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.
XXXXX
XXXXX
XXXXX
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 110323
Business Number: XXXXX
Attention: XXXXX XXXXX
August 4, 2010
Dear XXXXX,
Subject:
GST/HST RULING
Eligibility to claim the 83% public service body rebate with respect to the operation of a XXXXX Centre
Thank you for your letter of XXXXX concerning the eligibility of XXXXX to claim an 83% public service body (PSB) rebate with respect to the operation of XXXXX located at XXXXX.
We apologize for the delay in responding to your enquiry.
HST applies at the rate of 15% in Nova Scotia, 13% in New Brunswick, Newfoundland and Labrador, and Ontario, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
Based on the information provided in your letters dated XXXXX, and XXXXX (with enclosures), the information included in a letter from XXXXX dated XXXXX, as well as the information available on the websites XXXXX and the Ontario Ministry of Health and Long-Term Care (MOHLTC), our understanding of the facts is as follows:
1. XXXXX is a registered charity within the meaning assigned to that expression by subsection 248(1) of the Income Tax Act. As such, it is a charity for GST/HST purposes. XXXXX is not registered for GST/HST purposes.
2. XXXXX operates a facility (Centre) located at XXXXX. XXXXX is resident only in the Province of Ontario.
3. XXXXX.
4. The health care services provided by XXXXX at the Centre include general physical assessment, health consultation and counselling, health advice and instruction, family planning, pre-natal classes and baby support, and immunization. The services are rendered by physicians, nurses, nurse practitioners, chiropodists, social workers, community workers, and a dietician.
5. XXXXX also provides health promotion and illness prevention services to individuals, groups and the community, XXXXX:
• Community outreach
• XXXXX
• XXXXX
• XXXXX
6. In addition, XXXXX is involved in a variety of teaching and research activities XXXXX.
7. XXXXX does not provide chronic or palliative care requiring patients to stay overnight at the Centre.
8. XXXXX sees clients by appointment only and when visiting the Centre, clients are asked to present their Ontario Health Card. There is an intake process to register new clients. XXXXX does not offer an emergency walk-in service.
9. The hours of service for primary care and physician services at the Centre are from XXXXX.
10. A physician is always available during the Centre's hours of service. XXXXX.
11. The Local Health System Integration Act, 2006 (LHSIA), devolves the management of local health services in Ontario to the Local Health Integration Networks (LHINs). LHINs are XXXXX not-for-profit organizations responsible for planning, integrating and funding local health services in XXXXX different geographic areas of the province.
12. Subsection 4(1) of the LHSIA states that a local health integration network is an agent of the Crown and may exercise its powers only as an agent of the Crown. We note that the LHINs are also listed on Schedule A of the Reciprocal Taxation Agreement between the Government of Canada and the Province of Ontario with respect to the application of GST/HST to Ontario Crown corporations, boards, commissions, and agencies.
13. Pursuant to subsection 19(1) of the LHSIA, a LHIN may provide funding to a health service provider in respect of services that the service provider provides in or for the geographic area of the network.
14. Prior to receiving funding for the provision of services, the LHSIA requires that the LHIN and the health service provider enter into a service accountability agreement, as defined in Part III of the Commitment to the Future of Medicare Act, 2004. You provided a copy of the multi-year service accountability agreement between the XXXXX LHIN and XXXXX (Agreement).
15. According to XXXXX to the Agreement, the following is a detailed description of the services to be provided by XXXXX:
• XXXXX:
- XXXXX:
16. XXXXX.
17. XXXXX.
18. XXXXX.
Ruling Requested
You would like to know if XXXXX is entitled to claim an 83% PSB rebate with respect to the operation of the Centre.
Ruling Given
Based on the facts set out above, we rule that XXXXX is a facility operator making facility supplies at a qualifying facility located at XXXXX, Ontario. As such, XXXXX is eligible to claim an 83% PSB rebate of the GST and the federal part of the HST for non-creditable tax charged in respect of property or services to the extent that the property or services are for consumption, use or supply in activities engaged in by XXXXX in the course of operating the qualifying facility for use in making facility supplies, or of making facility supplies.
In addition, effective July 1, 2010, XXXXX, as a facility operator resident only in Ontario, is also eligible to claim an 87% PSB rebate for the provincial part of the HST for non-creditable tax charged in respect of property or services to the extent that the property or services are for consumption, use or supply in activities engaged in by XXXXX in the course of operating the qualifying facility for use in making facility supplies, or of making facility supplies.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are 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 of the GST and the federal part of the HST and an 87% PSB rebate for the provincial part of the HST (in the case of an entity resident in Ontario), an entity 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.
Given that the Minister of National Revenue has not designated XXXXX as a hospital authority, it is not a hospital authority for purposes of the ETA. It is therefore necessary to determine whether it 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".
XXXXX is a charity for purposes of the ETA and therefore meets the first requirement of the definition of facility operator. In order to meet the second requirement, XXXXX must operate a "qualifying facility".
Qualifying facility
Subsection 259(2.1) provides that a facility, or part of a facility, other than a public hospital, is a qualifying facility for a fiscal year, or any part of a fiscal year, of the operator 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 to be a "qualifying facility" for purposes of section 259. A discussion of these requirements follows.
Facility supplies
In general terms, paragraph (a) of the definition of "qualifying facility" in subsection 259(2.1) provides that supplies of services that are ordinarily rendered to the public at the facility or part must be facility supplies.
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, 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 practise the profession of medicine.
In order to be a facility supply, the supply must first be an exempt supply (other than a prescribed supply). Exempt supplies are found 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 (n) of that section. As a registered charity, section 1 of Part V.1 would generally apply to cause supplies made by XXXXX to be exempt.
