GST/HST Ruling

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

XXXXX
XXXXX
XXXXX
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

Case Number: 103873

Business Number: XXXXX
Attention: XXXXX XXXXX
April 27, 2010

Dear XXXXX:

Subject:

GST/HST RULING
XXXXX

Thank you for your XXXXX dated XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the operations of the XXXXX ("Clinic") located in XXXXX. We apologize for the delay in this response.

XXXXX.

XXXXX.

The Government of Canada and the Government of British Columbia have signed a Comprehensive Integrated Tax Coordination Agreement for the implementation of HST in British Columbia. The HST is proposed to come into effect in British Columbia on July 1, 2010, at a rate of 12%, consisting of a 5% federal part (equivalent to the existing GST) and a 7% provincial part.

Legislation required to implement the HST in British Columbia has received Royal Assent by the Parliament of Canada. Required provincial legislation has been introduced but is still under consideration by the Legislative Assembly of British Columbia. However, many of the rules which would apply to transactions will be contained in regulations made under the Excise Tax Act (ETA). Although the Government of British Columbia has announced details of the rules which may eventually apply, the required regulations have not yet been made by the Government of Canada.

All legislative references are to the ETA unless otherwise specified.

Statement of Facts

We understand that:

1. Pursuant to Part 4 of the Health Professions Act [RSBC 1996] Chapter 183, the British Columbia College of Chiropractors (College) issued a Certificate Respecting Corporate Name to XXXXX. XXXXX is the President of XXXXX. XXXXX owns and operates the Clinic.

2. XXXXX is registered for GST/HST purposes.

3. The chiropractors, naturopaths, massage therapists, and other health care providers working at the Clinic are self-employed.

4. XXXXX bills for the services rendered by chiropractors, naturopaths, massage therapists, and other health care providers to patients of the Clinic. XXXXX uses a statement system for billing purposes, rather than invoices. For billing purposes, the XXXXX identifies the name of the health care provider (e.g., chiropractor) and their Registration Number. (In the Province of British Columbia, practitioners of chiropractic, for example, must register with College.) The XXXXX also identifies the date and description of the service rendered, a fee code, the opening balance, total fees, total payments and balance owing by the patient.

5. XXXXX charges patients of the Clinic the GST on all services provided at the Clinic, other than chiropractic services.

6. XXXXX pays for all administrative, operating, and overhead costs of the Clinic. The chiropractors, naturopaths, massage therapists, and other health care providers have agreed that XXXXX can withhold a certain percentage of their total monthly billings. The chiropractors, naturopaths, massage therapists, and other health care providers are not required to pay a minimum amount, nor is there any annual or periodic reconciliation of costs.

7. XXXXX pays each naturopath, massage therapist, and other health care provider, a specified amount of XXXXX% of their total monthly billings generated, as recorded in a XXXXX (Report), for the services they render to patients of the Clinic. The Report refers to "Fee Sharing".

8. XXXXX pays each chiropractor a specified amount of his or her total monthly billings generated as recorded in a Report, for chiropractic services rendered to patients of the Clinic. The specified amount paid by XXXXX to each chiropractor is as follows:

XXXXX% of the first $XXXXX of billings;
XXXXX% of the billings from $XXXXX up to $XXXXX;

XXXXX% of the billings over $XXXXX.

9. In the sample Report submitted for review, XXXXX.

10. XXXXX and the chiropractors, naturopaths, massage therapists, and other health care providers have not entered into a cost-sharing agreement nor is there an agency agreement in place between them. A written agreement does not exist with respect to the amounts paid or withheld by XXXXX from them, as described in facts seven (7) and eight (8) above.

11. XXXXX and the chiropractors, naturopaths, massage therapists, and other health care providers do not have a joint bank account.

12. The Clinic has the option to substitute a chiropractor working at the Clinic if the chiropractor is not available. When unavailable, a chiropractor can arrange to have another chiropractor take his or her place to provide chiropractic services to patients of the Clinic.

13. The chiropractors working at the Clinic are subcontractors and are free to choose their own hours of work. They provide their own libraries at the Clinic. The Clinic provides other equipment as it is too big to transport regularly.

14. The chiropractors may have their own patients separate from those of the Clinic.

15. Patients book appointments with chiropractors by calling the Clinic. Records of chiropractic patients are held by the Clinic.

16. XXXXX.

17. XXXXX.

18. XXXXX.

Ruling Requested

You would like to know whether the percentage of the total monthly billings withheld by XXXXX from each chiropractor working at the Clinic, as described in fact eight (8) above is consideration for a taxable supply that is subject to the GST.

Ruling Given

Based on the facts set out above, we rule that the percentage of the total monthly billings withheld by XXXXX from each chiropractor working at the Clinic, as described in fact eight (8) above is consideration for a taxable supply that is subject to the GST.

As XXXXX is a GST/HST registrant, pursuant to subsection 221(1) it is required to collect the GST on the value of the consideration for this supply (i.e., the percentage of the total monthly billings withheld by it from each chiropractor). As the recipient of the supply, each chiropractor is required to pay the GST on the value of the consideration for the supply pursuant to subsection 165(1).

XXXXX.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

GST/HST Policy Statement P-238 entitled Application of the GST/HST to Payments Made Between Parties Within a Medical Practice Organization (P-238) clarifies the application of the GST/HST to payments made between parties within a medical practice organization with respect to the organization's expenses. This policy applies to a "medical practitioner" and "practitioner", as defined in section 1 of Part II of Schedule V (hereinafter referred to as "practitioners") and explains how the GST/HST applies to such payments using five different examples of the types of medical practice organizations. The electronic version of P-238 can be found on the CRA's Web site at http://www.cra-arc.gc.ca/E/pub/gl/p-238/README.html.

As described in P-238, an amount withheld from or invoiced to a practitioner by the principal practitioner for administrative services and/or facilities, whether the arrangement is that of: (1) a medical practice organization of a sole proprietor practitioner using the services of a locum, (2) a medical practice organization with contracted associate practitioners, or (5) a medical practice organization of practitioners using the services of a management company, is consideration for a taxable supply made by the principal practitioner that is subject to the GST/HST. The only exception to this is:

• where a principal practitioner enters into a bona fide arrangement to share fees with a locum (i.e., apportion fees between the principal practitioner and the locum for health care services rendered to an individual), as explained in the preamble of P-238 and described under one (1) therein;
• where the medical practice organization is a partnership, as described under three (3); or
• where the medical practice organization involves cost-sharing under an agency arrangement, as described under four (4). In these arrangements, the GST may not apply to amounts paid by one practitioner to another practitioner.You advised that neither a cost-sharing arrangement nor an agency relationship exists between XXXXX and each of the chiropractors working at the Clinic. In addition, the relationship between XXXXX and each of the chiropractors is not that of a partnership. Therefore, the position taken by the CRA, as described under three (3) and four (4) of P-238 do not apply.

Further, the relationship between XXXXX and each of the self-employed chiropractors is not that of a principle/locum, as described under one (1) of P-238. A locum refers to a practitioner (i.e., a locum practitioner) who assumes the clinical duties or steps into the shoes of another practitioner (i.e., principal practitioner) on a temporary basis. A locum practitioner enables the principal practitioner to take time off from his/her practice for vacation, illness, etc. In these situations, the locum practitioner may bill the provincial health insurance plan for a health care service rendered to an individual (Footnote 1) using his/her own billing number and then forward a portion of the billing received from the plan to the principal practitioner. Alternatively, the principal practitioner may bill the provincial health insurance plan using his/her own billing number and then provide a portion of the billing received from the plan to the locum practitioner. Where the locum practitioner and principal practitioner have entered into a bona fide arrangement to share fees and the principal practitioner makes available the administrative services and/or facilities at his/her own costs, the apportionment of the billing fees received from a plan between the locum practitioner and the principal practitioner for a health care service rendered to an individual is outside of the scope of the ETA. This is because the practitioner that receives the fee from a plan would account for this amount for GST/HST purposes and the share given to the other practitioner would simply be a transfer of money and not consideration for a taxable supply made by the principal practitioner to the locum practitioner.

