6 July 2001 GST/HST Ruling 34915 - Entitlement to Claim a Public Service Body Rebate

Dear Sir:

Your facsimile of February 20, 2001, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) sent to the Canada Customs and Revenue Agency (CCRA) XXXXX office was forwarded to us for reply. You are seeking confirmation that the XXXXX is entitled to claim a public service body rebate at the prescribed percentage of 83% for the GST it incurs on its purchases consumed, used, or supplied in respect of its operation of the XXXXX.

Statement of Facts

Our understanding of the facts is based on documentation retrieved from our files, additional documentation submitted by you, and the information you provided in a telephone conversation with XXXXX on February 27, 2001. It is as follows:

XXXXX

Ruling Requested

You request confirmation as to the rate that the XXXXX is qualified to use when claiming public service body rebates for the GST the XXXXX incurred in respect of purchases used in the course of operating XXXXX.

Ruling Given

Based on the facts set out above, we rule that the XXXXX, which is a "public institution" as defined in the ETA, is entitled to claim a public service body rebate at the prescribed percentage of 50% for the non-creditable tax incurred on its purchases consumed, used, or supplied in the course of operating XXXXX.

Please note that XXXXX are not public hospitals for purposes of the ETA. Rather, these facilities are long-term care facilities that provide residential care and these facilities do not satisfy the criteria, as explained below, to be considered public hospitals under the ETA. Accordingly, the XXXXX is entitled to claim a 50% rebate and not an 83% rebate for the GST it incurred on purchases consumed, used, or supplied in the course of operating 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 ETA or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

To be designated as a "hospital" for purposes of the XXXXX, a facility does not have to be capable of providing medical or surgical treatment to individuals. However, in order for a facility to be considered a "public hospital" for GST/HST purposes, the facility must meet the following four criteria:

(a) The facility must be recognized as a public hospital by the government of the province in which it is located.

(b) The facility must be established and operated otherwise than for profit.

(c) The facility must be operated for the medical and surgical treatment of the sick and injured.

(d) The facility must provide and maintain in-patient beds and services.

Please note that criterion (c) of the administrative guidelines means the facility is operated for the purpose of providing medical or surgical services by medical practitioners that are either employed by the facility or who are actively practicing medicine at the facility. For purposes of the ETA, an "active" medical practitioner is one who has admitting privileges at the facility and who works regularly at the facility. Further, medical and surgical treatment refers to treatment provided by a medical practitioner other than care given by other health care providers, such as nurses, physiotherapists, etc. The criteria listed above were used by the Department of National Health and Welfare for purposes of certifying bona fide public hospitals. These criteria are included in section 25.2 of Chapter 25 of the GST/HST Memoranda Series.

For purposes of the ETA, a public hospital is a facility that is operated for the purpose of providing medical or surgical treatment as opposed to providing residential care. A public hospital has medical, surgical, nursing and allied health professionals available at all times and commonly provides diagnostic services utilizing high technology. A public hospital provides all of the services enumerated in the definition of "institutional health care service" in section 1 of Part II of Schedule V to the ETA, such as laboratory, radiological or other diagnostic services, the administration of drugs, the use of operating rooms, case rooms and anaesthetic facilities, medical or surgical equipment and supplies, accommodation, etc.

As noted in our letter of XXXXX, the GST incurred on purchases used in the course of operating long-term care facilities is not eligible for the 83% hospital authority rebate. The provision of long-term care, such as residential care, consists of a range of services that address the health, social and personal needs of individuals who, for one reason or another, have never developed or have lost some capacity for self-care. We understand that each province uses its own terminology to describe a long-term care facility. Such facilities may be referred to as continuing care centers, nursing homes, auxiliary hospitals, lodges, extended care facilities, residential care facilities, homes for the aged, etc. Long-term care facilities are not public hospitals for purposes of the ETA because these facilities are not operated for the purposes of providing medical or surgical treatment.

XXXXX are residential care facilities that are not operated for the purpose of providing medical or surgical treatment as required by criterion (c) above. XXXXX do not employ medical staff or have surgical facilities, nor do medical practitioners actively practice at these facilities. Accordingly, XXXXX are not public hospitals for purposes of the ETA.

Please note that the 83% GST/HST rebate in respect of the operation of a facility applies only where the facility meets the four public hospital criteria noted above. Although XXXXX was previously certified by the Department of National Health and Welfare for purposes of the former Federal Sales Tax, XXXXX currently does not satisfy all four public hospital criteria. When a facility no longer satisfies all four of the requisite criteria, the facility is no longer considered to be a public hospital for purposes of the ETA.

Furthermore, please note that it is the policy of the CCRA that hospitals, health authorities, boards, etc., that have been created as a result of a merger or amalgamation must confirm their status with the CCRA with respect to their entitlement to public service body rebates. When the operation of a facility is transferred to a new organization, the new operator of the facility must apply for designation as a hospital authority for purposes of the ETA. We note that the XXXXX (the organization that operated XXXXX prior to its amalgamation with XXXXX) did not apply to the Minister of National Revenue for designation as a hospital authority in respect of its operation of XXXXX.

When an organization is designated as a hospital authority, only the GST/HST the organization incurred in respect of its purchases used in the operation of a public hospital qualifies for the 83% GST/HST rebate. The hospital authority designation does not permit an organization to claim an 83% GST/HST rebate for the tax it incurred in respect of all of its activities. Consequently, the GST/HST incurred by a designated hospital authority in respect of long-term care activities does not qualify for an 83% rebate. When an organization that has been designated as a hospital authority for ETA purposes is also engaged in the provision of residential care services, the organization must calculate the GST/HST rebate in accordance with the apportionment rules provided in subsection 259(4.1) of the ETA.

Pursuant to the apportionment rules in subsection 259(4.1) of the ETA, because the XXXXX is a public institution, the XXXXX may claim a GST/HST rebate at the prescribed percentage of 50% on all its non-creditable tax charged; i.e., the GST the XXXXX incurred on purchases for which it cannot claim an input tax credit. Since it is a designated hospital authority, the XXXXX may claim an 83% GST rebate for the non-creditable tax charged in respect of its purchases used in the operation of the four public hospitals noted in the designation letter dated XXXXX.

In summary, hospital activity, for purposes of the 83% GST/HST rebate, means the operation of a facility that is a public hospital and excludes the provision of long-term care activities, such as residential care services. If a designated hospital authority operates a separate facility for the purpose of providing residential care, or if the designated hospital authority provides residential care within a segregated ward or section of a public hospital, the GST/HST paid in respect of the operation of the separate residential care facility or the residential care activity carried on in the segregated ward or section of a public hospital must be "carved out" of the 83% rebate pursuant to the apportionment rules provided in subsection 259(4.1) of the ETA. The GST/HST paid in respect of the residential care activity is eligible for a rebate at the rate of 50%.

Accordingly, the XXXXX is entitled to the 83% rebate for the GST/HST it paid, but only in respect of those purchases that the XXXXX consumed, used, or supplied in the course of its hospital activities within the four public hospital facilities noted in Fact #3 of this letter. The remaining non-creditable GST the XXXXX paid in respect of the operation of XXXXX, as well as other long-term care activities, is eligible for a rebate at the prescribed percentage of 50%.

Should you have any further questions or require clarification on the above, please do not hesitate to contact me at (613) 952-6761.

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division