29 September 2006 GST/HST Ruling 80351 - XXXXX Status as a band-empowered entity

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.

Dear XXXXX:

The purpose of this letter is to advise you that the Canada Revenue Agency ("CRA") has issued Policy Statement P-248, The application of the GST/HST to the supply of an independent medical examination ("IME") and to other independent assessments. We are also replying to your letter XXXXX in which you requested clarification on what constitutes a "health care facility" for purposes of the Excise Tax Act (the "ETA") as well as clarification on the application of the Goods and Services Tax ("GST")/Harmonized Sales Tax ("HST") to IMEs and other independent assessments supplied by various health professionals and when a supply does not involve an assessment rendered in a health care facility operated by the supplier.

This policy statement can be found under the GST/HST Policy Statements link at (http://www.cra-arc.gc.ca/menu/GTPP_200-e.html) on the CRA Web site. A copy of the policy statement is enclosed for your reference. The policy represents a change in the CRA's position on the application of the GST/HST to sections 5 and 7 of Part II of Schedule V to the ETA and it describes the circumstances under which IMEs and other independent assessments will be exempt from the GST/HST under these provisions as well as section 2 of that Part.

The effective date of the policy is June 8, 2001, which is the date the Tax Court of Canada issued its decision regarding Riverfront Medical Evaluations Ltd. v. Canada ("Riverfront"). The policy is based on careful consideration of the Tax Court of Canada and Federal Court of Appeal decisions in Riverfront, the exemptions in the ETA that apply to supplies made by medical practitioners and practitioners, as well as the information provided by stakeholders on the issue.

In situations where the CRA has issued specific interpretations that differ from this policy, the policy should be applied to the affected person(s) on the earlier of the day the CRA has made the public aware of this policy or informs the person(s) in writing of the application of the tax to their transaction(s). However, the CRA may apply the policy retroactively, where this would be beneficial to a person and the person asks that the policy be applied retroactively.

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. You may refer to Reduction in the Rate of the GST/HST - Questions and Answers at (http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html) for more information on the transitional rules for the reduction of the GST/HST rate.

All legislative references are to the ETA and the regulations therein, unless otherwise specified.

Interpretation Requested

We understand that you are requesting clarification on the following three issues related to the provision of IMEs and other independent assessments:

1. What constitutes a "health care facility" for purpose of the ETA;

2. The tax status of assessment services provided by regulated health professionals, such as nurses, massage therapists, kinesiologists, social workers and vocational examiners; and

3. The application of the GST/HST to an assessment supplied by a person who does not operate a health care facility or when the supply does not involve a service rendered in a health care facility operated by the supplier.

Interpretation Given

The GST/HST is a transaction tax and for each transaction, the supplier must determine whether the tax is applicable. The general rule under in section 165 of the ETA is that all supplies of goods and services made in Canada are subject to the GST/HST at the rate of 6% or 14%. There are exceptions for certain health care services that are identified as being exempt from the GST/HST. These exempt services are listed in Part II of Schedule V. The exempting provisions apply to specific suppliers as well as to specific services. In particular, section 2 of that Part exempts a supply made by the operator of a "health care facility" of an "institutional health care service" if the service is rendered to a patient or resident of the facility. The ETA defines "health care facility" and "institutional health care service". In addition, sections 5 and 7 of that Part exempt from GST/HST certain supplies made by a "medical practitioner" and a "practitioner", as those suppliers are defined in section 1 of that Part.

1. Health care facility

For supplies of IMEs and independent assessments, the relevant part of the definition of "health care facility" is paragraph 1(a) of Part II of Schedule V, which is describing a facility, or part thereof, operated for the purpose of providing hospital or medical care. This means a facility, or part thereof, operated for the purpose of providing care to patients by physicians acting in the course of the practice of medicine. The CRA considers medical care to mean services provided to patients by physicians, including examining or interviewing patients, and would consider the following factors to determine the purpose for which a facility is operated:

•   The operator contracts with physicians to provide medical care to patients of the facility;

•   Physicians provide medical care in the operator's facility; and

•   The facility has consultation and examination rooms and equipment and supplies to support the provision of medical care.

In a multi-disciplinary facility, only the part of that facility's operations where medical care is provided to patients falls within the definition of "health care facility". Services provided by other practitioners, such as dentists, physiotherapists, chiropodists, chiropractors, occupational therapists, and psychologists, are not included within the meaning of medical care. Thus, the part of a multi-disciplinary facility operated to provide care by other practitioners is not a health care facility for ETA purposes.