However, where a locum practitioner agrees to pay for a portion of the costs of the administrative services and/or facilities of the principal practitioner, one (1) of P-238 provides that the apportionment of the billing fee is consideration for a taxable supply made by the principal practitioner to the locum practitioner.

These same principles apply to an arrangement involving a practitioner/associate. In the case at hand, XXXXX owns the Clinic and pays for all of the costs related to its operation.

XXXXX.

Although the Agreement entered into between XXXXX and XXXXX does not specifically state that the withholding of monthly billings is for the provision of administrative services and facilities, it is our view that the amounts withheld are consideration for a taxable supply of these and other benefits described therein. By signing the Agreement, XXXXX agreed to its terms and conditions which included the withholding of monthly billings and the receipt of administrative services, use of facilities and other benefits as an associate chiropractor.

XXXXX.

P-238 is intended to illustrate the basic concepts regarding the application of the GST/HST to payments made between parties within a medical practice organization and is not meant to be exhaustive. It provide examples of situations where the facts respecting a medical practice organization demonstrate that a supply exists and consideration is payable for that supply. Unless the supply is an exempt supply listed in Schedule V or a zero-rated supply listed in Schedule VI, the GST/HST will apply.

Based upon the facts presented and the application of P-238, it is our view that the percentage of the total monthly billings withheld XXXXX from each self-employed chiropractor in accordance with the terms and conditions described in the Agreement, whether agreed to verbally or in writing, constitutes consideration for a taxable supply. As the percentage of total monthly billings withheld by XXXXX are consideration for a taxable supply, as a GST/HST registrant, it is required to collect the GST from each self-employed chiropractor working at the Clinic in respect of this supply.

Other comments

XXXXX contracts out for the provision of chiropractic services to patients of the Clinic. XXXXX is a separate legal entity distinct from each of the chiropractors, who are self-employed, subcontractors. (Note: On the basis of the information provided, we assume that an employee/employer relationship does not exist between the subcontractors and XXXXX for purposes of the Income Tax Act.)

Generally, where a person (i.e., a contractor) has an agreement with an individual to supply a service and the contractor then enters into a service contract with another person (i.e., subcontractor) to provide that service, we consider that two supplies have been made. The first is the supply of a service made by the contractor to the individual, and the second is the supply of the service made by the subcontractor to the contractor. This second supply made by the subcontractor to the contractor is viewed as an input to the first supply made by the contractor to the individual.

In the case at hand, patients book appointments with a chiropractor through the Clinic and it is the Clinic that maintains patient records. Further, the example XXXXX submitted for review indicates that the chiropractic services rendered to patients of the Clinic by a chiropractor are XXXXX the Clinic for consideration equal to the amount billed to the clients by the Clinic. In addition, XXXXX.

This information, together with the fact that XXXXX has contracted with chiropractors as subcontractors to provide chiropractic services to its patients, indicates to us that it is XXXXX that is making the supply of chiropractic services to patients of the Clinic, and not the chiropractors working at the Clinic.

You also advised that XXXXX has not been collecting GST on chiropractic services rendered by chiropractors to patients of the Clinic.

Although you have not asked for a GST/HST ruling in this regard, we have taken the liberty of clarifying the application of the GST/HST to chiropractic services. In that respect, we offer the following:

Generally, all supplies made in Canada are taxable unless specifically exempt under Schedule V.

Supplies made before February 26, 2008
Prior to its amendment which applies to supplies made after February 26, 2008, section 7 of Part II of Schedule V read as follows:

"A supply of any of the following services when rendered to an individual, where the supply is made by a practitioner of the service:

(a) optometric services;
(b) chiropractic services;
(c) physiotherapy services;
(d) chiropodic services;
(e) podiatric services;
(f) osteopathic services;
(g) audiological services;
(h) speech-language pathology services;
(i) occupational therapy services;
(j) psychological services; and
(k) midwifery services."

For purposes of this provision, section 1 of Part II of Schedule V defines "practitioner" as follows:

"practitioner", in respect of a supply of optometric, chiropractic, physiotherapy, chiropodic, podiatric, osteopathic, audiological, speech-language pathology, occupational therapy, psychological, midwifery or dietetic services, means a person who
(a) practises the profession of optometry, chiropractic, physiotherapy, chiropody, podiatry, osteopathy, audiology, speech-language pathology, occupational therapy, psychology, midwifery or dietetics, as the case may be,
(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."

In order for a supply of a one of the services described under paragraphs (a) to (k) of section 7 to be exempt, it had to be made by a practitioner (i.e., the practitioner had to be the supplier of the service).

For example, where a corporation (i.e., a contractor) entered into an agreement to provide a chiropractic service to an individual and then contracted out with a chiropractor (i.e., a subcontractor) to provide that service, the chiropractic service supplied by the corporation to the individual was generally taxable. The chiropractic service acquired by the corporation from the chiropractor would retain its exempt status. This was because the chiropractor rendered a chiropractic service to an individual and the exempting requirements set out in section 7 were met. The fact that the corporation paid an amount as consideration for the supply to the chiropractor did not change the nature of the supply made by the chiropractor or the tax status of the supply. Although the corporation would have acquired the supply without the payment of the GST/HST in this situation, it would generally have been required to charge the GST/HST when it made the supply to an individual because, prior to the amendment made to section 7 of Part II of Schedule V, no exempting provision within Schedule V applied to this supply when made by a corporation.

The one exception to this was where a professional corporation held a valid certificate of authorization or a permit authorized under provincial law to carry on the business of practicing the profession described in section 7 of Part II of Schedule V (e.g., chiropractic). In this case, the professional corporation holding such a certificate would fall within the meaning of "practitioner" as defined in section 1 of Part II of Schedule V and any supplies of the services described in section 7 that it made were exempt.

Supplies made after February 26, 2008
Further to an amendment which applies to supplies made after February 26, 2008, section 7 of Part II of Schedule V reads as follows:

"A supply of any of the following service if the service is rendered to an individual by a practitioner of the service..."

Because of the amendment made to section 7, a practitioner no longer has to make the supply in order for it to be exempt. Using the example cited earlier, the supply of a chiropractic service by the corporation to the individual would be exempt provided the consideration payable is for the supply of a service rendered to the individual by the practitioner.

Summary

To summarize, the supply made by XXXXX of chiropractic services rendered to patients of the Clinic is exempt under section 7 of Part II of Schedule V both prior to and following its amendment. This is because XXXXX falls within the definition of "practitioner" in section 1 of Part II of Schedule V (i.e., it is a professional health corporation that holds a valid certificate of authorization to practise a profession listed under section 7 of Part II of Schedule V issued under provincial legislation governing a health profession).

Since the supply of chiropractic services rendered to an individual was and continues to remain exempt under section 7, the monthly compensation paid by XXXXX to each self-employed chiropractor working at the Clinic, as described in fact eight (8) above, is not subject to GST/HST.

However, the percentage of the total monthly billings withheld by XXXXX from each self-employed chiropractor working at the Clinic is consideration for a taxable supply of administrative services, facilities and other benefits that is subject to the GST/HST.

