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.
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
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Case Number: 53254
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XXXXX
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January 17, 2005
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Subject:
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Sections 7, 9 and 13 of Part II of Schedule V to the Excise Tax Act
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Dear XXXXX:
This in reply to your submission XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to certain services supplied to XXXXX.
Your query involves the application of sections 9 and 13 of Part II of Schedule V to the Excise Tax Act (the "ETA") to a variety of services acquired by XXXXX from corporations that are multi-service providers. XXXXX contract with these corporations to arrange for services that include physiotherapy, occupational therapy and social work services to be provided to the clients of XXXXX. We understand that your query involves these services supplied to XXXXX in general rather than supplies made by a particular supplier. We understand that it is your view that both of the above-noted exemptions apply to these supplies made to XXXXX and you are requesting confirmation that these supplies are exempt for purposes of the ETA.
As explained below, the supplies described in your letter made to XXXXX do not fall within either section 9 or section 13 of Part II of Schedule V to the ETA. In addition, the supplies made by a supplier that is not a "practitioner" as defined in section 1 of Part II of Schedule V to the ETA do not meet the conditions set out in section 7 of that Part (with respect to physiotherapy and occupational therapy services); nor do they meet the conditions of proposed section 7.2 to that Part (with respect to social work services). As there are no other provisions in Schedule V to the ETA that would apply to the supplies made by corporations in the circumstances described in your letter, these supplies would be subject to the GST/HST at the rate of 7% (or 15% where the supplies are made in a participating province). Please note that we have reproduced the ETA provisions that are pertinent to your query in the Appendix to this letter.
Background
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Section 9 of Part II of Schedule V to the ETA
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CRA Interpretation
The definition of "insured person" in section 1 of Part II of Schedule V to the ETA applies to the interpretation of section 9 of that Part. That is, an "insured person" for purposes of section 9 has the same meaning as in the Canada Health Act (the "CHA").
The CHA requires each province and territory to report annually to Parliament respecting the administration and operation of that Act for the fiscal year, and include all relevant information on the extent to which provincial health insurance plans have satisfied the criteria for payment under that Act. [xliv]2 After reviewing relevant documents and legislation, we would agree with your comment that XXXXX is a type of plan described in section 9 of Part II of Schedule V to the ETA.
It is important to note that whether a supply may be considered an "insured service" for purposes XXXXX or whether funding for a supply is made under the authority of XXXXX are not factors for purposes of section 9 of Part II of Schedule V to the ETA. Rather, the exemption applies to the extent that the consideration for a supply of a service or property is directly payable or reimbursed under a plan established under the legislature of a province to provide for health care services for all insured persons of that province. The application of this exemption is dependent on the mechanism under which the consideration payable or reimbursable for a supply of services or property is made and therefore, this exemption applies on a supply-by-supply basis. Accordingly, it will be a question of fact as to whether the consideration (or a portion of the consideration) for a supply made by a third party contractor is directly paid or reimbursed by the XXXXX government under a plan described in section 9 of Part II of Schedule V to the ETA, XXXXX.
You cited various legislative provisions to conclude that the supplies made by a third party contractor to XXXXX. While circumstances may exist in which the consideration charged for services provided by a physiotherapist, occupational therapist or social worker may be covered by a plan such as XXXXX, we note that these circumstances were not evident in your submission and that our review of the relevant information indicates that the provincial funding arrangements for XXXXX is not set up to pay or reimburse XXXXX for specific services and property on a supply-by-supply basis.
The services provided or arranged by XXXXX are publicly funded services; however, public funding is not equivalent to a payment or reimbursement of the consideration charged for these services made under a plan such as XXXXX. The mechanism under which XXXXX are funded by XXXXX is a separate program from XXXXX. As previously noted, XXXXX receive funding based on an annual budget allocation under XXXXX for which they determine how the funds are spent.
Based on our review of the provincial legislation as well as the service and funding agreements between XXXXX provide services pursuant to the XXXXX, which is the statutory authority under which XXXXX funds XXXXX for the provision of the services that they are approved to provide. Where a XXXXX pays the consideration for supplies it acquires with funds from that XXXXX annual budget allocation to cover its activities for the fiscal year, this source of payment is not a payment or reimbursement for a particular supply of a service or property under a provincial health insurance plan such as XXXXX. It will be a question of fact how the consideration for any particular supply is paid or reimbursed, such as under a plan described in section 9 of Part II of Schedule V to the ETA.