2. Services provided by regulated health professionals

With respect to your query regarding assessment services provided by a variety of regulated health professionals, such as nurses, massage therapists, kinesiologists, social workers and vocational examiners, as noted above the GST/HST always applies unless there is a specific exemption for the particular service. The application of the exemption in section 7 of Part II of Schedule V is limited to an optometric, chiropractic, physiotherapy, chiropodic, podiatric, osteopathic, audiological, speech therapy ^[ix]footnote 1, occupational therapy or psychological service rendered to an individual when supplied by a "practitioner" of the service. By definition in the ETA, a "practitioner" means a person who practises the profession of optometry, physiotherapy, chiropody, podiatry, osteopathy, audiology, speech therapy occupational therapy, or psychology and is licensed or otherwise certified to practise that profession in the province in which the person supplies the service. If no licence or certification is required, then the person must have the qualifications equivalent to those necessary to be licensed or certified in another province.

Services provided by nurses, massage therapists, kinesiologists, social workers and vocational examiners are not listed in section 7 of Part II of Schedule V and therefore, this exempting provision cannot apply to these services. However, section 6 of that Part contains exemptions for nursing services rendered by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse, and a registered psychiatric nurse. A supply of a nursing service is exempt where it is rendered to an individual in a health care facility or in the individual's place of residence; the service is a private-duty nursing service; or the supply is made to a "public sector body". The ETA defines "public sector body" and this definition includes organizations such as non-profit organizations, charities, municipalities, and hospital authorities.

The Notice of Ways and Means Motion introduced by the Department of Finance on October 3, 2003, included a proposal to exempt certain services rendered in the practice of the profession of social work. The proposed amendment to the ETA will apply to services supplied by a person who practises the profession of social work and the person is licensed or otherwise certified to practise the profession in the province in which the service is supplied. If no such licensing or certification is required in that province, then the proposed amendment stipulates that the person must have the qualifications equivalent to those necessary to be so licensed or certified in a province where such a requirement exists.

The proposed amendment, which has not yet received Royal Assent, will cover only certain social work services, which are described as services rendered to an individual within a professional-client relationship between the supplier and the individual, where those services are provided for the prevention, assessment or remediation of a physical, emotional, behavioural, or mental disorder or disability of the individual, or to assist the individual in coping with a disorder or disability, or to assist another person to whom the individual is related or to whom the individual provides care or supervision otherwise than in a professional capacity.

The issue involving independent assessments involved the application of section 7 of Part II of Schedule V; thus nursing services and social work services were not part of the revised policy. The CRA will consider on a case-by-case basis whether a supply falls within the scope of the exemption for nursing services or the proposed amendment to exempt social work services.

With respect to services provided by massage therapists, kinesiologists and vocational examiners, please note that these services are not specifically identified in the exempting provisions in the ETA that relate to health care services. Accordingly, these services are generally taxable, notwithstanding that they may be provided by a regulated health professional.

Accordingly, because of the limitations and conditions contained in the exempting provisions relating to health care services, your recommendation to simply refer to "services rendered by a regulated health professional" as exempt supplies would not accurately reflect the provisions of the ETA.

3. Services not provided in a health care facility operated by the supplier

We understand that this issue relates to a supply that consists of an assessment of an individual where the assessment is rendered at another person's facility. That is, in the scenario you described, the supply does not involve an assessment of an individual provided in a health care facility operated by the supplier; instead the supplier refers the individual to another person for an assessment.

As previously noted, section 2 of Part II of Schedule V exempts a supply of an "institutional health care service" rendered to a patient or resident of a "health care facility" where the operator of that facility supplies these services to them within its facility. The definition of "institutional health care service" describes services rendered by a person that are provided in a health care facility where the operator of the facility remunerates the person for these services. The definite article "the" in paragraph (h) of this definition links the location where the person's services are rendered to the operator's facility. Services rendered by a person remunerated by the operator of a health care facility fall within the definition only when the person's services are provided in the operator's facility.

On the basis of the definition of "institutional health care service", the exemption in section 2 of Part II of Schedule V does not apply to services rendered outside the supplier's health care facility nor does it apply to services that are not medical care, as such services do not fall within the meaning of "institutional health care service" since they were not provided in a "health care facility"; i.e., that part of the supplier's facility where medical care is not provided is not a "health care facility" as defined in paragraph 1(a) of Part II of Schedule V. Further, where the supplier does not operate a health care facility, this exempting provision will not apply to any assessments supplied by this supplier.

Accordingly, if the supply consists of an assessment rendered by a practitioner to an individual and the supplier is not a "practitioner" as defined in the ETA, the supply is taxable regardless of where it was rendered; i.e., the location of the assessment is not a factor. Similarly, if the supply consists of an assessment rendered to an individual by a physician and the supplier is a person other than that physician or the supplier does not operate a health care facility, the supply is taxable. However, as noted above, if the supply consists of an assessment rendered to an individual by a physician and the supplier operates a "health care facility", the location of the assessment is a factor for purposes section 2 of Part II of Schedule V because of the definition of "institutional health care service". This latter supply will be taxable if it did not consist of a service identified in this definition that was provided in the supplier's health care facility and rendered to a patient of the facility.

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, Goods and Services Tax Rulings, do not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require additional information, please call me directly at (613) 952-6761.

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

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