We appreciate the concerns raised by XXXXX and XXXXX and regret that a more favourable response could not be provided. We also acknowledge their assertion that there may be an inconsistency in the application of the GST/HST in similar arrangements in other medical practice organizations. To that end, the CRA promotes compliance under the ETA by encouraging clients to come forward in order to comply with their legal obligations.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4395. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,
Lynn Fournier Renner
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
ENDNOTES

1 Note: Section 9 of Part II of Schedule V exempts any supply of property or services to the extent that the consideration for that supply is payable ore reimbursable under a provincial health insurance plan.

UNCLASSIFIED

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.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 201376
Business Number: [...]

Dear [Client]:

Subject: GST/HST RULING
Public Service Body Rebate Eligibility

Thank you for your fax of [mm/dd/yyyy], concerning the eligibility of […](the Centre) to claim an 83% public service body (PSB) rebate of the goods and services tax (GST) and the federal part of the harmonized sales tax (HST), and an 87% PSB rebate of the provincial part of the HST, under section 259 of the Excise Tax Act (ETA) in respect of its activities. We apologize for the delay in our response.

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 ETA unless otherwise specified.

STATEMENT OF FACTS

Based on your faxes of [mm/dd/yyyy]; and information on the Centre’s website, we understand the facts to be:

1. The Centre is a registered charity within the meaning assigned to that expression by subsection 248(1) of the Income Tax Act and is a charity for purposes of the GST/HST. The Centre has been given BN# [...].

2. The Centre is not registered for GST/HST purposes.

3. As part of its commitment to promote the delivery of public health services by non-profit organizations, the Province of Ontario passed the Local Health System Integration Act, 2006.

On April 1, 2021, the health system planning and funding functions from the Local Health Integration Networks (LHINs) transferred into Ontario Health. LHINs began operating under a new business name, Home and Community Care Support Services, to reflect a focused service delivery mandate. (Footnote 1)

4. […] (Footnote 2)

5. The Centre’s mission is […] (Footnote 3) . […].

6. Health care services at the Centre are provided by […]

7. […]

8. […], the Centre provides the following services and programs (Footnote 4) :

9. […]

10. The Centre has […][an Agreement] with […][the LHIN] for the provision of health care services and programs.

11. The vast majority of the Centre’s operating funding comes from the Minister of Health and Long-Term Care for Ontario (MOHLTC) through [the LHIN]. The year-end [mm/dd/yyyy] financial statements indicate that funds received from [the LHIN] amounted to $[…].

12. […].

13. There is no overnight accommodation or beds provided at any of the Facilities.

14. The Centre currently claims PSB rebates of 50% of the GST and federal part of the HST, and 82% of the provincial part of the HST, as a “charity”.

15. […].

[…] (Footnote 5)

16. [...].

RULINGS REQUESTED

You would like to know if the Centre can recover tax […] at the rate of 83% for the GST and the federal part of the HST and 87% for the provincial part of the HST under section 259.

RULINGS GIVEN

Based on the facts set out above, we rule that:

The Centre is a facility operator making facility supplies at qualifying facilities.

PSB rebate of the GST and the federal part of the HST

As a charity that is also a facility operator, the Centre is entitled to a PSB rebate of the GST and the federal part of the HST as follows:

* A 50% PSB rebate of the non-creditable GST charged (Footnote 6) or the federal non-creditable HST charged in respect of property or a service for the claim period to the extent that the property or service is for consumption, use or supply in activities engaged in by the Centre otherwise than in the course of operating a qualifying facility for use in making facility supplies, or in the course of making facility supplies, ancillary supplies or home medical supplies.

* An 83% PSB rebate of the non-creditable GST charged or the federal non-creditable HST charged in respect of property or a service to the extent that the property or service is for consumption, use or supply in activities engaged in by the Centre in the course of operating the Facilities for use in making facility supplies, or in the course of making facility supplies, ancillary supplies or home medical supplies.

PSB rebate of the provincial part of the HST

As the Centre is resident in Ontario, it is also entitled to a PSB rebate of the provincial part of the HST as follows:

* An 82% PSB rebate of the provincial non-creditable HST charged in respect of property or a service for the claim period to the extent that the property or service is for consumption, use or supply in activities engaged in by the Centre in Ontario otherwise than in the course of operating a qualifying facility for use in making facility supplies, or in the course of making facility supplies, ancillary supplies or home medical supplies.

* An 87% PSB rebate of the provincial non-creditable HST charged in respect of property or service to the extent that the property or service is for consumption, use or supply in activities engaged in by the Centre in Ontario in the course of operating the Facilities for use in making facility supplies, or in the course of making facility supplies, ancillary supplies or home medical supplies.

[…].

EXPLANATION

Provincially recognized and funded non-profit public health care facilities established and operated for the medical or surgical treatment of individuals are generally eligible to claim an 83% PSB rebate of the otherwise unrecoverable GST and federal part of the HST and, when resident in Ontario, 87% of the provincial part of the HST paid on purchases related to certain exempt health care operations. Hereafter these two rebates will be referred to as the “83% (and 87%) PSB rebate”).

As a charity, the Centre is also entitled to claim a 50% PSB rebate of the GST and the federal part of the HST paid or payable on eligible purchases and expenses intended for consumption, use or supply in activities engaged in by the Centre otherwise than in the course of operating a qualifying facility for use in making facility supplies, or in the course of making facility supplies, ancillary supplies or home medical supplies.

As the Centre is resident in Ontario, it is also eligible to claim an 82% PSB rebate of the provincial part of the HST paid or payable on eligible purchases and expenses intended for consumption, use or supply in activities engaged in by the Centre otherwise than in the course of operating a qualifying facility for use in making facility supplies, or in the course of making facility supplies, ancillary supplies or home medical supplies.

You will find our explanation presented in the following manner:

* The first part entitled Status of the Centre as a facility operator provides an explanation as to why the Centre is a facility operator and the activities that are eligible for the 83% (and 87%) PSB rebate;

* The second part entitled Ancillary supplies and home medical supplies provides information on other activities that are eligible for the 83% (and 87%) PSB rebate;

[…]

* The last part entitled Additional information on the calculation of the PSB rebate provides additional information on the calculation of the PSB rebate.

Status of the Centre as a facility operator

To be eligible for the 83% (and 87%) PSB rebate, a PSB must be a “hospital authority”, a “facility operator” or an “external supplier”.

Hospital authority

The Centre does not operate a public hospital and is not designated as a hospital authority, and as such it is not a “hospital authority”.

Therefore, to determine whether there is eligibility for the 83% (and 87%) PSB rebate, it is necessary to determine whether the Centre is a “facility operator” or an “external supplier”.

Facility operator

A “facility operator” is defined in subsection 259(1) as meaning “a charity, a public institution or a qualifying non-profit organization (other than a hospital authority), that operates a qualifying facility”.

As the Centre is a charity, it meets the first requirement of the definition. In order to meet the second requirement, the Centre must operate a “qualifying facility”.

Qualifying facility

Subsection 259(2.1) sets out three criteria that must be met for a facility, or part of a facility, other than a public hospital, to be a qualifying facility, for a fiscal year, or any part of a fiscal year, of the operator of the facility or part.

A facility or part of a facility will be considered a “qualifying facility” if:

(a) supplies of services that are ordinarily rendered during that fiscal year or part to the public at the facility or part would be facility supplies if the references in the definition of “facility supply” in subsection 259(1) to “public hospital or qualifying facility” were references to the facility or part;

(b) an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part; and

(c) an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.

