1 February 1999 General Information Letter HQR0000464 - GENERAL INFORMATION LETTER [Application of GST/HTS to Regional Health Authorities]

Dear XXXXX

This refers to Mr. XXXXX's letter dated December 11, 1996, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to regional health authorities in XXXXX his will confirm the verbal information given to your office concerning the issues raised in Mr XXXXX[.]

Statement of Facts

1) As a result of restructuring of the health care system in XXXXX XXXXX XXXXX were created with authority to deliver health services in their respective regions.

2) Existing organizations within the new health regions such as hospitals and personal care homes have entered into agreements with the XXXXX which their operations, property, obligations, etc. are transferred to the XXXXX[.] The hospitals and personal care homes would then wind up.

You have requested our comments regarding the following issues raised in your above-noted letter:

1) Each XXXXX will qualify for designation as a hospital authority pursuant to subsection 123(1) of the Excise Tax Act ("Act").

2) The XXXXX will be entitled to a rebate of 50 per cent of the GST/HST in respect of their supplies of ambulance services.

3) The XXXXX may apply for registered charity status under the Income Tax Act.

4) Section 167 can be considered with respect to the transfer of property, etc. from the hospitals, personal care homes, etc. to the XXXXX[.]

Response

1) Yes, each XXXXX will, on application, be designated a hospital authority pursuant to subsection 123(1) of the Act. The entire organization, i.e., each XXXXX will be designated a hospital authority for GST/HST purposes and will be required to apportion non-creditable tax between their exempt hospital activities vs their exempt non hospital activities such as the supply of personal care services. Each XXXXX would be eligible for the 83 per cent rebate of the GST incurred on inputs to make supplies of exempt hospital activities and if a qualifying non-profit organization or charity would be eligible for the 50 per cent rebate on the exempt non-hospital activities.

In order to obtain designation as a hospital authority, a XXXXX must operate a public hospital that meets the four criteria listed on page 2 of your letter and Chapter 25.2 of the GST memoranda series. Many of the XXXXX have already been designated. We currently have three applications which we are currently processing.

2) Some ambulance boards that were established by one or more municipalities and that were owned or controlled by these municipalities were determined to be municipalities pursuant to subsection 123(1) of the Act as para-municipal organizations as outlined on page 4 of TIB B-046 and as such were eligible to claim the 57.14 per cent rebate with respect to their purchases needed to provide ambulance services.

You mention in your letter that it is your understanding that the XXXXX will be providing ambulance services. The XXXXX do not qualify to be determined as municipalities pursuant to subsection 123(1) of the Act as they do not meet the criteria for determination outlined in TIB B-046. In addition, they will not be designated as municipalities under subsection 259(1) of the Act as the provision of ambulance services is not considered to be a municipal service for GST/HST purposes. However, if the XXXXX are qualifying NPOs or registered charities for purposes of the Act they would be eligible for a rebate of 50 per cent with respect to their ambulance service.

3) Yes, the XXXXX may apply to the appropriate division of Revenue Canada to obtain registered charity status under the Income Tax Act.

4) Section 167 may apply with respect to the transfer of the property from the hospitals and nursing homes to the XXXXX provided that the requirements of subsection 167(1) are met. Where the supplier (i.e., hospital) and the recipient XXXXX) qualify to file a joint election (GST form 44) under subsections 167(1) and (1.1) of the Act, no tax will be payable (with some exceptions, i.e., supply by way of lease, licence or similar arrangement) on the supply. Because of this decision there is no need to comment on sections 126 and 155 referred to in your letter.

The use of the above election, however, may not be necessary notwithstanding that the conditions in subsection 167(1) of the Act are met, if both the supplier and the recipient are non-registrants engaged exclusively in non-commercial activities, which may be the case in these circumstances as both parties are engaged in health care services which are exempt under Part II of Schedule V to the Act. In these circumstances, subsection 141.1(1)(b) applies. In general, the sale of equipment and inventory are taxable. However, the sale of personal property which means property that is not real property is not taxable under paragraph 141.1(1)(b) of the Act if the property was acquired by the supplier exclusively for consumption or use in non-commercial activities and was not consumed or used in commercial activities. With respect to real property, section 25 would apply.

Should you have any further questions or require clarification of items one to three above or any other GST/HST matter, please do not hesitate to contact me at (613) 954-4395. If you have any questions concerning item four please contact Jacques Allard at (613) 954-4394.

Yours truly,

Neil Minken
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate