31 August 2011 Ministerial Correspondence 2011-0414301M4 - medical expense - cosmetic procedures

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 the cost of purely cosmetic procedures qualifies as a medical expense for purposes of the medical expense tax credit

Position: No.

Reasons: See 118.2(2.1).

August 31, 2011

XXXXXXXXXX

Dear XXXXXXXXXX :

The office of the Right Honourable Stephen Harper, Prime Minister of Canada, forwarded to me a copy of your correspondence, which I received on July 15, 2011, regarding the cost of cosmetic procedures no longer qualifying as a medical expense for purposes of a private health services plan (PHSP).

Benefits received or enjoyed by an employee because of an office or employment are generally taxable as income from that office or employment under the Income Tax Act. However, the Act specifically excludes benefits derived from the contributions of a taxpayer's employer to or under a PHSP.

A PHSP is a contract of insurance for hospital expenses, medical expenses, or any combination of such expenses. A PHSP can also be a medical care insurance plan, a hospital care insurance plan, or any combination of such plans. In Interpretation Bulletin IT-339R2, Meaning of private health services plan, the Canada Revenue Agency (CRA) has set out the requirements that a plan must meet to be considered a PHSP. Paragraph 4 of that bulletin states that coverage under a PHSP must be for medical expenses that normally would have qualified for the medical expense tax credit (METC). If a particular plan does not qualify as a PHSP, the amount of any benefit received out of the plan will be taxable to the employee.

The 2010 federal budget excludes from medical expenses any amounts paid for purely cosmetic procedures. Such expenses are ineligible for the METC and will not qualify as medical expenses for coverage under a PHSP. These procedures generally include surgical and non-surgical procedures purely aimed at enhancing an individual's appearance, such as liposuction, hair replacement procedures, botulinum toxin injections, and teeth whitening. This measure applies to expenses incurred after March 4, 2010. The CRA has posted on its Web site some examples of procedures that will generally be ineligible as medical expenses for the METC or coverage under a PHSP. This information can be found on the CRA Web site at
www.cra.gc.ca/gncy/bdgt/2010/mdcl-eng.html.

You ask why the cost of purely cosmetic procedures is no longer an eligible medical expense for the METC. In the 2010 federal budget, the Department of Finance Canada indicated that the change makes the tax treatment of purely cosmetic procedures consistent with that in other jurisdictions, such as the United States, the United Kingdom, and Quebec. Your concerns regarding this change to the Income Tax Act relate to tax policy, which is the responsibility of Finance Canada. I am therefore forwarding a copy of our correspondence to the Honourable James M. Flaherty, Minister of Finance, for his consideration.

I trust that the information I have provided is helpful.

Yours sincerely,

Gail Shea, P.C., M.P.

c.c.: The Honourable James M. Flaherty, P.C., M.P.
Minister of Finance
House of Commons
Ottawa ON K1A 0A6

Gwen Moore
957-2141
July 22, 2011
2011-041430