in paragraph (a) of the definition of “facility supply” and are rendered at the part of the Hospice that is a qualifying facility (explained below) under the active direction or supervision, or with the active involvement, of a physician, they will meet the requirements of subparagraphs (a)(i) and (a)(ii) of the definition and will, therefore, constitute facility supplies.
Supplies of end-of-life Care and of Symptom Management, when part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, which process is undertaken in whole or in part at the part of the Hospice that is a qualifying facility and is reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of the practise of medicine, would be considered facility supplies.
If the Corporation engages in any activities or programs for which there is no expectation of active physician direction or supervision, or active physician involvement, being undertaken, then supplies of services provided within such activities or programs would not fall within the definition of “facility supply”, and thus such activities or programs would not be eligible for the 83% PSB rebate under this particular provision. As noted below, the Corporation may still be entitled to a 50% PSB rebate of the GST and the federal part of the HST for charities in relation to such activities and programs.
As mentioned above, subsection 259(2.1) sets out three criteria that must be met in order for a facility or part of a facility to be considered a qualifying facility for all or part of a fiscal year. The first criterion that must be met, under paragraph 259(2.1)(a), is that the exempt supplies made at the part of the Hospice that is a qualifying facility must be facility supplies. The exempt supplies that are facility supplies made by the Corporation meet this first criterion.
Qualifying Funding
The second criterion that must be met for a facility or part of the facility to be a “qualifying facility” is that 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.
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 that are made available, or services that are 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 that are 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.”
[…][The health authority] is a regional health authority created by [the Province] to administer and allocate provincial government grants for the provision of health services in its area of responsibility.
The Corporation is a charity that operates the Hospice within the area of responsibility of […][the health authority]. Under the agreement entered into with the Corporation, [the health authority] provides funding to the Corporation for its provision of palliative care to residents at the Hospice. As [the health authority] provides funding to the Corporation for the purposes for which [the health authority] receives funding from [the Province] (i.e., in respect of health care services), the funding provided by [the health authority] to the Corporation meets the second criteria under paragraph 259(2.1)(b) and constitutes “qualifying funding”.
This criterion is thus satisfied.
It should be noted that […][under the agreement, the health authority provides an amount of funding to the Corporation] […] for up to [#] of the [#] total beds, […] [and therefore only part of the Hospice] can be potentially considered a qualifying facility. The part of the Hospice that is not funded by [the health authority] will not be considered a qualifying facility.
Accreditation, licence or other authorization
The third criterion that must be met under paragraph 259(2.1)(c) for a facility, or part of a facility, other than a public hospital, to be a qualifying facility for a fiscal year, or any part of a fiscal year of the operator of the facility, or part, is that 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.
[…]. As the licence issued […] to the Corporation for the Hospice is recognized or provided for under a law of a province in respect of facilities for the provision of health care services, the third criterion that must be met under paragraph 259(2.1)(c) for a facility to be a qualifying facility is satisfied.
This criterion is thus satisfied.
Summary of “qualifying facility” analysis
To summarize, part of the Hospice meets all of the requirements of the definition of “qualifying facility” in subsection 259(2.1) and, as a result, the Corporation is a facility operator for purposes of section 259 (Footnote 6) . Accordingly, the Corporation qualifies for an 83% PSB rebate of the GST and of the federal part of the HST for the non-creditable tax charged in respect of property and services, to the extent that the property and services are for consumption, use or supply in activities engaged in by the Corporation in the course of operating the part of the Hospice that is a qualifying facility for use in making facility supplies, or in the course of making facility supplies, ancillary supplies or home medical supplies.
As discussed above, the definition of “facility supply” requires that an exempt supply made to an individual at a qualifying facility be part of a medically necessary process of health care that is reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician. As such, not all supplies made by the Corporation necessarily constitute facility supplies. The determination of whether a particular supply is a facility supply is to be made on a case-by-case basis.
A facility operator may also be entitled to claim an 83% rebate of the GST and the federal part of the HST paid or payable on eligible purchases and expenses to the extent that it intended to consume, use or supply the property or service in the course of activities engaged in by the Corporation in the course of making ancillary supplies or home medical supplies.
ADDITIONAL INFORMATION
As there is no indication that the Corporation is involved in the provision of ancillary supplies or home medical supplies, we offer the following information for your reference.
Ancillary supplies
Subsection 259(1) defines an “ancillary supply” to mean
“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 to which the property or service 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 a “home medical supply” to mean “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, diagnosing or treating an injury, illness or disability or providing 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 is made available, or the service is 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.”
Subsection 259(1) defines “medical funding” of a supplier in respect of a supply to be “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 that are 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.”
There is no evidence that the Corporation is making home medical supplies through the Hospice. Although the Corporation offers a remote hospice service, it is unclear whether any of the supplies of services and property qualify as “home medical supplies” since it is unknown whether all the “home medical supplies” criteria are met, for instance, whether a physician acting in the course of the practise of medicine has identified or confirmed that it is appropriate for a medically necessary process to take place at the individual's place of residence or lodging (other than a public hospital or a qualifying facility).
In regards to medical funding, if the Corporation receives funding from [the Health Authority] to help with the provision of such services, such funds could qualify as “medical funding” if they are to financially assist the Corporation with health care services.
Calculation of the PSB rebate
Section 259 provides that the PSB rebate is calculated and claimed on a claim period by claim period basis. The claim periods of a GST/HST registrant are the same as the reporting periods for its GST/HST returns (i.e., annually, quarterly or monthly). A PSB that is not a GST/HST registrant has two claim periods per fiscal year – the first six months and the last six months of its fiscal year.