The requirements contained in (a) to (c) above must be met in order for a particular facility to be a “qualifying facility” for purposes of section 259. A discussion of these requirements follows.

Facility Supply

Subsection 259(1) defines the term “facility supply” as “an exempt supply (other than a prescribed supply) of property or a service in respect of which

(a) the property is made available, or the service is rendered, to an individual at a public hospital or qualifying facility as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, which process

(i) is undertaken in whole or in part at the public hospital or qualifying facility,

(ii) is reasonably expected to take place under the active direction or supervision, or with the active involvement, of

(A) a physician acting in the course of the practise of medicine,

(B) a midwife acting in the course of the practise of midwifery,

(C) if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner acting in the course of the practise of a nurse practitioner, or

(D) a prescribed person acting in prescribed circumstances, and

(iii) in the case of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, (…), and

(b) if the supplier does not operate the public hospital or qualifying facility, an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.”

A “physician” is defined in subsection 259(1) as “a person who is entitled under the laws of a province to practise the profession of medicine”.

As the Centre does not provide chronic care at its facilities that requires an individual to stay overnight, and because the Centre operates its own facilities, subparagraph (a)(iii) and paragraph (b) of the definition of “facility supply” are not relevant here and are not discussed in this letter.

The definition of “facility supply” is to be applied on a supply-by-supply basis. To be a “facility supply”, the property made available or the service rendered to an individual at the qualifying facility must be an exempt supply. As mentioned above, exempt supplies are listed in Schedule V to the ETA.

Section 1 of Part V.1 of Schedule V exempts supplies of property or a service made by a charity unless specifically excluded under paragraphs (a) to (p) of that section. As the Centre is a charity, the supplies it makes to its patients/clients would generally be exempt under section 1 of Part V.1 of Schedule V.

Section 2 of Part II of Schedule V exempts a supply of an institutional health care service made by the operator of a health care facility if the institutional health care service is rendered to a patient or resident of the facility. The terms “institutional health care service” and “health care facility” are defined in section 1 of Part II of Schedule V. This section may also apply to exempt supplies of services that the Centre makes.

Of note, if a supply is of an institutional health care service that falls within section 2 of Part II of Schedule V, it is necessary to determine if the supply is excluded from the exemption because the supply is a cosmetic service supply or because the supply is not a qualifying health care supply, pursuant to sections 1.1 and 1.2 of Part II of Schedule V (Footnote 7) .

Paragraph (a) of the definition of “facility supply” requires that the exempt property be made available, or the exempt service be rendered, to an individual at the qualifying facility. Therefore, only the exempt property made available, or exempt services rendered, by the Centre to patients/clients at its Facilities would meet this requirement. In other words, supplies made outside the qualifying facilities would not be considered facility supplies.

The combination of paragraph (a), subparagraphs (a)(i) and (a)(ii), and clause (a)(ii)(A) of the definition of “facility supply” further requires that the exempt supply of property be made available or the exempt supply of a service be rendered at the qualifying facility and be part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative care. This process must be undertaken in whole or in part at the qualifying facility and reasonably be expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of practise of medicine (or in certain circumstances, a midwife, a nurse practitioner if a physician is not readily accessible in the geographic area or a prescribed person in prescribed circumstances).

In our examination of the programs and activities of the Centre, we conclude that the Centre is making facility supplies at the Facilities in regards to certain programs and activities.

Accordingly, to the extent that supplies of health care services provided at the Facilities are exempt supplies that are part of a medically necessary process of health care for the individual for purposes described in paragraph (a) of the definition of “facility supply” and are rendered at the Facilities under the active direction or supervision, or with the active involvement, of a physician, they will meet the requirements of subparagraphs (a)(i) and (a)(ii) of the definition and will, therefore, constitute “facility supplies”.

[…]

Although subclause (a)(ii)(C) in the subsection 259(1) definition of “facility supply” refers to a nurse practitioner acting in the course of the practise of a nurse practitioner, that circumstance is only considered/applicable when a physician is not readily accessible in the geographic area in which the medically necessary process of health care takes place.

In addition, subclause (a)(ii)(D) of the definition of “facility supply” is not relevant because no regulations have been prescribed.

Qualifying funding

Paragraph (b) of the definition of “qualifying facility” in subsection 259(2.1) requires that an amount, other than a nominal amount, be paid or payable to the operator of the facility as “qualifying funding” in respect of the facility or part.

Subsection 259(1) defines “qualifying funding” of the operator of a facility for all or part of a fiscal year of the operator as meaning “a readily ascertainable amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the operator in respect of the delivery of health care services to the public for the purpose of financially assisting in operating the facility during the fiscal year or part, as consideration for an exempt supply of making the facility available for use in making facility supplies at the facility during the fiscal year or part or as consideration for facility supplies of property that are made available, or services that are rendered, at the facility during the fiscal year or part and is paid or payable by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and

(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made”.

Financial assistance provided to the Centre by the MOHLTC (through [the LHIN] for the Facilities) meets the requirements of the definition of “qualifying funding” as the funding provided is a readily ascertainable amount of money paid or payable in respect of the delivery of health care services to the public in the circumstances described above.

Accreditation, licence or other authorization

Paragraph (c) of the definition of “qualifying facility” in subsection 259(2.1) requires that an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.

[…]

Ancillary supplies and home medical supplies

A facility operator may also be entitled to claim an 83% rebate of the GST and the federal part of the HST paid or payable on eligible purchases and expenses to the extent that it intended to consume, use or supply the property or service in the course of activities engaged in by the Centre in the course of making “ancillary supplies” or “home medical supplies”. As resident in Ontario, it may also be entitled to claim an 87% rebate of the provincial part of the HST paid or payable on eligible purchases and expenses to the extent that it intended to consume, use or supply the property or service in the course of activities engaged in by the Centre in the course of making ancillary supplies or home medical supplies.

Although there is no clear indication that the Centre is involved in the provision of ancillary supplies or home medical supplies, […]as described below, we offer the following information for your reference.

Ancillary supply

Subsection 259(1) defines the term “ancillary supply” as:

(a) an exempt supply of a service of organizing or coordinating the making of facility supplies or home medical supplies in respect of which supply an amount, other than a nominal amount, is paid or payable to the supplier as medical funding, or

(b) the portion of an exempt supply (other than a facility supply, a home medical supply or a prescribed supply) of property or a service (other than a financial service) that represents the extent to which the property or service is, or is reasonably expected to be, consumed or used for making a facility supply and in respect of which portion an amount, other than a nominal amount, is paid or payable to the supplier as medical funding.

Subsection 259(1) defines “medical funding” of a supplier in respect of a supply to be “an amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the supplier in respect of health care services for the purpose of financially assisting the supplier in making the supply or as consideration for the supply by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and

(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.”

[…]

Home Medical Supply

Subsection 259(1) defines a “home medical supply” to mean “an exempt supply (other than a facility supply or a prescribed supply) of property or a service

(a) that is made
(i) as part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, and

(ii) after a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances, has identified or confirmed that it is appropriate for the process to take place at the individual’s place of residence or lodging (other than a public hospital or a qualifying facility),

(b) in respect of which the property is made available, or the service is rendered, to the individual at the individual’s place of residence or lodging (other than a public hospital or a qualifying facility), on the authorization of a person who is responsible for coordinating the process and under circumstances in which it is reasonable to expect that the person will carry out that responsibility in consultation with, or with ongoing reference to instructions for the process given by, a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances,

(c) all or substantially all of which is of property or a service other than meals, accommodation, domestic services of an ordinary household nature, assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the individual, and

(d) in respect of which an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.”

