21 November 2008 External T.I. 2008-0284881E5 - Over-the-counter drugs

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether non-prescription drugs qualify for the medical expense tax credit.

Position: Insulin, oxygen, and liver extract injectible or vitamin B12 for pernicious anaemia qualify under paragraph 118.2(2)(k), notwithstanding that they can lawfully be acquired without a prescription. Pursuant to 118.2(2)(n) and proposed section 5701 of the Income Tax Regulations, a drug that may only be acquired through the intervention of a medical practitioner (a pharmacist, for example) may qualify for the METC even though it does not lawfully require a prescription to be acquired. Otherwise, drugs obtainable without a prescription do not generally qualify for the METC.

Reasons: Only those medical expenses described by paragraph 118.2(2)(a) of the Act are eligible for the METC.

XXXXXXXXXX 								2008-028488
J. Gibbons, CGA
November 21, 2008

Dear XXXXXXXXXX :

Re: Non-Prescription Medication

This is in reply to your email dated July 4, 2008, concerning non-prescription drugs and the rules for the medical expense tax credit ("METC") under section 118.2 of the Income Tax Act (the "Act").

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings. Further, it is a question of fact whether particular expenses qualify for the METC, and this would require an actual review of the particular claim, including a verification of the receipts and other supporting documentation. Nonetheless, we have provided some general comments below.

Generally, drugs, medicaments, preparations or other substances (hereinafter referred to as "drugs") that may be lawfully acquired without a prescription do not qualify for the METC, subject to exceptions. Notably, under paragraph 118.2(2)(k) of the Act, insulin, oxygen, and liver extract injectible or vitamin B12 for pernicious anaemia, as prescribed by a medical practitioner for use by an individual, qualify for the METC. As well, other drugs that may be lawfully acquired without prescription may qualify under new subparagraph 118.2(2)(n)(ii) of the Act, if they are prescribed by the Income Tax Regulations (the "Regulations"). In this regard, proposed new section 5701 of the Regulations prescribes drugs that:

(a) are manufactured, sold or represented for use in the diagnosis, treatment or prevention of a disease, disorder or abnormal physical state, or its symptoms, or in restoring, correcting or modifying an organic function;

(b) are prescribed for a patient by a medical practitioner; and (c) may, in the province in which it is acquired, be lawfully acquired for use by the patient only with the intervention of a medical practitioner.

Based on the foregoing, a drug that may only be acquired through the intervention of a medical practitioner (a pharmacist, for example) may qualify under section 5701 of the Regulations even if it does not lawfully require a prescription. However, pursuant to this provision, the patient must still obtain a prescription for the particular use of the drug.

Other than the exceptions noted above, drugs that may be lawfully acquired without a prescription do not generally qualify for the METC, even if prescribed by a medical practitioner. Amendments to paragraph 118.2(2)(n) of the Act were introduced in the 2008 Federal Budget to clarify this position. In this regard, subparagraph 118.2(2)(n)(i) now describes qualifying drugs as drugs:

(A) that are manufactured, sold or represented for use in the diagnosis, treatment or prevention of a disease, disorder or abnormal physical state, or its symptoms, or in restoring, correcting or modifying an organic function,
(B) that can lawfully be acquired for use by the patient only if prescribed by a medical practitioner or dentist, and
(C) the purchase of which is recorded by a pharmacist.

I trust these comments will be of assistance.

Yours truly,

G. Moore
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch