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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XXXXX
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XXXXX
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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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XXXXX
XXXXX
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Case Number: 86499
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January 23, 2007
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Subject:
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GST/HST RULING
Supplies of Independent Medical Examinations
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Dear XXXXX:
This letter is in response to our telephone conversation and your XXXXX message XXXXX regarding the application of the Goods and Services Tax ("GST")/Harmonized Sales Tax ("HST") to supplies of independent medical examination ("IME") reports that are supplied by XXXXX to insurance companies.
All legislative references are to the Excise Tax Act (the "ETA") and the regulations therein, unless otherwise specified.
Statement of Facts
We understand that XXXXX sells a service to insurance companies, large corporations and government agencies, which includes IME reports prepared by physicians. We understand that:
1. To supply the IME reports, XXXXX contracts with physicians for the examinations and the preparation of the reports. The physicians supply the reports to XXXXX.
2. XXXXX.
3. XXXXX does not operate a facility for the medical examinations and preparation of the IME reports. Rather, it is a facility that solely contracts out to physicians who conduct the examinations and prepare the IME reports at other locations. The physicians forward the IME reports to XXXXX clients.
4. XXXXX invoices its clients for the supply of the completed IME report. The total consideration charged by XXXXX for this supply is comprised of an administrative service fee and an amount to cover XXXXX costs of providing the IME report (i.e., the amount billed to XXXXX by the physician).
5. XXXXX does not hold a licence to practise the profession of medicine in its name.
Ruling Requested
You would like confirmation that XXXXX is required to collect the GST/HST on the total consideration it charges for the supply of IME reports.
Ruling Given
Based on the facts set out above, we rule that XXXXX is required to collect the GST/HST on the total consideration it charges for the supply of IME reports. The tax is calculated on the value of the consideration for this supply, which is the total amount charged by XXXXX to its clients; i.e., the total amount is comprised of an administrative service fee as well as an amount to recover its costs, such as amounts paid to physicians, incurred to make this supply.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
The general rule under the ETA is that supplies of property and services are subject to the GST/HST at the rate of 6% or 14% (prior to July 1, 2006, the rates were 7% and 15% respectively). Part II of Schedule V contains exemptions for certain health care services when these services are provided by a supplier identified in that Part.
Section 2 of Part II of Schedule V 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" for purposes of this Part. Sections 5 and 7 of that Part exempt from GST/HST certain supplies made by a "medical practitioner" or a "practitioner". These suppliers are also defined in the ETA.
The exempting provisions do not apply to services supplied by other persons, as these persons do not meet the legislative criteria of being a supplier as defined for purposes of these provisions. On the basis of our understanding of XXXXX activities, it is our view that neither section 2, 5 or 7 of Part II of Schedule V would apply to the supplies of IME reports made by XXXXX to insurance companies.
That is, we understand that XXXXX does not operate a health care facility for the purpose of providing hospital or medical care. Rather, it subcontracts with physicians who conduct the examinations and prepare the IME reports elsewhere, e.g., in their own offices. We also note that you indicated that XXXXX would fall within example 4 in GST/HST Policy Statement P-248, The application of the GST/HST to the supply of an independent medical examination ("IME") and to other independent assessments. This example is describing a situation where the operator of a facility directs a patient to attend a physician's office for an examination; i.e., the services rendered by the physician are not provided in the operator's facility. As such, XXXXX supplies do not constitute exempt institutional health care services rendered to patients of a health care facility.
Section 5 exempts a supply made by a medical practitioner (a physician or dentist) of a consultative, diagnostic, treatment or other health care service rendered to an individual. Generally speaking, where a person such as XXXXX subcontracts with a medical practitioner in the course of making supplies, the person's supplies are not exempt under section 5 of Part II of Schedule V because the person is not a medical practitioner for ETA purposes. The fact that the subcontractor may be a medical practitioner does not confer any benefit to the person such that the person would also qualify as a medical practitioner. Each person is a separate legal entity and its status as a supplier is evaluated separately from the other persons that it subcontracts with in the course of making its supplies.
This ruling follows the GST/HST legislation and the Tax Court of Canada and the Federal Court of Appeal decisions in Riverfront Medical Evaluations Ltd. v. The Queen. A legislative amendment would be required to treat the supplies of IMEs made by XXXXX as exempt. Legislative amendments are a matter of tax policy, which falls within the responsibility of the Department of Finance. We have advised officials of that Department of your concerns regarding this ruling.
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 Healthcare Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
[i] * Provided that all of the requirements for a rebate have been met and your Client keeps sufficient documentation on file.
[ii] * Provided that all of the requirements for a rebate have been met and your Client keeps sufficient documentation on file.
[iii] 1. Paragraph 181(2)(a) (specified in the memorandum) is the predecessor of current section 181.1.
[iv] 2. We note that the Guide is currently obsolete; however, the technical information pertaining to manufacturer's rebates remains valid.
[v] 3. As determined in paragraph 181.1(e)
[vi] 4. Note also that if the customer is a registrant, the customer may be required to adjust its net tax in accordance with paragraph 181.1(f).
