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: 231316
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
The application of the “qualifying health care supply” purpose test and the tax status of occupational health services and travel health consultation services
Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to occupational health and travel health consultation services.
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
We understand the following:
1. […] (the Corporation) carries on a healthcare service business […][in Canada].
2. It is registered for GST/HST under account number […].
3. Among other services, the Corporation offers occupational health services, travel health consultation services and vaccinations to their clients [at a clinic located in Canada].
4. The occupational health services are performed by healthcare professionals such as medical physicians, lab technicians, imaging technicians, nurses, kinesiologists, etc., licensed or certified to practice their profession in the jurisdiction in which they provide the healthcare services.
5. The travel health consultations are performed by either a medical physician or a registered nurse who specializes in travel medicine.
6. Medical physicians engaged by the Corporation are independent contractors while all other health professionals are employees of the Corporation.
7. The occupational health services
- Occupational services are performed for the purpose of determining whether an individual meets health requirements for employment.
- The services include, but are not limited to, pre-employment medical evaluations and periodic medical evaluations.
- Each evaluation is designed to meet the Corporations’ clients needs and may include the following services:
- Medical history and examination conducted by a medical physician
- Lab work conducted by a nurse or laboratory technician
- Stress/Resting ECG or a fitness assessment conducted by a nurse or kinesiologist
- Vision testing performed by a nurse
- Audiometric testing performed by a nurse
- Alcohol and drug testing conducted by a nurse
- Pulmonary function tests and/or chest x-ray conducted by a nurse or an imaging technician
The evaluations are industry-specific and depend on the job the candidate is being considered for or the job the candidate is currently holding.
Each evaluation is invoiced for a single consideration.
Pre-employment and periodic evaluations are not covered nor are they reimbursed by a provincial health care plan.
8. The travel health consultations
- Travel health consultations are performed for the purpose of maintaining health and preventing disease for individuals travelling outside of Canada.
- They include among other services:
- an assessment of vaccinations and/or prescriptions that should be obtained before travelling to certain countries;
- travel medical advice based on itineraries, personal risk and underlying health issues;
- personal advice on injury and infection prevention;
- recommended vaccinations and prescriptions for malaria prevention and self-treatment of traveler’s diarrhea;
- the provision of any recommended vaccine.
The travel health consultation service and the administration of the vaccine are invoiced for a single consideration.
9. Vaccines
- Vaccines are administered at the facilities of the Corporation by a medical physician or a registered nurse;
- They are invoiced for a separate consideration as the price of the vaccine on the invoice represents the amount charged for the drug only.
- Revenues from vaccines are recorded in a separate general ledger account.
10. We understand that the services offered by the Corporation are health care services (not cosmetic services or for cosmetic purposes) and are services that can fall under various exemptions of Part II of Schedule V, such as the exemptions of sections 2, 5, 6 or 7 depending on the nature of the supply.
RULING REQUESTED
You would like to know the tax status of the following services that the Corporation offers at its various facilities:
- pre-employment medical evaluations;
- periodic medical evaluations;
- travel health consultations, and
- vaccines.
RULING GIVEN
Based on the facts set out above, we rule the following:
- The supply of pre-employment and periodic evaluations as part of the occupational health services offered by the Corporation are subject to GST/HST at the applicable rate.
- The supply of travel health consultations are qualifying health care supplies and are exempt from GST/HST, pursuant to section 5 of Part II of Schedule V where a medical practitioner renders the service, or pursuant to section 6 of Part II of Schedule V where a registered nurse renders the service.
- The supply of vaccines is zero-rated pursuant to section 2 of Part I of Schedule VI.
EXPLANATION
Generally, all supplies of property and services made in Canada are taxable unless an exemption from the GST/HST applies. Taxable supplies are supplies made in the course of a commercial activity and may be taxable at the rate of 0% (zero-rated supplies), 5%, 13%, or 15% on the value of the consideration for the supply depending on the province in which the supply is made. Zero-rated supplies are included in Schedule VI. Exempt supplies are not subject to the GST/HST and are included in Schedule V.
Part II of Schedule V sets out the health care services that are exempt from GST/HST. For a health care service to be exempt, the service must meet the requirements in one of the exemptions included in this Part and not be excluded from the exemption by sections 1.1 and 1.2 of Part II of Schedule V.
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.”
Therefore, the application of the exemptions under Part II of Schedule V is limited by sections 1.1 and 1.2 of that Part. Sections 1.1 and 1.2 deem supplies that are made for cosmetic purposes and supplies that are not qualifying health care supplies to not be included in Part II of Schedule V.
A “qualifying health care 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.
For an exemption under Part II of Schedule V to apply, the supply has to be made for at least one of the enumerated qualifying health care supply purposes and not for cosmetic purposes.
In the case at hand, the supplies of concern being made by the Corporation are: the occupational health services comprised of pre-employment and periodic medical evaluations, and the travel health consultation services in conjunction with vaccinations.
The application of section 1.2 makes it mandatory to determine the purpose of each of those supplies to determine their tax status.
