31 August 1998 GST/HST Ruling HQR0001198 - Medical Clinic

                                                                        GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, ON K1A 0L5

Dear Sir:

Thank you for your letter of May 5, 1998 to XXXXX (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction(s) described below.

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

1. Your client (Medical Clinic) is a corporation incorporated under the laws of XXXXX[.]

2. Physicians associated with the Medical Clinic agree with the Medical Clinic to provide medical services to the patients of the Medical Clinic.

3. In return for the provision of management services by the Medical Clinic, physicians agree to pay the Medical Clinic a management fee of XXXXX of the rate paid by the Ministry of Health for the patient service.

We note that your draft agreement refers to the Medical Clinic's billing number that it uses to bill the Ministry of Health. Our information is, that in this situation, only the physicians would have a billing number, not the Medical Clinic. According to our information, the only situation where the Medical Clinic may bill on behalf of the physicians is where it is billing using the physician's billing numbers. However, this fact would not alter our ruling.

Transaction(s)

Physicians associated with the Medical Clinic pay the Medical Clinic a management fee of XXXXX[.]

Ruling Requested

GST/HST will not apply to the XXXXX payment to the Medical Clinic by the physicians or to the XXXXX retained by the Medical Clinic if it was able to bill using its billing number.

Ruling Given

Based on the facts set out above, we rule that GST/HST does apply to XXXXX payment by the physicians to the Medical Clinic (or to amount retained by the Medical Clinic).

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

The Medical Clinic is a management corporation. The Department's administrative position regarding management corporations and health care services is set out in GST Memorandum 300-2 at paragraph 27. Management corporations must register for purposes of the GST if their annual taxable revenues exceed $30,000. Their charges to health care professionals for accommodation, administration, etc. are taxable, and the corporation is entitled to input tax credits for the GST/HST paid for business expenses used to provide these services.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact Enikö Vermes, Manager at (613) 954-5127 or me at (613) 952-0370.

Yours truly,

Joyce M. Crago, LL.B.
Public Service Bodies & Governments Division
GST/HST Rulings and Interpretations Directorate

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