Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 193309a
Dear [Client]:
Subject: GST/HST INTERPRETATION
Supplies made by a corporation operating […][a rehabilitation clinic]
This letter is further to […][your request for a] GST/HST interpretation [on] […] the application of the Goods and Services Tax/Harmonized Sales Tax (GST/HST) to supplies made by one of your clients (the Corporation) that operates […][a rehabilitation clinic] in Ontario. […].
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
Based on the information contained in your fax on [mm/dd/yyyy], in the supplemental documents you provided on [mm/dd/yyyy], and in the Minor Injury Guideline issued by the Financial Services Commission of Ontario (Footnote 1) , we understand the following:
1. The Corporation operates [a] rehabilitation […][clinic].
2. The Corporation provides a range of services at the […][clinic] including chiropractic adjustments, stretching services, physiotherapy, acupuncture and massage therapy.
3. Your questions relate to services rendered to patients […] that are receiving treatment for injuries sustained in motor vehicle accidents.
4. In Ontario, the compensation paid by Insurance Companies to health practitioners involved in the rehabilitation of insured individuals that have sustained injuries is regulated. The compensation varies according with the type of injury sustained and are categorized between minor injuries and major injuries.
Minor injury program
5. The minor injury program consists of the following:
a. An initial visit with a health professional, which consists of an assessment of the patient’s condition including a physical examination, a review of the functional status and psychosocial risk factors associated with the injury, an identification of the diagnosis and impairments and recommendations of additional intervention if required.
b. A treatment phase which does not typically exceed 12 weeks. The treatment phase is divided in three blocks of 4 weeks. At the end of each block the health professional determines if the individual has reached maximal recovery and if they require additional intervention before undertaking the next block.
c. The rehabilitation program may also include a supplementary goods package provided for an additional fixed fee to complement the treatment a patient receives. The content of the supplementary goods package varies with the needs of the [patient] and may include goods such as: compression socks, cold compress, custom orthotics, joint and muscle relief cream, ice packs, tenser bandages, braces, exercise bands, muscle stimulators and electrodes etc.
d. The fixed established fees (regardless of the combination of services provided or the content of the supplementary goods package) for each element of the minor injury program are as follows:
i. The initial visit: $ 215
ii. Treatment phase - Block 1: $ 775
iii. Treatment phase - Block 2: $ 500
iv. Treatment phase - Block 3: $ 225
v. Supplementary goods: To an aggregate maximum of 400$
6. In the case of the Corporation, a chiropractor conducts the initial visit under the minor injury program and creates a rehabilitation program that addresses the patient’s injuries. The treatment plan is submitted to the patient’s insurance company for approval. The pre-approved program will typically include a combination of various services (e.g., several sessions of chiropractic adjustments, stretching services, physiotherapy, acupuncture, and/or massage therapy) depending on the program developed by the chiropractor. […].
7. You have indicated that a breakdown of the mix of services is displayed on the invoices for minor injury programs for information purposes and to emphasize the importance of attending all services in the prescribed package to ensure a successful rehabilitation process.
Major injuries
8. For patients that have suffered major injuries, the Corporation provides the same rehabilitative services as for minor injury patients. The recommended treatments are sent to the insurance company for approval prior to the provision of the services. The main differences between the minor and major injury programs relate to the fact that within the major injury program each service is established individually according to the situation and needs of the patient. Moreover, the invoicing is made on a fee for service basis and the fees are listed for each itemized service. As is the case for the minor injury program, supplementary goods may be provided for a fixed fee. […].
9. In the major injury program, after the completion of a certain number of treatments it is determined if additional services are required based on an assessment by the health professional in charge.
Interpretation requested
You indicate in your fax on [mm/dd/yyyy], that you are requesting a ruling with respect to the [GST/HST] status of the various supplies made by the Corporation.
A ruling provides Canada Revenue Agency’s (CRA) position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person, and where all the relevant facts and supporting documents have been presented in writing. The CRA reserves the right not to issue a ruling where all the facts such as the names of the parties involved in the transactions are not indicated or where all transactions are not explicitly described. Therefore, we are issuing the following interpretation, which is a general explanation of the applicable provisions and how the legislation would apply.