The purpose of a supply is the reason why the supply is being made. The fact that an individual may ultimately receive health care benefits as a result of the supply does not necessarily make this the purpose of the supply. It is important to note that a link between a supply and the receipt of health care benefits is not always indicative that the purpose of the supply is to provide health care services (and as a result, the purpose of the supply is not necessarily one that meets the purposes set out in the definition of the term “qualifying health care supply”).
Occupational Health Services
The Corporation offers two kinds of occupational health services: pre-employment evaluations and periodic evaluations. In the case of both types of evaluations, the fact that the medical assessments resulting from such evaluations may uncover any health issues of the individual does not change the purpose of the supply. It is therefore primordial to determine the purpose of such evaluations.
Pre-employment evaluations
Pre-employment evaluations are completed as a prerequisite to employment. Therefore, the purpose of the supply of pre-employment evaluations is to assist the employer in making a decision on whether or not an individual meets the criteria to be accepted for a certain kind of job.
Periodic evaluations
Periodic evaluations are completed as a prerequisite to employment retention. Therefore, the purpose of the supply of periodic evaluations is to assist an employer in determining if an individual meets the necessary health requirements to retain or renew employment.
Consequently, the supply of pre-employment or periodic evaluations is not that of a qualifying health care supply as the purpose of each of those supplies is not included in paragraphs (a) to (e) of the definition of "qualifying health care supply" in section 1 of Part II of Schedule V.
Travel health consultations
The travel health consultations determine the types of vaccines needed by the individual and offer medical advice depending on the individual’s place of travel. Their purpose is that of maintaining the health and preventing of disease of an individual while abroad. The Corporation invoices the supply of travel health consultations and the administration of vaccines as one separate consideration from the supply of the vaccines themselves outlining clearly that these are treated as two distinct supplies even if offered or rendered in conjunction to each other. For the Corporation, the administration of the vaccine is simply a component of the overall supply of the travel health consultation unlike the supply of the vaccine itself. The consultation may or may not result in a vaccine being administered depending on the risk assessment of the individual both physically, contingent on personal health issues, and geographically, contingent on the place of travel. For example, a person may attend at the clinic and it may be decided that they do not require any vaccines; nonetheless the supply of the consultation has already been made without the administration or supply of a vaccine. As a result, the supply of the consultations is separate from the supply of the vaccines and the fact that the Corporation also provides these vaccines and administers them has no prevalence on the purpose of the consultation itself. This reasoning is consistent with that of the Tax Court of Canada (TCC) decision in Jema International Travel Clinic Inc. v. The Queen, 2011 TCC 462 (Jema).
It should be noted that the decision in Jema was reached before the addition of section 1.2 to Part II of Schedule V. As a result of the legislative amendment in section 1.2, services performed by health care professionals became either taxable or exempt depending on their purpose.
In this case, the consultation with a client involves a determination of which vaccines are required and what vaccines the individual may or may not elect to have before travelling to a specific country. The number and type of vaccines supplied would vary from client to client.
The purpose of the travel health consultations is to provide advice to persons travelling outside of Canada with respect to the health precautions to be taken and the vaccinations that should be obtained before arriving in certain countries in order to maintain their health and prevent from disease. As such, the supply of travel health consultations is a qualifying health care supply as the purpose of this supply is included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V, as long as it is the client’s choice to seek such a consultation for travel motives without being obliged to do so in order to meet any pre-imposed travel conditions.
Since the travel health consultations are performed by either a medical physician or a registered nurse who specializes in travel medicine and are qualifying health care supplies, the supply of such consultations is exempt pursuant to section 5 or section 6 of Part II of Schedule V.
Vaccines
As previously stated, the Corporation’s travel health consultations may or may not result in a vaccine being administered. In the instances where a vaccine is administered, the Corporation invoices the supply of the vaccine (the drug) for a separate consideration.
Section 2 of Part I of Schedule VI provides zero-rated status to certain drugs that are regulated under federal legislation unless the drugs are labelled or supplied for agricultural or veterinary use only. These drugs or substances are zero-rated throughout the production and distribution chain (that is, regardless of who sells them).
Drugs included in Schedule C or D to the Food and Drugs Act are essentially those, other than radionuclides, represented for use in the radiopharmaceuticals. Schedule D drugs are biologic. These drugs include: allergenic substances used for the treatment or diagnosis of allergic or immunological diseases, immunizing agents such as vaccines, blood, blood derivatives and certain hormones, and enzymes extracted from animal tissues or cultures of micro-organisms.
For purposes of applying section 2 of Part I of Schedule VI, for a vaccine to be zero-rated it should fall under the Food and Drug Act or any other Act or Regulation identified in this section. Vaccines administered by the Corporation fall under the Acts or Regulations identified in this section, therefore the Corporation’s supply of vaccines is zero-rated. Additional information may be found in GST/HST Memorandum 4.1, Drugs and Biologicals.
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(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-553-4626. 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,
Amal Khorchid
Health Care Sectors Unit
Public Services Bodies and Government Division
Excise and GST/HST Rulings Directorate
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