GST/HST Notice 339, “Input Tax Credits Related to Dental Practices,” October 2024

Administrative arrangement with the Canadian Dental Association

Under the CRA arrangement made in 1991 with the Canadian Dental Association, a dentist registrant could, for each reporting period in a fiscal year, use an estimate up to a maximum of 35% of the total consideration charged for orthodontic treatments to represent the consideration for the supply of orthodontic appliances and claim input tax credits (ITC) accordingly – but then, at the end of the fiscal year, was required to perform a reconciliation based on the actual amounts charged for orthodontic appliances, and adjust the ITC claims for the year accordingly (keeping in mind that charges for cosmetic services also generated ITCs).

Revocation of the arrangement

CRA adverted to (without naming) the decision in Davis Dentistry, and announced that this arrangement is revoked effective for any fiscal year of a dentist (who had been relying on this arrangement) that begins on or after January 1, 2025.

It stated:

After the revocation of the arrangement, a dentist is expected to claim ITCs throughout the year based on their actual eligibility to do so without making estimates. The eligibility to claim an ITC for a particular input remains dependant on the extent that the input was acquired for consumption or use in the course of their commercial activities.

• Davis Dentistry confirmed input tax credit (ITC) claims of a professional practice on the basis that a portion of its supplies to each orthodontic patient was of a zero-rated supply of the orthodontic appliance, and that only the balance of what was supplied was an exempt healthcare service.
• Under CRA’s arrangement made in 1991 with the Canadian Dental Association, a dentist registrant could, for each reporting period in a fiscal year, use an estimate up to a maximum of 35% of the total consideration charged for orthodontic treatments to represent the consideration for the supply of orthodontic appliances, and claim ITCs on that basis – but then, at the end of the fiscal year, was required to perform a reconciliation based on the actual amounts charged for orthodontic appliances, and adjust the ITC claims for the year accordingly (keeping in mind that charges for cosmetic services also generated ITCs).
• CRA has now announced that this arrangement is revoked effective for any fiscal year of a dentist (who had been relying on this arrangement) that begins on or after January 1, 2025. Dentists will now be expected to claim ITCs throughout the year based on their actual eligibility to do so without making estimates, i.e., on the basis of the extent that the input was acquired for consumption or use in the course of their commercial activities.