22 March 2006 GST/HST Ruling 63960 - GST Exemption certificate

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:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the operations of a multi-discipline clinic.

You have requested a ruling on whether the GST/HST applies to certain supplies made by the clinic. However, as we have not been provided with specific information or documentation concerning the operation of the clinic and the nature of the services to be provided in this facility, including signed contracts or agreements, we are unable to provide you with a ruling.

This letter will provide an interpretation with our general views of the application of the GST/HST to the questions in your letter. All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.

Interpretation Requested

We understand XXXXX are planning on opening a clinic in which they will provide physiotherapy services to individuals. They also plan to hire professionals to provide additional services.

You would like to know if the clinic would have to charge GST for services provided by a XXXXX and other professional services.

You also asked if the clinic must charge GST for office space rented to other professionals XXXXX.

Interpretation Given

Part II of Schedule V to the ETA exempts certain health care services made by practitioners.

Specifically, section 7 of Part II of Schedule V to the ETA provides exemptions from the GST/HST to the supply of an optometric, chiropractic, physiotherapy, chiropodic, podiatric, osteopathic, audiological, speech-language pathology, occupational or psychological service rendered to an individual when a practitioner provides the service.

The ETA defines a practitioner in respect of a supply of optometric, chiropractic, physiotherapy, chiropodic, podiatric, osteopathic, audiological, speech-language pathology, occupational or psychological services as a person who practises the profession of one of these services and who is licensed or otherwise certified to practise that profession if required in the province where the service is supplied, or who has qualifications needed to be licensed or certified in another province, if this is not required in the particular province where the service is supplied.

Because the exemptions from tax in section 7 of Part II to Schedule V do not apply to services supplied by persons who do not qualify as practitioners, the tax status of these services will vary depending on the qualifications of the supplier.

In some provinces, a corporation may qualify as a practitioner for purposes of the ETA where the corporation practises the particular profession and is licensed or otherwise certified to practise the particular profession in the province in which its services are provided. Therefore, the exemptions from the GST/HST in section 7 of Part II of Schedule V may apply to supplies made by a corporation that meets the definition of practitioner in the ETA. However, supplies of services by corporations who do not meet the definition of practitioner will not fall under this provision.

A corporation, other than a corporation that meets the definition of practitioner, may supply health care services through its employees or through independent contractors engaged to perform services on its behalf. The corporation is a separate legal entity from its owners, directors, employees and subcontractors. Therefore, while an employee or a subcontractor hired by the corporation may be licensed to practise a particular health care profession, and thus meets the definition of a practitioner in his or her own right, the status of practitioner does not extend to the corporation for purposes of the ETA. The tax status of a corporation's supplies is considered separately from the activities of its owners, directors, employees or subcontractors.

For example, a corporation (that is not a practitioner) provides health care services to individuals. It enters into an agreement with an independent contractor who is a licensed practitioner of physiotherapy to render physiotherapy services to its client. As the GST/HST is a multi-stage tax, each transaction is a supply. The supply by the independent contractor to the corporation is exempt under section 7 described above. However, this will have no effect on the tax status of the supply by the corporation to the client because the corporation's supply to the client is a distinct supply from the independent contractor's supply to the corporation. The service supplied by the corporation to the client will be taxable because the corporation is not a practitioner as defined in the ETA and no exemption in the ETA applies to the service.

Therefore, the tax status of supplies made to clients through the clinic described in your letter depends on who is actually making the supply to the individual client and the qualifications of that person.

In this connection, we would mention that there are no exemptions in the ETA for XXXXX.

However, we would point out that section 9 of Part II of Schedule V exempts a supply of any property or service, other than a zero-rated supply, 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 the Act of the legislature of a province to provide for health care services for all insured persons of the province.

Turning to your second question, the supply by the clinic of office space to health care professionals, XXXXX, is a supply of real property that will be subject to the GST/HST. Assuming the clinic is a GST/HST registrant, it is required to collect and remit the tax on this supply.

While there are certain exemptions in the ETA for supplies of real property made by public service bodies, there is no indication in your letter that the clinic is a charity, qualifying non-profit organization, or otherwise qualifies as a public service body for purposes of the GST/HST.

For additional information on the tax status of supplies of real property, you may refer to GST/HST Memorandum 19.1, Real Property and the GST/HST. A copy is enclosed for your reference.

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 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 call me directly at (613) 952-9590.

Yours truly,

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

2006/04/04 — RITS 64473 — Tax Status of Memberships