Interpretation given
Generally, all supplies of property and services made in Canada are taxable unless an exemption from the GST/HST applies. Taxable supplies are supplies made in the course of a commercial activity and may be taxable at the rate of 0% (zero-rated supplies), 5%, 13%, or 15% on the value of the consideration for the supply depending on the province in which the supply is made. Zero-rated supplies are included in Schedule VI. Exempt supplies are not subject to the GST/HST and are listed in Schedule V.
Part II of Schedule V lists supplies of health care services that are specifically identified as exempt supplies. Part II of Schedule VI lists supplies of certain medical and assistive devices that are specifically identified as zero-rated supplies. If a supply of a particular health care service or of a medical or assistive device is not included in Part II of Schedule V or Part II of Schedule VI, then the supply of the service or of the property would be subject to the GST/HST at the applicable rate, depending on the province in which the supply is made, unless another relieving provision in the ETA applies to the supply. Therefore, it must be determined for each supply made by the Corporation if it is exempt, zero-rated or subject to the GST/HST.
Exempt supplies
Section 7 of Part II of Schedule V, in part, exempts a supply of a chiropractic service, a physiotherapy service, or an acupuncture service if the service is rendered to an individual by a practitioner of the service. Of note, supplies of massage therapy or stretching services that are rendered to an individual by a practitioner, as part of its scope of practice, are exempt under section 7 of Part II of Schedule V. However, if the massage therapy or stretching services are not rendered to an individual by a practitioner, or if they are rendered to an individual by a practitioner outside its scope of practice, the supplies are subject to the GST/HST.
Section 1 of Part II of Schedule V defines a “practitioner” in respect of supplies of chiropractic, physiotherapy, or acupuncture services, to mean a person who
(a) practises the profession of chiropractic, physiotherapy or acupuncture,
(b) where the person is required to be licensed or otherwise certified to practise the profession in the province in which the service is supplied, is so licensed or certified, and
(c) where the person is not required to be licensed or otherwise certified to practise the profession in that province, has the qualifications equivalent to those necessary to be so licensed or otherwise certified in another province.
Section 7.4 of Part II of Schedule V exempts a supply (made after March 19, 2019) of a service if all or substantially all (Footnote 2) of the consideration for the supply is reasonably attributable to two or more particular services, each of which meets the following conditions:
(a) the particular service is rendered in the course of making the supply; and
(b) a supply of the particular service would be a supply included in any of sections 5 to 7.3, if the particular service were supplied separately.
It should be noted that, sections 7 and 7.4 of Part II of Schedule V can only apply to exempt a supply so long as the supply is not a “cosmetic service supply” (nor a supply in respect of a cosmetic service supply), and so long as the supply is a “qualifying health care supply”, pursuant to sections 1.1 (Footnote 3) and 1.2 (Footnote 4) of Part II of Schedule V.
Zero- rated supplies
Supplies of property such as orthotics, braces and compression socks may be zero-rated as medical or assistive devices where certain conditions are met under Part II of Schedule VI.
Section 23 of Part II of Schedule VI zero-rates a supply of an orthotic or orthopaedic device that is made to order for an individual or is supplied on the written order of a specified professional for use by a consumer named in the order.
Section 35 of Part II of Schedule VI zero-rates a supply of graduated compression stockings, anti-embolic stockings, or similar articles if the stockings or article is supplied on the written order of a specified professional for use by a consumer named in the order.
Section 1 of Part II of Schedule VI defines a “specified professional” to mean:
(a) a person that is entitled under the laws of a province to practise the profession of medicine, physiotherapy, or occupational therapy, or
(b) a registered nurse.
Supplies of cold compress, tensor bandages, braces, exercise bands, muscle stimulators and electrodes are subject to the GST/HST. Joint and muscle creams are generally subject to the GST/HST.
GST/HST Memorandum 4.2, Medical and Assistive Devices provides additional information regarding the conditions that must be met for certain goods to be zero-rated.