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 property or a service that is made 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".
XXXXX provides primary health care services to its patients and those supplies are exempt under section 1 of Part V.1 of Schedule V or section 2 of Part II of Schedule V.
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 patients at the Centre would meet this requirement. In other words, a service that is not rendered at the Centre will not constitute a facility supply.
Paragraph (a), subparagraphs (a)(i) and (a)(ii) and clause (a)(ii)(A) of the definition of "facility supply" further require that the exempt property made available or exempt service rendered at the public hospital or qualify facility be part of a medically necessary process of health care for an individual. 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).
XXXXX offers primary health care services (e.g., diagnostic, treatment, general physical assessment, referrals), to patients enrolled at the Centre during set hours of operation. This health care is provided by the staff at the Centre whose members include physicians, nurses, nurse practitioners and other health care professionals. It is clear that physicians are reasonably expected to be involved in the process of health care for patients.
Accordingly, to the extent that the health care services provided by XXXXX at the Centre are exempt supplies that are part of a medically necessary process of health care for the individual for purposes described in paragraph 259(1)(a) of the definition of "facility supply" and are rendered under the active direction or supervision, or with the active involvement, of a physician, they will meet the requirements of subparagraphs 259(1)(a)(i) and 259(1)(a)(ii) and will therefore constitute facility supplies.
The reference to 'medically necessary process' in the definition of "facility supply" is qualified by the requirement that a physician be reasonably expected to be actively involved in the process. As such, only exempt supplies that are part of a medically necessary process of health care for individuals with active physician involvement will constitute facility supplies. Supplies that do not meet this requirement do not fall within the definition of "facility supply". For example, supplies made in the course of research activities, nutrition education programs and cooking classes, exercise programs and community wellness and health promotion workshops would not fall within the definition of "facility supply".
In addition, where the medically necessary process of health care for the individual involves chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, the process must require, or be reasonably be expected to require, the additional elements described in clauses (a)(iii)(A) to (D) of the definition of "facility supply" shown above. Since XXXXX does not provide chronic care that requires an individual to stay overnight at the Centre, these particular requirements will not be discussed in this letter.
Qualifying funding
Paragraph (b) of the definition of "qualifying facility" in subsection 259(2.1) requires that an amount, other than a nominal amount, be paid or payable to the operator of the facility as "qualifying funding" in respect of the facility 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 is 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 funding provided to XXXXX by XXXXX under the Agreement meets the requirements of the definition of "qualifying funding" as it is a readily ascertainable amount of money paid or payable in respect of the delivery of health care services to the public in the circumstances described above.
Accreditation, licence or other authorization
Paragraph (c) of the definition of "qualifying facility" in subsection 259(2.1) requires that the facility must have 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.
Although the Centre does not hold an accreditation or licence that is recognized or provided for under a law of Canada or a province for the purposes described in paragraph (c) of the definition of "qualifying facility" in subsection 259(2.1), XXXXX, supports the fact that XXXXX is authorized by the MOHLTC to provide primary health care to patients at the Centre. Further, it is clear from the information contained in the Agreement and its accompanying schedules (Schedule A in particular), that the MOHLTC has provided XXXXX with authorization to provide primary health care at the Centre.
To summarize, the Centre meets all of the requirements of paragraphs (a) to (c) of the definition of "qualifying facility" in subsection 259(2.1) and, as a result, XXXXX is a facility operator for purposes of section 259. Accordingly, XXXXX qualifies for an 83% PSB rebate for the GST and the federal part of the HST and an 87% PSB rebate for the provincial part of the HST for non-creditable tax charged in respect of property or services, to the extent that the property or services are for consumption, use or supply in activities engaged in by XXXXX in the course of operating the Centre for use in making facility supplies, or of making facility 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 XXXXX will automatically constitute facility supplies. The determination of whether a particular supply is facility supply is to be made on a case-by-case basis.
In addition to the making of facility supplies, XXXXX, as a facility operator, may be entitled to claim an 83% PSB rebate for the GST and the federal part of the HST and an 87% PSB rebate for the provincial part of the HST for non-creditable tax charged in respect of property or services to the extent that the property or services are for consumption, use or supply in activities engaged by XXXXX in the course of making "ancillary supplies" or "home medical supplies" as defined in subsection 259(1).
Although it has not been demonstrated that XXXXX is involved in the provision of ancillary supplies or home medical supplies, we offer the following information for your reference.
Ancillary supply
Subsection 259(1) defines the term "ancillary supply" as:
(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, 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 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.
External supplier
As indicated above, an entity that is an "external supplier" can also qualify for an 83% PSB rebate of the GST and the federal part of the HST and an 87% PSB rebate for the provincial part of the HST (in the case of an entity resident in Ontario).
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. Given that the definition of "external supplier" expressly excludes a facility operator, XXXXX, as a facility operator, is not an external supplier.
Although XXXXX is not an external supplier, we reiterate that XXXXX, as a facility operator, is entitled to an 83% PSB rebate for the GST and the federal part of the HST and, as a facility operator resident only in Ontario, an 87% PSB rebate for the provincial part of the HST for non-creditable tax charged in respect of property or services, to the extent that the property or services are for consumption, use or supply in activities engaged in by XXXXX in the course of operating the Centre for use in making facility supplies, or of making facility supplies or, where it can be demonstrated that such supplies are being made, ancillary supplies or home medical supplies.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4289. 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,
Brian Olsen, CGA
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
2010/08/27 - RITS 111348 - Allocation of ITC on the Purchase of Point of Sale Terminals
UNCLASSIFIED
Email this Content