23 December 1999 GST/HST Interpretation 8396/HQR2002 - Medical Clinic

Dear Sir:

Thank you for your facsimile of September 17, 1999, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the services provided by your client.

As of November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (the "CCRA").

In your message, you provided the following information.

•   a medical clinic is an incorporated company;

•   medical practitioners acting as associates of the medical clinic have agreed to render healthcare services to the patients of the medical clinic;

•   in return for the provision of management services by the medical clinic, medical practitioners have agreed to pay the medical clinic a management fee for administration services;

•   the medical clinic has set the fee at XXXXX of billing to the provincial health insurance plan; and

•   in addition, the medical clinic will invoice the medical practitioners a XXXXX fee for the use of the clinic's medical assistance services.

Interpretation Requested

The GST/HST is applicable to the XXXXX fee charged by the medical clinic to the medical practitioners for the use of the medical clinic's medical assistance services. The GST/HST is not applicable to the XXXXX management fee charged by the medical clinic to the medical practitioners for administrative services.

Interpretation

The GST/HST applies to the XXXXX fee charged by the medical clinic to the medical practitioners for the use of the medical clinic's medical assistance services. The GST/HST also applies to the XXXXX management fee charged by the medical clinic to the medical practitioners for the supply of administrative services.

The medical clinic is not providing an exempt supply of an institutional health care service under section 2 of Part II of Schedule V to the Excise Tax Act (the "ETA"). The services are not provided by the operator of a health care facility to a patient. The services provided by the medical clinic are not exempt under sections 5 and 9 of Part II of Schedule V. In order for health care services to be exempt under section 5, the service must be rendered to an individual by a medical practitioner. The medical clinic is not a medical practitioner. Section 9 provides for an exempt supply of any property or service that is payable or reimbursed by the government of a province under a plan established under an Act of the legislature of the province to provide for health care services. The medical clinic does not receive payments from the provincial government for health care services.

The medical clinic is a management corporation. The CCRA'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. Its charge, 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 theses services.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the ETA, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the CCRA with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-3158.

Yours truly,

Michel Guay
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division