PSB rebate […]

To be eligible to claim the 83% (and 87%) PSB rebate, where the person is a facility operator resident in Ontario, the calculation of the rebate must be done in accordance with the rules provided in section 259 and in the Public Service Body Rebate (GST/HST) Regulations (the Regulations).

A facility operator is eligible to claim the 83% (and 87%) PSB rebate of the non-creditable tax charged in respect of property or services to the extent that the property or services are for consumption, use or supply in activities engaged in by the facility operator in the course of operating a qualifying facility for use in making facility supplies, or in the course of making facility supplies, ancillary supplies and home medical supplies.

As a charity and a facility operator resident in Ontario, the Centre can claim a PSB rebate in respect of property or a service for a claim period as follows:

* If the Centre, acting in its capacity as a facility operator, consumes, uses or supplies the property or service in the course of activities engaged in by the Centre in the course of operating a qualifying facility for use in making facility supplies or of making facility supplies, ancillary supplies or home medical supplies:

* An 83% rebate of the non-creditable GST charged or the federal non-creditable HST charged in respect of the property of service multiplied by the extent (expressed as a percentage) to which the Centre intended, at the relevant time (Footnote 8) , to consume, use or supply the property or service in the course of activities engaged in by the Centre in the course of operating a qualifying facility for use in making facility supplies or of making facility supplies, ancillary supplies or home medical supplies.

* An 87% rebate of the provincial non-creditable HST charged in respect of the property or service multiplied by the extent (expressed as a percentage) to which the Centre intended, at the relevant time, to consume, use or supply the property or service in the course of activities engaged in by the Centre in the course of operating a qualifying facility in Ontario for use in making facility supplies or of making facility supplies, ancillary supplies or home medical supplies in Ontario.

* In any other case:

		* A 50% rebate of the non-creditable GST charged or the federal non-creditable HST charged in respect of the property or service to the extent that the Centre intended to consume, use, or supply property or services in the course of its non-selected public service body activities (Footnote 9) .

		* An 82% rebate of the provincial non-creditable HST charged in respect of the property or service to the extent that the Centre intended to consume, use, or supply property or services in the course of its non-selected public service body activities in Ontario.

[…]

Additional information on the calculation of the PSB rebate

Calculation of the PSB rebate

Section 259 provides that a PSB rebate is calculated and claimed on a claim period by claim period basis. A PSB that is not a GST/HST registrant has two claim periods per fiscal year – the first six months and the last six months of its fiscal year.

Pursuant to subsection 259(14), where all or substantially all (90% or more) of the non-creditable tax charged in respect of property or a service for a claim period is tax incurred in its capacity as a facility operator, the Centre will be entitled to claim an 83% (and 87%) PSB rebate on all of the non-creditable tax charged in respect of the property or service for that claim period. In other words, where the Centre incurs 90% or more of the GST/HST paid or payable on a property or a service for a claim period in its capacity as a facility operator (e.g., for use in making facility supplies), all of the GST/HST charged in respect of the property or service for that claim period is deemed to have been incurred in that capacity. As such, the Centre could claim an 83% (and 87%) PSB rebate on all of the non-creditable tax charged in respect of the property or service for that claim period. For example, if the Centre incurs GST/HST on its utilities in a claim period, and 93% of the use of the utilities is for activities in its capacity of operating a qualifying facility for use in making facility supplies, the Centre may claim the PSB rebate for all of the GST/HST it pays on the utilities using the 83% (and 87%) PSB rebate rate.

If less than 90% of non-creditable tax charged in a claim period is for these purposes, then the Centre is entitled to claim an 83% (and 87%) PSB rebate to the extent the property or service is for activities engaged in by the Centre in the course of operating a qualifying facility for use in making facility supplies, or in the course of making of facility supplies, ancillary supplies or home medical supplies.

PSB rebates from previous periods

The Centre may find that it has GST/HST that was paid or payable but has not been claimed in a rebate or that it has claimed rebates in respect of certain activities at an incorrect rate. The requirements for claiming such additional rebate amounts are not the same and are described in detail below.

Where a person has made an application for a PSB rebate for a particular claim period and later discovers additional GST/HST that was paid or payable in that claim period but was not claimed, subsection 259(6.1) may apply. Where certain conditions are met, subsection 259(6.1) allows a PSB to claim a rebate in respect of property or a service for a particular claim period in a rebate application for a subsequent claim period ending after September 8, 2017. If a PSB has not claimed a rebate in respect of property or a service for a particular claim period, subsection 259(6.1) allows the rebate to be carried forward where the following four conditions are met:

* The PSB did not claim the rebate in the application for any other claim period;

* The application for the subsequent claim period is filed within two years after

		* if the person is a registrant, the day on or before which the person is required to file its GST/HST return for the particular claim period, and
		* if the person is not a registrant, the day that is three months after the last day of the particular claim period;

* The PSB did not change the claimant type under which it was eligible to claim PSB rebates at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period; and

* The applicable rebate factor(s) did not change at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period.

Subsection 259(6.1) does not apply in situations where a person has claimed a PSB rebate in respect of a property or service and later finds out that it was eligible to claim the rebate at a higher rate. If the Centre has already claimed a PSB rebate for a claim period and subsequently discovers that the rebate was not claimed at the proper rate, the Centre must adjust the previously filed rebate application to claim a PSB rebate at the higher rate. The Centre cannot include the additional rebate amount in the PSB rebate application for a different claim period. For more information on how to adjust a previously filed rebate claim, see “How do you make changes to a rebate application you already filed?” in GST/HST Guide RC4034, GST/HST Public Service Bodies' Rebate. A reassessment or additional assessment of a rebate claim shall not normally be made more than four years after the day the application for the rebate was filed.

For more information on the calculation of the rebate in general, please refer to the same GST/HST Guide RC4034.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the rulings given in this letter provided that: none of the issues discussed in the rulings are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. The additional information given in this letter is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the additional information provided herein.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 306-807-5296. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

John Ware
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 https://health.gov.on.ca/en/common/system/services/lhin/facts.aspx

2 […]

3 […]

4 […]

5 […]

6 In general terms, “non-creditable tax charged” means the GST/HST paid or payable on property or services for which the Centre cannot claim an input tax credit, rebate, refund or remission other than a PSB rebate.

7 Sections 1.1 and 1.2 of Part II of Schedule V

A supply that is a cosmetic service supply or a supply in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes is generally deemed under section 1.1 of Part II of Schedule V not to be included in Part II of Schedule V and is therefore not exempt under section 2 of Part II of Schedule V. 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."

In addition, section 1.2 of Part II of Schedule V provides that for the purposes of Part II of Schedule V, 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 Part II of that Schedule. Generally, supplies deemed not to be included in Part II of Schedule V would be taxable at the applicable rate of GST/HST (if made by a registrant), unless the supplies are exempted pursuant to another provision.

The expression "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."

For more information on the expression “qualifying health care supply”, please refer to GST/HST Notice 286, Draft GST/HST Policy Statement – Qualifying Health Care Supplies and the Application of Section 1.2 of Part II of Schedule V to the Excise Tax Act to the Supply of Medical Examinations, Reports and Certificates.

8 Generally, the relevant time will be the time the supply was made to, or the property was imported, or brought into a participating province by the person.