Single and multiple supplies
The GST/HST is a transaction-based tax and for each supply made, the supplier must determine whether the tax is applicable. As such, where an agreement provides for the provision of a number of services and/or property, the supplier must determine whether a single supply, or multiple supplies, are being made under the agreement. For each identified supply, the supplier must then determine if one of the provisions listed in Schedule V or VI applies to the supply or if the supply is subject to the GST/HST.
GST/HST Policy Statement P-077R2, Single and Multiple Supplies, provides guidance in determining whether a transaction consisting of various service and/or property elements is to be regarded as a single supply or as multiple supplies. The interrelationships among the various elements of the transaction, the purpose of an agreement, the needs of the customer, and the economic reality of the agreement are among the factors considered to determine whether an agreement provides for a single supply or multiple supplies.
In applying the principles set out in Policy Statement P-077R2 to the services provided under these agreements, an important question to consider is what has been supplied for the payment made. Policy Statement P-077R2 also explains that the way in which the consideration for a transaction is set out does not in itself determine whether there are one or more supplies. For example, a single consideration does not automatically mean that there is one supply. Equally, separately identified consideration for certain elements do not necessarily mean that there are two or more supplies. Thus, one cannot rely solely on the breakdown of charges on an agreement or invoice to conclude that a supplier is making multiple supplies of different goods and/or services. Rather, where two or more elements are so closely linked that they form objectively and from an economic point of view a whole transaction, all of those elements constitute a single composite supply for purposes of the GST/HST.
Characterization of a supply
Once it has been determined whether the Corporation is making single or multiple supplies, it is next necessary to characterize the supplies. Characterization of each supply requires considering whether there is a predominant element supplied and whether any other elements are minor or ancillary in order to identify the essential character of the supply.
If there is a predominant element supplied, that element must be established in order to determine the nature of the supply. As such, if the predominant element of the single supply is determined to be a particular service, then the GST/HST status of the supply as a whole will be considered to be that particular service.
Minor Injury Program
In applying the principles in Policy Statement P-077R2, it appears as though each of the service portions of the Minor Injury Program (that is the initial visit and each block of the treatment phase) would constitute a separate single supply. The Minor Injury Program provides the services of various health care professionals depending on the needs of the patient. This indicates that the supply of each portion of the program would rightly be characterized as a supply of a rehabilitation program. The tax status of each of these supplies must therefore be determined.
The Auto Insurance Standard Invoice you provided, indicated that, for that particular patient, [#] chiropractors (who are registered members of the College of Chiropractors of Ontario) were involved in rendering the rehabilitation services. As the initial visit and each of the treatment blocks are separate supplies the tax status of each of the supplies would have to be determined. For purposes of this example we are assuming that all services rendered by the chiropractors are chiropractic services. The supply of the initial visit would consist of a chiropractic service rendered to an individual by a practitioner of the service. As all of the subsequent services are rendered by chiropractors the supplies of the treatment blocks would be the same as the supply of the initial visit. These supplies would be exempt under section 7 of Part II of Schedule V.
Where the services of the Minor Injury Program are rendered to the patient by more than one type of health care provider the results could be different. For example, a chiropractor renders the services during the initial visit and a chiropractor, a physiotherapist and a massage therapist render services in each of the 3 blocks of the treatment phase. For this example we are assuming that the chiropractor and the physiotherapist are practitioners under the definition of practitioner under section 1 of Part II of Schedule V and they, respectively, provide chiropractic and physiotherapy services. Therefore, the supply of the service provided during the initial visit would be exempt under section 7 of Part II of Schedule V as a supply of a chiropractic service and the supplies of the services provided under the each block of the treatment phase would be exempt under section 7.4 of Part II of Schedule V as long as the consideration for each block reasonably attributable to the chiropractor and physiotherapist services represent 90% or more of the total consideration of each block. However, if more than 10% of the consideration in any of the treatment blocks can be reasonably attributed to the services rendered by the massage therapist then the conditions for section 7.4 would not be met and the supply of the services in this treatment block would be subject to the GST/HST.