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After carefully considering your arguments and reviewing the information provided as well as our additional research, including information describing XXXXX funding arrangement for the activities of XXXXX, it is our position that the supplies made by third party contractors to XXXXX in the circumstances described in your submission do not fall within section 9 of Part II of Schedule V to the ETA.
Section 13 of Part II of Schedule V to the ETA
You suggested that occupational therapy, physiotherapy and social work services rendered to clients (who are individuals) of XXXXX are publicly funded homemaker services. That is, it is your view that the services provided by a physiotherapist, occupational therapist or a social worker XXXXX.
We understand the basis for your view to be that occupational therapy, physiotherapy and social work services are "personal services" rendered to an individual in his or her home and that these services should not be construed as being outside the ambit of section 13 simply because they are not listed as examples in the definition of "homemaker service" in section 1 of Part II of Schedule V to the ETA.
We also understand that it is your contention that because the services in question are paid for by XXXXX, which is in turn funded by XXXXX, the conditions set out in section 13 of Part II of Schedule V to the ETA are satisfied. XXXXX receives its funding for "home care" services directly from XXXXX and it is your assertion that XXXXX is an organization administering a government program and pays for the services provided by third party providers.
Therefore, you are asserting that the services in question fall within the meaning of "homemaker service" as defined in the ETA and the supply made by a third party contractor to XXXXX that involves physiotherapy, occupational therapy and social work services rendered to clients of XXXXX, is exempt under section 13 of Part II of Schedule V to the ETA.
CRA Interpretation
The examples enumerated in the definition of "homemaker service" in Part II of Schedule V to the ETA of "cleaning, laundering, meal preparation and child care, that is rendered to an individual who, due to age, infirmity or disability, requires assistance" are illustrative of both household and personal services.
We note that the meanings of "home care" and "homemaker" services are not synonymous. That is, "home care" is not described in the ETA whereas "homemaker service" is a defined term. The reference to "home care" services used by other authorities to describe programs and services that fall within their jurisdictions does not bring those services within the scope of the ETA definition of "homemaker service". The meaning of "homemaker service" for ETA purposes is limited to the services that ordinarily fall within the class of homemaking and personal services, such as assistance with laundry, child care, personal hygiene activities, and routine activities of daily living. We note that the object of the ETA is to exempt publicly funded household and personal services rendered to individuals in their homes when these services are rendered to individuals who require such assistance due to age, infirmity or disability.
Because of the conditions set out in section 13, a determination must be made as to whether an organization, including a particular XXXXX, is administering a government or municipal program of homemaker services. It must also be determined whether the payment by XXXXX to a third party contractor is made specifically under a government or municipal homemaker service program administered by XXXXX for a supply of a homemaker service that is rendered to an individual in the individual's place of residence.
It is understood that XXXXX receive government funding to provide or arrange for the provision of various services for individuals in their homes. We also understand that while the XXXXX provide a variety of services, each individual XXXXX is responsible for determining how it spends the funds from its annual budget allocation from XXXXX to serve the clients in its particular region. Thus, to the extent that any XXXXX or the XXXXX in general administer a government or municipal program in respect of homemaker services is unknown. The facts pertaining to each XXXXX would have to be evaluated to make such a determination. Because each XXXXX is a separate legal entity and operates independently, a decision regarding the application of section 13 of Part II of Schedule V to the ETA would have to be made on a case-by-case basis and would apply only to a particular XXXXX.
We also note that the ETA includes separate provisions to exempt physiotherapy and occupational therapy services (paragraphs 7(c) and (i) of Part II of Schedule V) rendered to individuals. In addition, a proposed amendment was announced to add social work services to Schedule V. Section 7, proposed section 7.2 and section 13 have different objects and different conditions and there is no overlap between them, nor is there any internal contradiction or conflict between these provisions. Section 7 and proposed section 7.2 are describing professional services supplied by licensed practitioners, whereas section 13 is describing publicly funded household and personal services supplied under a government or municipal homemaker services program. Because physiotherapy, occupational therapy and social work services are specifically addressed in a comprehensive way in other provisions included in Part II of Schedule V to the ETA, these specified provisions would apply rather than section 13 of that Part.
