21 March 2007 GST/HST Ruling 77999 - Sale of Real Property XXXXX

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 definition of "practitioner" in section 1 of Part II of Schedule V to the Excise Tax Act (the ETA). You are also inquiring about the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made by licensed practitioners and other persons of chiropractic and psychological services, as well as optometric, physiotherapy, podiatric, osteopathic, audiological, speech-language pathology, occupational therapy, and dietetic services.

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

Interpretation Requested

You would like to know whether chiropractic, psychological, optometric, physiotherapy, podiatric, osteopathic, audiological, speech-language pathology, and occupational therapy services rendered to an individual are exempt supplies described in section 7 of Part II of Schedule V when supplied by a person that is not a licensed practitioner (e.g., a corporation) and when supplied by a person that is a licensed practitioner. You would also like to know whether a dietetic service rendered to an individual is an exempt supply described in section 7.1 of Part II of Schedule V when supplied by a person that is not a licensed practitioner (e.g., a corporation) and when supplied by a person that is a licensed practitioner. In addition, you would like our comments on the tax status of the supply when the supplier (whether a corporation or a licensed practitioner) invoices the individual or a third party for these services.

Interpretation Given

Sections 7 and 7.1 of Part II of Schedule V exempt from GST/HST supplies of certain services when the supply is made by a "practitioner" of the service. For purposes of these exempting provisions, a "practitioner" is defined to mean a person who practises the profession of optometry, physiotherapy, chiropody, podiatry, osteopathy, audiology, speech therapy, occupational therapy, psychology or dietetics and who is licensed or otherwise certified to practise that profession in the province in which the person supplies the service. If no license or certification is required in the province where the service is supplied, then the supplier must have the qualifications equivalent to those necessary to be licensed or certified in another province.

The services listed in section 7 of Part II of Schedule V are optometric, chiropractic, physiotherapy, chiropodic, podiatric, osteopathic, audiological, speech therapy ^[xxiv]footnote 1, occupational therapy and psychological services when rendered to an individual. Section 7.1 of this Part exempts a supply of a dietetic service made by a practitioner of the service where the service is rendered to an individual or the supply is made to a public sector body or to the operator of a health care facility.

We understand that regulated practitioners must be members of a provincial regulatory authority to practise their health profession. The role and authority of these authorities are set out in provincial legislation. For example, XXXXX these authorities include the College of Chiropractors XXXXX, the College of Physiotherapists XXXXX, and the College of Psychologists XXXXX and their role and authority are set out in the XXXXX and other legislation for regulated health professions, i.e., Chiropractic Act, Physiotherapy Act, and XXXXX. Under the XXXXX, practitioners who are members of a College are permitted to establish a professional health corporation for the purpose of practising their profession XXXXX. Practitioners incorporate under the Business Corporations Act. Following incorporation, the professional health corporation must apply to the applicable College for a certificate of authorization for a corporation to practise a health profession, e.g., chiropractic, physiotherapy, psychology, etc. This certificate, which must be renewed annually, is issued under the XXXXX and without it the corporation may not practise a health profession.

It is our view that where a professional health corporation holds a valid certificate of authorization to practise a profession listed in the definition of "practitioner" in the ETA issued under provincial legislation governing a health profession, that corporation would fall within the meaning of "practitioner" as defined in the ETA.

The application of section 7 of Part II of Schedule V is not dependent on who pays for the supply, as this section does not require that the supply be "made to" a particular recipient. For instance, when a licensed speech therapist treats an individual for a speech dysfunction, this supply remains exempt notwithstanding that another person other than the individual (a third party) pays the consideration to the licensed speech therapist for that supply. Similarly, the wording in section 7.1 of Part II of Schedule V provides that a practitioner of dietetics may render a dietetic service to an individual but bill another person for payment of that service.

Essentially, the exempting provisions apply to practitioners of the listed services who practise independently under their own name and who are licensed or otherwise certified to practise their profession in the province in which they supply their services. These exempting provisions do not apply to services supplied by other persons such as governments, municipalities, institutions, corporations (other than professional health corporations as discussed above) and other organizations ^[xxv]footnote 2. For instance, whether the supply of physiotherapy services rendered to an individual is exempt pursuant to paragraph 7(c) of Part II of Schedule V depends on the status of the supplier. If the supplier is not a "practitioner" of physiotherapy services as defined in the ETA, this exempting provision will not apply to the physiotherapy services supplied by this supplier.

Generally speaking, when a person such as a corporation employs or subcontracts with a practitioner in the course of making supplies, the corporation's supplies are not exempt under section 7 or section 7.1 of Part II of Schedule V. If a practitioner 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, section 7 and section 7.1 of Part II of Schedule V would not apply to the employer's supplies, notwithstanding the qualifications of its employees. The employer is a separate legal entity from the practitioner and 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. In both scenarios, the employer or other person's status as a "practitioner" as defined in the ETA is evaluated separately from the practitioners that it employs or otherwise subcontracts with in the course of making its supplies.

You advised that you have copies of two GST/HST interpretations XXXXX regarding the application of section 7 of Part II of Schedule V. It is your understanding that the interpretations given were that:

•   A chiropractic service rendered to an individual by a licensed chiropractic is an exempt supply notwithstanding that a corporation is either the supplier of the service or an agent of the chiropractor;

•   A psychological service rendered to an individual by a licensed psychologist is an exempt supply even in circumstances where the psychologist is an employee of a corporation; and

•   The key factor in determining the tax status of the service is the nature of the service being rendered by the practitioner to the individual and the manner used to obtain the payment is not relevant.

As you are aware, the correctness of the application of the GST/HST to a supply is based on the law and the facts. Sections 7 and 7.1 of Part II of Schedule V make it clear that several conditions need to be met in order for a supply to fall within those sections:

•   The supplier must be a "practitioner" of the service, as that term is defined in the ETA. If the supplier is not a practitioner, then neither of these sections will apply to the supply regardless of whether the remaining conditions are met;

•   The supply must be a service listed in these sections; and

•   For section 7 that service must be rendered to an individual, or

•   For section 7.1, that service must be rendered to an individual or the supply of the dietetic service must be made to a public sector body or to the operator of a health care facility.

Please note that the Summer 2005 edition of the Excise and GST/HST News included an article entitled "Health care services supplied by corporations that are not medical practitioners or practitioners" to advise corporations who do not meet the definition of "medical practitioner" or "practitioner" that their supplies may not fall within the exemptions in the ETA.

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 CRA 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 613-952-6761.

Yours truly,

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

2007/03/10 — RITS 81842 — [Third Party Authorization]