9 Non-selected public service body activities are activities other than:

A. in the case of a person designated to be a municipality, those activities for which a person was designated as a municipality

B. activities carried out in the course of:

* in the case of a person determined to be a municipality, fulfilling responsibilities as a local authority

* in the case of a person acting in its capacity as a hospital authority, operating a public hospital, making facility supplies, ancillary supplies, or home medical supplies or operating a qualifying facility to make facility supplies

* in the case of a person acting in its capacity as a facility operator, making facility supplies, ancillary supplies, or home medical supplies or operating a qualifying facility to make facility supplies

* in the case of a person acting in its capacity as an external supplier, making facility supplies, ancillary supplies, or home medical supplies

* in the case of a person acting in its capacity as a school authority, public college, or university, operating an elementary or a secondary school, a post-secondary college or technical institute, a recognized degree-granting institution or a college affiliated with, or research body of, such a degree-granting institution

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.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 204089
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
[…][Supplies of Services of Tutoring or Instructing]

Thank you for your fax of October 29, 2019, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of services made by […](the Partnership). We apologize for the delay in our response.

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

We understand that the following statement of facts applies to your situation.

1. […] are partners in a partnership (the Partnership) which operates under the name […]. The partnership has registered for GST/HST purposes under the above noted Business Number.

2. The Partnership is engaged in a business of instructing elementary and secondary school students in writing skills using a program designed by the partners […](the Program). The provision of the Program is the only business activity of the Partnership.

3. The Partnership has not collected any GST/HST on its supplies since it began operating.

4. The Program is not approved for credit by a school authority in […][the Province] and completion of the Program is not a requirement for admittance into a course that is approved for credit by a school authority in [the Province].

5. The Program is a student enhancement program designed to promote language skills that follow and expand upon the standard school curriculum. The Program is intended to aid students in preparation for secondary and post-secondary educational success.

6. The Program helps students develop high proficiency levels in writing. The Program focuses on grammar, vocabulary, essay writing, literary analysis, research, and public speaking skills. The Program is provided at the grade/skill level of each student, but goes further in depth into the writing skills than the regular school curriculum. […].

7. The Program is offered […] to elementary and secondary school students in grades […].

8. Admission to the Program is by application […].

9. The Program is split into three levels. Level one is for students in grades […]; level two is for students in grades […]; and level three is for students in grades […]. The Partnership provided an outline of the weekly course work for each level.

10. Levels 1 and 2 reflect the expectations for writing for grades […] from […][the Provincial] Curriculum […]. Level 3 reflects the expectations for writing for grades […] from [the Provincial Curriculum […]. Each level provides students with key skills and support resources that they can immediately apply to their school work.

11. [The Provincial] Curriculum is the curriculum designated by […][the school authorities], which operate schools in your region.

12. The Program is led by instructors who are educated professionals with degrees in related fields that have been trained to work with children in an iterative process of teaching and learning.

13. The Program runs […] sessions. Each session involves classroom-style instruction in a small group, assignments, and individual interaction with the instructor.

14. The instructor works collaboratively with each student to hone their individually strong skills, and enhance other areas in which they may need more concentrated attention.

15. The instructor evaluates student progress using written assignments, presentations, and examinations. Feedback is provided to the students and their parents consistently throughout the Program and in the form of progress reports.

RULING REQUESTED

You would like to know if the Partnership’s supplies of services of instructing through the Program are exempt from the GST/HST.

RULING GIVEN

Based on the facts set out above, we rule that the Partnership’s supplies of services of instructing individuals through the Program are exempt from the GST/HST.

EXPLANATION

Paragraph 9(a) of Part III of Schedule V exempts a supply of a service of tutoring or instructing an individual in a course that is approved for credit by, or that follows a curriculum designated by, a school authority. “School authority” is a term defined in the ETA to mean “an organization that operates an elementary or secondary school in which it provides instruction that meets the standards of educational instruction established by the government of the province in which the school is operated.”

The Program is not a course that is approved for credit by a school authority. As a result, a supply of tutoring or instructing an individual in a course that follows a curriculum designated by a school authority is the only possible exemption that could apply to the Program.

The Program is an instructional program in writing skills that targets students in grades […]. [The Provincial] Curriculum is the curriculum designated by school authorities in the province where the Partnership operates. Writing skills are an essential part of [the Provincial] Curriculum. As a result, the Program involves the making of supplies of tutoring or instructing an individual in a course that follows a curriculum designated by a school authority. Therefore, these supplies are exempt from the GST/HST.

ADDITIONAL INFORMATION

Deregistration

The Partnership is neither required nor permitted to be registered for GST/HST purposes as its only business activity is the making of exempt supplies. For greater certainty, the Partnership is eligible to cancel its registration for GST/HST purposes. Registrants are to inform the CRA of situations requiring the cancellation of registration, as well as any circumstances requiring an amendment of registration. To cancel your GST/HST registration, please send us completed Form RC145, Request to Close Business Number Program Accounts. Alternatively, you may request cancellation of your registration by calling our Business Enquiries line at 1-800-959-5525 or in writing as long as all necessary information is received. You may wish to refer to GST/HST Memorandum 2-7, Cancellation of Registration, for further information.

Input tax credits

A GST/HST registrant is generally eligible to claim an input tax credit (ITC) for the GST/HST paid or payable on property and services acquired by the registrant for consumption, use or supply in its commercial activities. The definition of “commercial activity” in subsection 123(1) excludes a business involved in the making of exempt supplies. Therefore, where a person, e.g., a Partnership, has incurred an expense in relation to an exempt activity, there would not be an entitlement to claim an ITC to recover any of the GST/HST paid on the expense.

For more information on ITCs, please refer to GST/HST Memorandum 8.1, General Eligibility Rules, and 8.2, General Restrictions and Limitations.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. Any additional information given in this letter is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the additional information provided herein.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-573-6095. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Andrew Kaye
Government Sectors and Indigenous Affairs Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

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.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 222029

Dear [Client]:

Subject: GST/HST RULING
83% Public Service Body rebate eligibility

Thank you for your letter of March 15, 2021, with accompanying documents, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the services provided by […](the Corporation).

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 obtained from your letter and […](Footnote 1) and […](Footnote 2) , we understand that:

1. The Corporation is a registered charity within the meaning assigned to that expression by subsection 248(1) of the Income Tax Act and is a charity for GST/HST purposes.

2. The Corporation was given the Business Number […] and is not registered for GST/HST purposes.

3. […][Information about the Corporation’s incorporation]

4. […]

5. The Corporation […] operates […] (the Hospice). The Hospice is located in […][the Province].

6. The Corporation provides palliative care services to its residents at the Hospice.

7. […][More information about the Hospice]

8. […].

9. The Corporation has a licence issued by […][the relevant provincial health authority] that authorizes the Corporation to operate the Hospice […].

10. Residents are admitted to the Hospice for palliative and respite care.

11. […]

RULING REQUESTED

You would like to know whether the Corporation is entitled to claim an 83% public service body (PSB) rebate of the GST and the federal part of the HST as a facility operator making facility supplies at a qualifying facility (the Hospice).

RULING GIVEN

Based on the facts set out above, we rule that the Corporation is a facility operator making facility supplies at a qualifying facility, that is, at the Hospice.

As such, pursuant to section 259, the Corporation is eligible to claim an 83% PSB rebate of the GST and the federal part of the HST for non-creditable tax charged (Footnote 3) in respect of eligible purchases of property or services for operating the part of the Hospice that is a qualifying facility (Footnote 4), to the extent that the property or services are for consumption, use or supply in activities engaged in by the Corporation in the course of operating the Hospice for use in making facility supplies, or in the course of making facility supplies, ancillary supplies or home medical supplies.

EXPLANATION

To be eligible for an 83% PSB rebate of the GST and the federal part of the HST, a person must be a “hospital authority”, a “facility operator” or an “external supplier”.

Hospital Authority

A “hospital authority” is defined in subsection 123(1) as “an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority” for GST/HST purposes.