We note that physiotherapy, occupational therapy and social work services are professional services governed by provincial statutes and are not of the same character as the assistance encompassed within the definition of "homemaker service". These services do not fall within the scope of what is generally understood to be a homemaker service nor can these services be construed as household and personal services rendered to individuals because of their age, infirmity or disability. Therefore, physiotherapy, occupational therapy and social work services do not fall within the ambit of the definition of "homemaker services" and section 13 of Part II of Schedule V to the ETA.
Section 7 and Proposed Section 7.2: Part II of Schedule V to the ETA
Although you did not ask for an interpretation of paragraphs 7(c) and 7(i) of Part II of Schedule V to the ETA or proposed section 7.2 of that Part, an interpretation of these provisions is relevant to your query.
Paragraphs 7(c) and 7(i) of Part II of Schedule V to the ETA
These provisions exempt a supply of a physiotherapy or occupational therapy service rendered to an individual when a practitioner of the service makes the supply. A "practitioner" for purposes of these provisions is as follows: [xlv]3
"Practitioner" in respect of a supply of physiotherapy or occupational therapy services means a person who
(a) practises the profession of physiotherapy or occupational therapy;
(b) where the person is required to be licensed or otherwise certified to practise the profession in the province in which the service is supplied, is so licensed or certified, and
(c) where the person is not required to be licensed or otherwise certified to practise the profession in that province, has the qualifications equivalent to those necessary to be so licensed or otherwise certified in another province.
Basically, these provisions apply to physiotherapists and occupational therapists working independently who are licensed or otherwise certified to practise these professions in the province in which they supply their services. We understand that in the XXXXX these practitioners are subject to a registration requirement with a provincial regulatory body.
The exemptions do not apply to physiotherapy and occupational therapy services supplied by other persons, such as governments, institutions, corporations or other organizations, as these persons do not meet the legislative criteria of being a supplier who practises these professions.
If a physiotherapist or occupational therapist is an employee of another person, please note that under the ETA services provided by employees to their employers are not supplies and therefore no GST/HST applies to wages and salaries paid to employees. However, as noted above, the exemption would not apply to the employer's supplies, notwithstanding the qualifications of its employees. The fact that an employee may be a practitioner does not confer any benefit to the employer such that the employer would qualify as a practitioner for purposes of the ETA. The same principle would also apply where a practitioner is an independent contractor hired by another person. The employer or other person is a separate legal entity from the practitioner, and the employer or other person's status as a "practitioner" as defined in the ETA is evaluated separately from its employees and contractors.
Proposed section 7.2
The Department of Finance tabled a Notice of Ways and Means Motion on October 3, 2003, which included a legislative proposal to exempt from tax supplies made after that date of certain health-related services rendered in the practice of the profession of social work. Currently, these supplies are subject to the GST/HST at the rates of 7% and 15%. The services covered by the proposed amendment are supplies made by social workers of counselling individuals for the prevention or treatment of physical or mental disorders or to assist these individuals or their caregivers in coping with these disorders.
The proposed amendment to the ETA applies to social workers that are licensed or otherwise certified to practise the profession of social work in the province in which they supply their services. We understand that in the XXXXX social workers are subject to a registration requirement with a provincial regulatory body.
Where the supplier is not required to be licensed or otherwise certified to practise the profession of social work in the province in which the service is supplied, the supplier must have the equivalent qualifications required to be licensed or certified in a province where there is such a requirement. The proposed exemption does not apply to social work services supplied by other persons, as these persons do not meet the proposed legislative criteria of being a supplier who practises the profession of social work.
Similar to the discussion above regarding paragraphs 7(c) and 7(i) of Part II of Schedule V to the ETA, the proposed amendment does not apply to a person that is not engaged in the practice of the profession of social work as described in the proposed amendment. For example, the proposed amendment would not apply to a person such as a corporation that is not itself a practitioner, notwithstanding the qualifications of its employees or contractors. The corporation is a separate legal entity and notwithstanding that its employees or contractors may be licensed or certified social workers, this licensing or certification does not transfer to the corporation or convey any agreement that the corporation practises the profession of social work as described in the proposed amendment. Whether it can be said that any person, including a corporation, practises the profession of social work and provides a service to an individual within a professional-client relationship will be questions of fact and will also depend on the provincial regulatory scheme that applies in the particular province in which the service is supplied.
Conclusion
As a transactional tax the application of the GST/HST is determined on a supply-by-supply basis. The approach behind the exemptions in Part II of Schedule V to the ETA is to exempt a supply of a particular service rendered to an individual on a fee-for-service basis. This is evident in the wording of the provisions of that Part, which describes supplies of particular services rendered to individuals. For example, the exemption in paragraph 7(c) of that Part is explicit in its limited application to a physiotherapy service supplied and rendered by a person with specific professional qualifications to an individual. Within the context of this exemption there is a direct connection between the physiotherapy service and the individual to whom the service is rendered and the practitioner.