It is important to note that, as each treatment block is a separate supply, the calculation for purposes of section 7.4 would need to be done for each individual treatment block. It is necessary to determine the tax status on a supply-by-supply basis. For more information on the application of section 7.4 please refer to GST/HST Notice No. 311, Proposed Exemption of Multidisciplinary Health Care Services.
The fact that a supplementary goods package may or may not be provided in addition to the health care services and that the goods package is made up of a variety of products depending on the needs of the patient is indicative that the supplemental goods package is a separate supply from the supplies of health care services made in the Minor Injury Program. Furthermore, each component of the supplementary goods package would constitute a separate single supply and the tax status of each of the components would need to be determined. It will be a question of fact when these supplies of goods are subject to the GST/HST or if they are zero-rated. If the Corporation is not a small supplier and is required to be registered for the GST/HST (see explanation below), the tax must be collected and remitted by the Corporation on the consideration attributable to the taxable (but not zero-rated) items included in the supplementary goods package. The same would apply to supplies of supplementary goods for patients receiving services through the Major Injury Program.
Major Injury Program
Each element of the Major Injury Program (the initial assessment and each subsequent treatment) is independent of the other. Each treatment is prescribed as the patient’s condition progresses and the treatments are provided until the patient’s recovery. The invoicing is made on a fee-for-service basis and the fees are listed for each itemized service. Applying the principles included in Policy Statement P-077R2, it appears that the initial visit and subsequent treatments of the major injury program consists of multiple supplies of the various services. Therefore, as the provision of each service within the major injury program is a separate supply, the tax status of each supply will be based on whether the supply meets the conditions for exemption under Part II of Schedule V of the ETA as explained above.
Registration requirements
Section 240 provides, in part, that every person who makes a taxable supply in the course of a commercial activity engaged in by the person in Canada is required to be registered for the GST/HST, except where the person is a small supplier.
A “commercial activity” is defined in subsection 123(1), in part, as a business carried on by the person, except to the extent to which the business involves the making of exempt supplies by the person.
In general, subsection 148(1) provides that a person is a small supplier during any particular calendar quarter and the following month if the total value of the consideration for world-wide taxable supplies including zero-rated supplies (other than supplies of financial services, sales of capital property, and goodwill attributable to the sale of a business) made by the person or an associate of the person at the beginning of the particular calendar quarter, that became due, or was paid without becoming due, in the previous four calendar quarters does not exceed $30,000.
A person ceases to be a small supplier at any time in a calendar quarter if the total value of the consideration that becomes due, or is paid without becoming due, in that quarter for world-wide taxable supplies made by the person, or an associate of the person at the beginning of the calendar quarter, exceeds $30,000. The person ceases to be a small supplier immediately before the consideration becomes due or is paid for the particular taxable supply that puts the person over the $30,000 small supplier threshold.
A person does not include the consideration received from the provision of exempt supplies in determining whether it has exceeded the small supplier threshold.
Disclaimer
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
Contact
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-552-3865. Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Sincerely,
Robert Demers
Industry Sector Specialist
Health Care Sectors Unit
Public Service Bodies and Governments Division
GST/HST Rulings Directorate
FOOTNOTES
1. The Financial Services Regulatory Authority has replaced the Financial Services Commission of Ontario. The Minor Injury Guideline remains the same as under the new authority.
2. The term “all or substantially all” generally means 90% or more.
3. Section 1.1 of Part II of Schedule V provides that for the purposes of this Part, other than section 9, a cosmetic service supply and a supply, in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes are deemed not to be included in this Part.
A “cosmetic service supply” is defined in section 1 of part II of Schedule V to mean, “a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes”.
4. Section 1.2 of Part II of Schedule V provides that for the purposes of this Part, other than sections 9 and 11 to 14, a supply that is not a qualifying health care supply is deemed not to be included in this Part.
A “qualifying health care supply” is defined in section 1 of part II of Schedule V to mean, “a supply of property or a service that is made for the purpose of
(a) maintaining health,
(b) preventing disease,
(c) treating, relieving or remediating an injury, illness, disorder or disability,
(d) assisting (other than financially) an individual in coping with an injury, illness, disorder or disability, or
(e) providing palliative health care.”
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