The Corporation does not operate a public hospital and is not designated as a hospital authority.

Therefore, to determine whether there is eligibility for the 83% PSB rebate, it is necessary to determine whether the Corporation is a “facility operator” or an “external supplier”.

Facility Operator

A “facility operator” is defined in subsection 259(1) as meaning “a charity, a public institution or a qualifying non-profit organization (other than a hospital authority), that operates a qualifying facility”.

As the Corporation is a charity, it meets the first requirement of the definition. In order to meet the second requirement, the Corporation must operate a “qualifying facility”.

Qualifying facility

Subsection 259(2.1) sets out three criteria that must be met for a facility, or part of a facility, other than a public hospital, to be a qualifying facility, for a fiscal year, or any part of a fiscal year, of the operator of the facility or part.

A facility or part of a facility will be considered a qualifying facility if:

(a) supplies of services that are ordinarily rendered during that fiscal year or part to the public at the facility or part would be facility supplies if the references in the definition of “facility supply” in subsection 259(1) to “public hospital or qualifying facility” were references to the facility or part;

(b) an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part; and

(c) an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.

The requirements contained in (a) to (c) above must be met in order for a particular facility, or part of the facility as in this case, to be a “qualifying facility” for purposes of section 259. A discussion of these requirements follows.

Facility Supply

Subsection 259(1) defines the term “facility supply” as “an exempt supply (other than a prescribed supply) of property or a service in respect of which

(a) the property is made available, or the service is rendered, to an individual at a public hospital or qualifying facility as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, which process

(i) is undertaken in whole or in part at the public hospital or qualifying facility,

(ii) is reasonably expected to take place under the active direction or supervision, or with the active involvement, of

(A) a physician acting in the course of the practise of medicine,

(B) a midwife acting in the course of the practise of midwifery,

(C) if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner acting in the course of the practise of a nurse practitioner, or

(D) a prescribed person acting in prescribed circumstances, and

(iii) in the case of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, (…) and

(b) if the supplier does not operate the public hospital or qualifying facility, an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.”

A “physician” is defined in subsection 259(1) as “a person who is entitled under the laws of a province to practise the profession of medicine”.

The definition of “facility supply” is to be applied on a supply-by-supply basis. To be a “facility supply”, the property made available or the service rendered to an individual at the public hospital or qualifying facility must be an exempt supply (other than a prescribed supply). Exempt supplies are listed in Schedule V to the ETA.

Section 1 of Part V.1 of Schedule V exempts supplies of property or a service made by a charity unless specifically excluded under paragraphs (a) to (p) of that section. As the Corporation is a charity, the supplies it makes to the patients would generally be exempt under section 1 of Part V.1 of Schedule V.

Section 2 of Part II of Schedule V exempts a supply of an institutional health care service made by the operator of a health care facility if the service is rendered to a patient or resident of the facility. The terms “institutional health care service” and “health care facility” are defined in section 1 of Part II of Schedule V. Section 2 of Part II of Schedule V may also apply to exempt supplies of services that the Corporation makes.

Of note, if a supply is of an institutional health care service that falls within section 2 of Part II of Schedule V, it is necessary to determine if the supply is excluded from the exemption because the supply is a cosmetic service supply or because the supply is not a qualifying health care supply, pursuant to sections 1.1 and 1.2 of Part II of Schedule V (Footnote 5) .

The combination of paragraph (a), subparagraphs (a)(i) and (a)(ii), and clause (a)(ii)(A) of the definition of “facility supply” further requires that the exempt supply of property be made available, or the exempt supply of a service be rendered, at a public hospital or qualifying facility and be part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative care. This process must be undertaken in whole or in part at the public hospital or qualifying facility and reasonably be expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of practise of medicine (or in certain circumstances, a midwife, a nurse practitioner or a prescribed person in prescribed circumstances).

It is our understanding that palliative care differs from chronic care. Therefore, it is not necessary for elements referred to in clauses (a)(iii)(A) to (D) of the definition of “facility supply” to be met in order for a supply to qualify as a “facility supply”, where only palliative care is being provided, as in the present case.

The decision of the Tax Court of Canada in Elim Housing Society v The Queen (2013-148(GST)G) addressed the question as to whether Elim Housing Society (Elim), operator of a long-term care facility, was a facility operator operating a qualifying facility. In this decision, the judge made the determination that Elim was entitled to claim the 83% PSB rebate as a facility operator operating a qualifying facility. After comparing the services and the care provided residents at the Hospice to the relevant elements described in the Elim case, we are of the view that facility supplies are made at the part of the Hospice that is a qualifying facility (explained below) by the Corporation.

To the extent that the health care services provided at the part of the Hospice that is a qualifying facility are exempt supplies that are part of a medically necessary process of health care for the individual for purposes described in paragraph (a) of the definition of “facility supply” and are rendered at the part of the Hospice that is a qualifying facility (explained below) under the active direction or supervision, or with the active involvement, of a physician, they will meet the requirements of subparagraphs (a)(i) and (a)(ii) of the definition and will, therefore, constitute facility supplies.

Supplies of end-of-life Care and of Symptom Management, when part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, which process is undertaken in whole or in part at the part of the Hospice that is a qualifying facility and is reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of the practise of medicine, would be considered facility supplies.

If the Corporation engages in any activities or programs for which there is no expectation of active physician direction or supervision, or active physician involvement, being undertaken, then supplies of services provided within such activities or programs would not fall within the definition of “facility supply”, and thus such activities or programs would not be eligible for the 83% PSB rebate under this particular provision. As noted below, the Corporation may still be entitled to a 50% PSB rebate of the GST and the federal part of the HST for charities in relation to such activities and programs.

As mentioned above, subsection 259(2.1) sets out three criteria that must be met in order for a facility or part of a facility to be considered a qualifying facility for all or part of a fiscal year. The first criterion that must be met, under paragraph 259(2.1)(a), is that the exempt supplies made at the part of the Hospice that is a qualifying facility must be facility supplies. The exempt supplies that are facility supplies made by the Corporation meet this first criterion.

Qualifying Funding

The second criterion that must be met for a facility or part of the facility to be a “qualifying facility” is that an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part.

Subsection 259(1) defines “qualifying funding” of the operator of a facility for all or part of a fiscal year of the operator as meaning “a readily ascertainable amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the operator in respect of the delivery of health care services to the public for the purpose of financially assisting in operating the facility during the fiscal year or part, as consideration for an exempt supply of making the facility available for use in making facility supplies at the facility during the fiscal year or part or as consideration for facility supplies of property that are made available, or services that are rendered, at the facility during the fiscal year or part and is paid or payable by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and

(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.”

[…][The health authority] is a regional health authority created by [the Province] to administer and allocate provincial government grants for the provision of health services in its area of responsibility.

The Corporation is a charity that operates the Hospice within the area of responsibility of […][the health authority]. Under the agreement entered into with the Corporation, [the health authority] provides funding to the Corporation for its provision of palliative care to residents at the Hospice. As [the health authority] provides funding to the Corporation for the purposes for which [the health authority] receives funding from [the Province] (i.e., in respect of health care services), the funding provided by [the health authority] to the Corporation meets the second criteria under paragraph 259(2.1)(b) and constitutes “qualifying funding”.

This criterion is thus satisfied.

It should be noted that […][under the agreement, the health authority provides an amount of funding to the Corporation] […] for up to [#] of the [#] total beds, […] [and therefore only part of the Hospice] can be potentially considered a qualifying facility. The part of the Hospice that is not funded by [the health authority] will not be considered a qualifying facility.