The ETA exemptions apply only where there is some legislated licensing or certification of the person supplying the service; for instance, the ETA requires that a physiotherapy, occupational therapy or social work service must have been supplied by a person authorized to practise one of those professions pursuant to the laws of the province in which that service was rendered. This criterion must be satisfied in order for the supply to fall within one of the relevant exemptions.
Evidence that the legislative criteria are met would generally involve a billing directly by the licensed practitioner to the individual for a service rendered or to a third party who is paying for the service on behalf of the individual. A situation that does not involve a billing by the practitioner for this service would have to be evaluated to determine whether the legislative criteria are met; e.g., that the supplier of this service is in fact a practitioner as defined in the ETA and the supply constituted a service identified in Part II of Schedule V to the ETA that was rendered to an individual.
Because of the explicit language used in paragraphs 7(c) and 7(i) and of Part II of Schedule V to the ETA, as well proposed section 7.2 to that Part, these exemptions do not apply to a person that is not itself a practitioner, such as a multi-service corporation described in the information you provided, notwithstanding the qualifications of its employees.
The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the ETA, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Revenue Agency with respect to a particular situation.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6761.
Yours truly,
Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
APPENDIX
Excise Tax Act Provisions: Part II of Schedule V
Section 1 definitions:
"Homemaker service" means a household or personal service, such as cleaning, laundering, meal preparation and child care, that is rendered to an individual who, due to age, infirmity or disability, requires such assistance.
"Insured person" has the same meaning as in the Canada Health Act.
"Practitioner", in respect of a supply of optometric, chiropractic, physiotherapy, chiropodic, podiatric, osteopathic, audiological, speech therapy, occupational therapy, psychological or dietetic services, means a person who
(a) practises the profession of optometry, chiropractic, physiotherapy, chiropody, podiatry, osteopathy, audiology, speech therapy, occupational therapy, psychology or dietetics, as the case may be,
(b) where the person is required to be licensed or otherwise certified to practise the profession in the province in which the service is supplied, is so licensed or certified, and
(c) where the person is not required to be licensed or otherwise certified to practise the profession in that province, has the qualifications equivalent to those necessary to be so licensed or otherwise certified in another province.
Section 7:
A supply of any of the following services when rendered to an individual, where the supply is made by a practitioner of the service:
(a) optometric services;
(b) chiropractic services;
(c) physiotherapy services;
(d) chiropodic services;
(e) podiatric services;
(f) osteopathic services;
(g) audiological services;
(h) speech therapy services;
(i) occupational therapy services; and
(j) psychological services.
Proposed section 7.2
A supply of a service rendered in the practise of the profession of social work where
(a) the service is rendered to an individual within a professional-client relationship between the supplier and the individual and is provided for the prevention, assessment or remediation of, or to assist the individual in coping with a physical, emotional, behavioural, or mental disorder or disability of the individual or of another person to whom the individual is related or to whom the individual provides care or supervision otherwise than in a professional capacity; and
(b) either
(i) if the supplier is required to be licensed or otherwise certified to practise the profession of social work in the province in which the service is supplied is so licensed or certified, or
(ii) if the supplier is not required to be licensed or otherwise certified to practise that profession in that province, the supplier has the qualifications equivalent to those necessary to be licensed or certified to practise that profession in a province where such a requirement exists.
Section 9:
A supply (other than a zero-rated supply) of any property or service but only if, and to the extent that, the consideration for the supply is payable or reimbursed by the government of a province under a plan established under an Act of the legislature of the province to provide for health care services for all insured persons of the province.
Section 13:
A supply of a homemaker service that is rendered to an individual in the individual's place of residence, whether the recipient of the supply is the individual or any other person, where
(a) the supplier is a government or municipality;
(b) a government, municipality or organization administering a government or municipal program in respect of homemaker services pays an amount
(i) to the supplier in respect of the supply, or
(ii) to any person for the purpose of the acquisition of the service; or
(c) another supply of a homemaker service rendered to the individual is made in the circumstances described in paragraph (a) or (b).
Documents Reviewed
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2005/01/27 — RITS 53352 — Artificial Breathing Apparatus
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