A PSB claims its rebate on a property-by-property or service-by-service basis. It is the intended consumption, use or supply of a particular property or service at the relevant time that determines the PSB rebate entitlement for the non-creditable GST charged and federal non-creditable HST charged on that property or service, not the overall activities of the PSB. Generally, the relevant time will be the time the supply was made to, or the property was imported or brought into [the Province] by, the Corporation.
As required by subsection 259(4.1), the Corporation will be required to apportion its rebate claims between its inputs that are for consumption, use or supply in its activities carried on in the course of operating a qualifying facility (part of the Hospice) for use in making facility supplies or in the course of making facility supplies, ancillary supplies or home medical supplies, and its other activities (if any).
The entitlement to an 83% PSB rebate may thus be limited and require apportionment where the tax paid or payable is for activities that do not qualify for the rebate. However, where the Corporation incurs 90% or more of the GST, or federal part of the HST, paid or payable on a property or a service acquired in its capacity as a facility operator (e.g., for use in making facility supplies), generally all of that GST, or federal part of the HST, is deemed to have been incurred in that capacity, pursuant to subsection 259(14). As such, the Corporation could claim a PSB rebate at the rate of 83% of the non-creditable GST charged and federal non-creditable HST for that property or service. For example, if the Corporation incurs GST on its utilities, and the Corporation determines the utilities are used 93% in its activities as a facility operator for making facility supplies, the Corporation, may claim 100% of the GST it pays on the utilities using the 83% PSB rebate rate.
Please note that this allocation is to be performed for each property or service identified in the claim period.
Rebate for purchases that do not qualify for 83% rebate
As discussed above, the definition of “facility supply” requires that an exempt supply made to an individual at a qualifying facility be part of a medically necessary process of health care that is reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician. As such, not all supplies made by the Corporation may constitute facility supplies. The determination of whether a particular supply is facility supply is to be made on a case-by-case basis. Similarly, some supplies may not meet the qualifications as being ancillary supplies or home medical supplies, either.
The Corporation, as a charity for purposes of the GST/HST, is eligible to claim a 50% PSB rebate of the GST and the federal part of the HST for the non-creditable tax charged on eligible purchases and expenses intended for consumption, use or supply in activities engaged in by the Corporation otherwise than in the course of operating the Hospice for use in making facility supplies, or in the course of making facility supplies, ancillary supplies or home medical supplies.
PSB rebates from previous periods
The Corporation may find that it has GST/HST that was paid or payable but has not been claimed in a rebate or that it has claimed rebates in respect of certain activities at an incorrect rate. The requirements for claiming such additional rebate amounts are not the same and are described in detail below.
Where a person has made an application for a PSB rebate for a particular claim period and later discovers additional GST/HST that was paid or payable in that claim period but was not claimed, subsection 259(6.1) may apply. Where certain conditions are met, this subsection allows a PSB to claim a rebate in respect of property or a service for a particular claim period in a rebate application for a subsequent claim period ending after September 8, 2017. If a PSB has not claimed a rebate in respect of property or a service for a particular claim period, subsection 259(6.1) allows the rebate to be carried forward where the following four conditions are met:
* The PSB did not claim the rebate in the application for any other claim period;
* The application for the subsequent claim period is filed within two years after
* if the person is a registrant, the day on or before which the person is required to file its GST/HST return for the particular claim period, and
* if the person is not a registrant, the day that is three months after the last day of the particular claim period;
* The PSB did not change the claimant type under which it was eligible to claim PSB rebates at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period; and
* The applicable rebate factor(s) did not change at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period.
The ability to carry forward does not apply in situations where a person has claimed a PSB rebate in respect of a property or service and later finds out that it was eligible to claim the rebate at a higher rate. If the Corporation has already claimed a PSB rebate for a claim period and subsequently discovers that the rebate was not claimed at the proper rate, the Corporation must adjust the previously filed rebate application to claim a PSB rebate at the higher rate. The Corporation cannot include the additional rebate amount in the PSB rebate application for a different claim period. For more information on how to adjust a previously filed rebate claim, see "How do you make changes to a rebate application you already filed?" in GST/HST Guide RC4034, GST/HST Public Service Bodies' Rebate. A reassessment or additional assessment of a rebate claim shall not normally be made more than four years after the day the application for the rebate was filed.
For more information on the calculation of the rebate, please refer to the same GST/HST Guide RC4034, GST/HST Public Service Bodies' Rebate.
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.
The additional information given in this letter 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 additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 306-807-5296. 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,
John Ware
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
1 […]
2 […]
3 In general terms, “non-creditable tax charged” means the GST/HST paid or payable on property or services for which the Corporation cannot claim in any other way other than by claiming the PSB rebate. For more information, see guide RC4034, GST/HST Public Service Bodies' Rebate or GST/HST Memorandum 13.5, Non-creditable Tax Charged.
4 Please note that, […], the Hospice consists of two parts for 83% PSB rebate purposes. One part of the Hospice qualifies as a “qualifying facility” and one part does not qualify as a “qualifying facility”, […][because the health authority only provides funding to the Hospice for] up to [#] beds of [#] total beds.
5 Section 1.1 of Part II of Schedule V provides that, “For the purposes of this Part, other than section 9, a cosmetic service supply and a supply, in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes are deemed not to be included in this Part.”
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”.
Section 1.2 of Part II of Schedule V provides that, “For the purposes of this Part, other than sections 9 and 11 to 14, a supply that is not a qualifying health care supply is deemed not to be included in this Part.”
A “qualifying health case 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 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.”
6 As the Corporation is a facility operator, it is not an external supplier, since the definition of “external supplier” in subsection 259(1) excludes a facility operator.
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