[vii] 1. Note that there are restrictions to claiming rebates. For instance, a person who makes taxable supplies, if a registrant, would be entitled to claim input tax credits to recover the GST/HST paid on expenses incurred to make these supplies. A person cannot claim a rebate if the amount is included in determining an input tax credit. In addition, a rebate cannot be claimed under section 259 if the person is entitled to a rebate, refund or remission in any other section of the ETA or other Act of Parliament, or where the person received or is entitled to receive a refund or credit of the GST/HST from the supplier.
[viii] 1. Practitioners of midwifery services whose revenue from taxable supplies did not exceed $30,000 in the last four consecutive calendar quarters or in any single calendar quarter were "small suppliers" for purposes of the GST/HST and as such, registration for the GST/HST was optional for them.
[ix] 1. We note that this is the same treatment that would be accorded by subsection 181(4) were we to take the view that the Card qualifies as a coupon.
[x] 2. The "tax fraction" of a coupon value or of the discount or exchange value of a coupon is essentially defined in subsection 181(1) as 14/114 for supplies made in a participating province and 6/106 for supplies made in a non-participating province.
[xi] 1. Generally, each Owner who occupies a site in the Park would own a 1/XXXXX interest in the Park, however, there is nothing that prevents a person from purchasing more than one interest in the Park. For example, a person could own a 2/XXXXX interest and thus be entitled to occupy two sites in the Park.
[xiii] 2. The definition of "grantor" from the Regulations is reproduced in Appendix A
[xiv] 3. The definition of "government funding" from the Regulations is reproduced in Appendix A
[xv] 1. "Personal trust" is defined in section 123(1) to include a testamentary trust. The definition of that term, according to section 123(1), is as defined in section 248(1) of the Income Tax Act ("ITA"), which refers to the definition in section 108(1) of the ITA. The latter section defines a testamentary trust to mean a trust or estate that arose on and as a consequence of the death of an individual. Accordingly, a "personal trust" referred to in section 9(2) includes the estate that arose as a consequence of the death of XXXXX.
[xvi] 2. For purposes of section 9, a "settlor", in relation to a testamentary trust that arose as a consequence of the death of an individual, means that individual.
[xvii] 3. The fact that the Estate subdivided the Property twice more subsequent to XXXXX death is not in this case a contributing factor since the exclusionary provisions of paragraph 9(2)(c) had already been met when XXXXX undertook the subdivision and conveyances described in fact 2.
[xviii] 1. A third party is any person or organization other than the Corporation (the supplier) or the claimant (the patient), such as an insurance company, lawyer, tribunal or government.
[xix] 1. These services are restricted to situations where immediate attention is required for a Resident's safety or to prevent damage to a condominium unit, and are of a minor nature.
[xx] 2. Given that XXXXX the Declaration requires the Corporation to maintain a Condominium Services Agreement at all times, it is unclear whether the provisions of the Owner's Services Agreement would ever be in effect.
[xxi] 3. A "health care facility" is defined in section 1 of Part II of Schedule V to the ETA to mean:
"(a) a facility, or a part thereof, operated for the purpose of providing medical or hospital care, including acute, rehabilitative or chronic care,
(b) a hospital or institution primarily for individuals with a mental health disability, or
(c) a facility, or a part thereof, operated for the purpose of providing residents of the facility who have limited physical or mental capacity for self-supervision and self-care with
(i) nursing and personal care under the direction or supervision of qualified medical and nursing care staff or other personal and supervisory care (other than domestic services of an ordinary household nature) according to the individual requirements of the residents,
(ii) assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the residents, and
(iii) meals and accommodation".
[xxii] 4. There was insufficient information presented to determine whether any such exempting provisions apply.
[xxiii] 1. The basic tax content of an asset is based on the total of the tax paid less the total of such tax that was received by way of rebate or remission. This difference is multiplied by a factor that represents the change in the value of the asset since the tax was last paid.
[xxiv] 1. On December 20, 2002, the Department of Finance announced a proposal to amend the definition of "practitioner" in section 1 of Part II of Schedule V by replacing the term "speech therapy" with "speech-language pathology". A corresponding amendment was proposed to paragraph 7(h) of that Part to replace the term "speech therapy services" with "speech-language pathology services" to continue indefinitely the exemption for these services. The change in terminology does not alter the scope of coverage of this provision. The proposed amendments apply to supplies made after 2001. These proposed amendments have not yet received Royal Assent.
[xxv] 2. Depending on the status of the supplier, it is possible that another exemption in Schedule V to the ETA may apply to the supply of the service.
[xxvii] 1. "Carotid" is described as pertaining to the principal artery of the neck; "endarterectomy" is described as excision of the thickened, atheromatous tunica intima of an artery. This procedure is done for the prevention of stroke. Reference: Dorland's Illustrated Medical Dictionary, 30th Edition.
[xxviii] 2. Heparinize" is described as a treatment of heparin (a solution containing calcium salt or sodium salt; a mixture of active principles some of which have anticoagulant properties) to increase the clotting time of the blood. Reference: Dorland's Illustrated Medical Dictionary, 30th Edition
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