26 August 1998 GST/HST Ruling HQR0001199 - Application of the GST/HST to Management Corporations and Health Care Services

Thank you for your letter received May 28, 1998 to Enikö Vermes (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. XXXXX is a corporation incorporated under the laws of XXXXX agree with XXXXX to carry on their practices (full or part-time) at the XXXXX premises.

3. In return for the provision of management services by XXXXX physicians agree to pay XXXXX a management fee of XXXXX [o]f their gross receipts attributable to their practices.

Transaction(s)

Physicians associated with XXXXX pay XXXXX a management fee o[f] XXXXX[.]

Ruling Requested

GST will not apply to the 40% payment to XXXXX by the physicians.

Ruling Given

Based on the facts set out above, we rule that GST does apply to the XXXXX payment by the physicians to XXXXX[.]

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

XXXXX 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. It is that management corporations must register for purposes of the GST if their annual revenues exceed $30,000. Their charges to health care professionals for accommodation, administration, etc. are taxable, and the corporation is entitled to claim input tax credits for the tax paid for business expenses used to provide these services.

Your incoming letter refers to our policy on locums. As outlined in the above-mentioned Memorandum at paragraph 30, an established medical practitioner may employ a locum to handle patient overloads or fill in during vacation. It is the Department's view that the policy regarding locums is not at issue with respect to XXXXX[.] For your convenience I enclose a copy of the relevant portions of GST Memorandum 300-2.

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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