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: 31590
Business Number: XXXXX
Attention: XXXXX XXXXX XXXXX
May 6, 2010
Dear XXXXX:
Subject:
GST/HST INTERPRETATION
XXXXX
This is further to our letters of XXXXX and XXXXX regarding XXXXX for purposes of the Excise Tax Act (ETA).
The Government of Canada and the Government of Ontario have signed a Comprehensive Integrated Tax Coordination Agreement for the implementation of HST in Ontario. The HST will come into effect in Ontario on July 1, 2010, at a rate of 13%, consisting of a 5% federal part (equivalent to the existing GST) and an 8% provincial part.
The Centre 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. As a charity, it is entitled to a 50% public service body rebate (PSB) of the Goods and Services Tax (GST) and the federal component of the Harmonized Sales Tax (HST). Charities resident in Ontario would be eligible for an 82% rebate claim of the provincial part of the HST as announced in the 2009 Ontario Budget tabled on March 26, 2009 by the Minister of Finance of Ontario.
As indicated in our letter of XXXXX, we thought it might be of interest to you to bring to your attention amendments made to section 259 of the ETA. These amendments provide for an 83% PSB rebate of the GST and the federal component of the HST that became payable on or after January 1, 2005, for facility operators and external supplies making facility supplies, home medical supplies or ancillary supplies. External suppliers and facility operators resident in Ontario would be eligible for an 87% rebate claim of the provincial part of the HST as announced in the Ontario's Tax Plan for Jobs and Growth: Cutting Personal and Corporate Taxes and Harmonizing Sales Taxes tabled on November 16, 2009 by the Minister of Finance of Ontario.
This should not be taken as a statement by the Canada Revenue Agency (CRA) that the charity, external supplier and facility operator rebate rates for the provincial part of the HST will be made in their current form.
All legislative references are to the ETA and the regulations thereunder, unless otherwise specified.
Interpretation Requested
Is the Centre entitled to claim an 83% PSB rebate as a facility operator or an external supplier in respect of its operation of its XXXXX long-term care facility for seniors?
Interpretation Given
The Centre would be entitled to qualify for an 83% PSB rebate if it meets the definition of "facility operator" or "external supplier" in subsection 259(1).
Explanation
A "facility operator" means "a charity, public institution or qualifying non-profit organization (other than a hospital authority) that operates a qualifying facility". An "external supplier" means "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".
It is our understanding from the information provided that the Centre makes all of its supplies at its long-term care facility. For this reason, we have not addressed the matter of whether the Centre could be an external supplier. However, for your reference, we have attached a transcript of the definitions of "ancillary supply", "home medical supply" and "medical funding" found in subsection 259(1) that are relevant to the definition of "external supplier".
The Centre is a registered charity. For a charity to be a facility operator, it must operate a qualifying facility.
Qualifying facility
Subsection 259(2.1) sets out the criteria that must be met in order for a facility or part, other than a public hospital, to be a qualifying facility 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.
Please note that whether a facility or part is a qualifying facility is determined on the basis of it having met this criteria in a fiscal year or any part of a fiscal year.
The first criterion that must be met in order for a facility to be a qualifying facility is that its operator must make facility supplies at the facility.
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) as a person who is entitled under the laws of a province to practice the profession of medicine.
Please note that only exempt supplies may constitute facility supplies. Further, administrative services provided by a physician in the capacity as medical director of a facility are not viewed as facility supplies because the definition requires exempt services to be part of a medically necessary process of health care for the individual for the purposes described therein.
The second criterion that must be met in order for a facility to be a qualifying facility is that its operator must receive qualifying funding.
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.
The third criterion that must be met in order for a facility to be a qualifying facility is that its operator 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 the facility for the provision of health care services.
Background
The Centre operates a XXXXX long-term care facility for seniors ("Facility"). The Facility is classified as XXXXX. The Facility began operations in XXXXX and is recognized by XXXXX as a long-term care facility. Other information concerning the Centre and its activities is as follows:
1. The Centre, as a registered charity for income tax purposes, is a charity for GST/HST purposes. XXXXX. It provides enhanced, supplementary and respite (short stay and convalescent) care, XXXXX.
2. The Centre is described on its Internet Website at XXXXX. Admission to the Facility is coordinated through XXXXX. Individuals apply for a placement in a long-term care facility through the XXXXX.
3. The Centre's long-term care program provides assistance to XXXXX.
4. The Centre's short-stay programs include XXXXX.
5. At the Facility, XXXXX beds are designated as XXXXX and XXXXX beds are for community residents. The XXXXX ("Ministry") determines the room rates for community residents and the Ministry sets the rates for XXXXX. For community residents, the rates range from $XXXXX per month to $XXXXX per month and for XXXXX the rate is $XXXXX per month.
6. The Facility offers daily nursing care, other services and clinics to residents and their families as follows:
(a) XXXXX;
(b) XXXXX;
(c) XXXXX;
(d) XXXXX;
(e) XXXXX; and
(f) XXXXX.
7. The Facility also offers the following services: XXXXX.
8. The Ministry provides funding to the Centre for its provision of services in long-term, respite and convalescent care, with particular emphasis on providing for the needs of seniors, XXXXX and those requiring dementia care.
Summary
To summarize, the Centre may be entitled to claim an 83% PSB rebate if it qualifies as a facility operator operating a qualifying facility in a fiscal year or part.
Because the Centre provides chronic care to individuals that stay overnight at the Facility, documentary evidence required to establish whether it qualifies for an 83% PSB rebate as a facility operator includes:
• Funding agreements between the Centre, the Ministry;
• Service Agreement with the Ministry;
• Financial Statements of the Centre;
• Reports prepared by the Ministry in respect of the operations of the Centre;
• A sample of agreements entered by the Centre with residents at the Facility identifying the specific health care services that the Centre provides to residents (sanitized);
• Sample care plans of residents at the Facility (sanitized);
• Records of the number of physician visits to residents at the Facility;
• Service agreements entered into by the Centre with physicians and any other documentation respecting physician involvement in the care provided to residents at the Facility. Please note that the documentation must demonstrate the level of care required of the residents and the level of physician involvement in that care. This information is required because the definition of "facility supply" requires the process of health care for the individual to be reasonably expected to take place under the active direction or supervision, or with the active involvement of a physician. A physician involvement in an individual's care must be on a continual and ongoing basis and simply not on an "as-needed" basis;
• Evidence that a registered nurse is at the Facility at all times; and
• Evidence that the Centre provides more than 2.4 hours/day of therapeutic health care services to residents at the Facility.Regarding the Centre's other activities (e.g., respite care; XXXXX; XXXXX; clinics for families of residents' of the Facility), we would require evidence to support that any exempt supplies made in respect of these activities are part of a medically necessary process of health care for individuals for the purpose described in the definition of "facility supply" and that process is reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician.
Persons who qualify as facility operators are only entitled to claim an 83% PSB rebate of the GST and the federal component of the HST to the extent that they make facility supplies. However, when all or substantially all of the non-creditable tax charged for a claim period of a person is incurred by the person in the capacity as a facility operator, the person is relieved from the obligation to allocated the non-creditable tax charged for the claim period between tax that was incurred in the capacity as facility operator and tax that was incurred in other capacities.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please contact me 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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