Accreditation, licence or other authorization

The third criterion that must be met under paragraph 259(2.1)(c) for a facility, or part of a facility, other than a public hospital, to be a qualifying facility for a fiscal year, or any part of a fiscal year of the operator of the facility, or part, is that an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.

[…]. As the licence issued […] to the Corporation for the Hospice is recognized or provided for under a law of a province in respect of facilities for the provision of health care services, the third criterion that must be met under paragraph 259(2.1)(c) for a facility to be a qualifying facility is satisfied.

This criterion is thus satisfied.

Summary of “qualifying facility” analysis

To summarize, part of the Hospice meets all of the requirements of the definition of “qualifying facility” in subsection 259(2.1) and, as a result, the Corporation is a facility operator for purposes of section 259 (Footnote 6) . Accordingly, the Corporation qualifies for an 83% PSB rebate of the GST and of the federal part of the HST for the non-creditable tax charged in respect of property and services, to the extent that the property and services are for consumption, use or supply in activities engaged in by the Corporation in the course of operating the part of the Hospice that is a qualifying facility for use in making facility supplies, or in the course of making facility supplies, ancillary supplies or home medical supplies.

As discussed above, the definition of “facility supply” requires that an exempt supply made to an individual at a qualifying facility be part of a medically necessary process of health care that is reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician. As such, not all supplies made by the Corporation necessarily constitute facility supplies. The determination of whether a particular supply is a facility supply is to be made on a case-by-case basis.

A facility operator may also be entitled to claim an 83% rebate of the GST and the federal part of the HST paid or payable on eligible purchases and expenses to the extent that it intended to consume, use or supply the property or service in the course of activities engaged in by the Corporation in the course of making ancillary supplies or home medical supplies.

ADDITIONAL INFORMATION

As there is no indication that the Corporation is involved in the provision of ancillary supplies or home medical supplies, we offer the following information for your reference.

Ancillary supplies

Subsection 259(1) defines an “ancillary supply” to mean

“a) an exempt supply of a service of organizing or coordinating the making of facility supplies or home medical supplies in respect of which supply an amount, other than a nominal amount, is paid or payable to the supplier as medical funding, or

(b) the portion of an exempt supply (other than a facility supply, a home medical supply or a prescribed supply) of property or a service (other than a financial service) that represents the extent to which the property or service is, or is reasonably expected to be, consumed or used for making a facility supply and in respect of which portion an amount, other than a nominal amount, is paid or payable to the supplier as medical funding.”

Home medical supply

Subsection 259(1) defines a “home medical supply” to mean “an exempt supply (other than a facility supply or a prescribed supply) of property or a service

(a) that is made

(i) as part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, and

(ii) after a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances, has identified or confirmed that it is appropriate for the process to take place at the individual’s place of residence or lodging (other than a public hospital or a qualifying facility),

(b) in respect of which the property is made available, or the service is rendered, to the individual at the individual’s place of residence or lodging (other than a public hospital or a qualifying facility), on the authorization of a person who is responsible for coordinating the process and under circumstances in which it is reasonable to expect that the person will carry out that responsibility in consultation with, or with ongoing reference to instructions for the process given by, a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances,

(c) all or substantially all of which is of property or a service other than meals, accommodation, domestic services of an ordinary household nature, assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the individual, and

(d) in respect of which an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.”

Subsection 259(1) defines “medical funding” of a supplier in respect of a supply to be “an amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the supplier in respect of health care services for the purpose of financially assisting the supplier in making the supply or as consideration for the supply by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and

(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.”

There is no evidence that the Corporation is making home medical supplies through the Hospice. Although the Corporation offers a remote hospice service, it is unclear whether any of the supplies of services and property qualify as “home medical supplies” since it is unknown whether all the “home medical supplies” criteria are met, for instance, whether a physician acting in the course of the practise of medicine has identified or confirmed that it is appropriate for a medically necessary process to take place at the individual's place of residence or lodging (other than a public hospital or a qualifying facility).

In regards to medical funding, if the Corporation receives funding from [the Health Authority] to help with the provision of such services, such funds could qualify as “medical funding” if they are to financially assist the Corporation with health care services.

Calculation of the PSB rebate

Section 259 provides that the PSB rebate is calculated and claimed on a claim period by claim period basis. The claim periods of a GST/HST registrant are the same as the reporting periods for its GST/HST returns (i.e., annually, quarterly or monthly). A PSB that is not a GST/HST registrant has two claim periods per fiscal year – the first six months and the last six months of its fiscal year.

A PSB claims its rebate on a property-by-property or service-by-service basis. It is the intended consumption, use or supply of a particular property or service at the relevant time that determines the PSB rebate entitlement for the non-creditable GST charged and federal non-creditable HST charged on that property or service, not the overall activities of the PSB. Generally, the relevant time will be the time the supply was made to, or the property was imported or brought into [the Province] by, the Corporation.

As required by subsection 259(4.1), the Corporation will be required to apportion its rebate claims between its inputs that are for consumption, use or supply in its activities carried on in the course of operating a qualifying facility (part of the Hospice) for use in making facility supplies or in the course of making facility supplies, ancillary supplies or home medical supplies, and its other activities (if any).

The entitlement to an 83% PSB rebate may thus be limited and require apportionment where the tax paid or payable is for activities that do not qualify for the rebate. However, where the Corporation incurs 90% or more of the GST, or federal part of the HST, paid or payable on a property or a service acquired in its capacity as a facility operator (e.g., for use in making facility supplies), generally all of that GST, or federal part of the HST, is deemed to have been incurred in that capacity, pursuant to subsection 259(14). As such, the Corporation could claim a PSB rebate at the rate of 83% of the non-creditable GST charged and federal non-creditable HST for that property or service. For example, if the Corporation incurs GST on its utilities, and the Corporation determines the utilities are used 93% in its activities as a facility operator for making facility supplies, the Corporation, may claim 100% of the GST it pays on the utilities using the 83% PSB rebate rate.

Please note that this allocation is to be performed for each property or service identified in the claim period.

Rebate for purchases that do not qualify for 83% rebate

As discussed above, the definition of “facility supply” requires that an exempt supply made to an individual at a qualifying facility be part of a medically necessary process of health care that is reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician. As such, not all supplies made by the Corporation may constitute facility supplies. The determination of whether a particular supply is facility supply is to be made on a case-by-case basis. Similarly, some supplies may not meet the qualifications as being ancillary supplies or home medical supplies, either.

The Corporation, as a charity for purposes of the GST/HST, is eligible to claim a 50% PSB rebate of the GST and the federal part of the HST for the non-creditable tax charged on eligible purchases and expenses intended for consumption, use or supply in activities engaged in by the Corporation otherwise than in the course of operating the Hospice for use in making facility supplies, or in the course of making facility supplies, ancillary supplies or home medical supplies.

PSB rebates from previous periods

The Corporation may find that it has GST/HST that was paid or payable but has not been claimed in a rebate or that it has claimed rebates in respect of certain activities at an incorrect rate. The requirements for claiming such additional rebate amounts are not the same and are described in detail below.

Where a person has made an application for a PSB rebate for a particular claim period and later discovers additional GST/HST that was paid or payable in that claim period but was not claimed, subsection 259(6.1) may apply. Where certain conditions are met, this subsection allows a PSB to claim a rebate in respect of property or a service for a particular claim period in a rebate application for a subsequent claim period ending after September 8, 2017. If a PSB has not claimed a rebate in respect of property or a service for a particular claim period, subsection 259(6.1) allows the rebate to be carried forward where the following four conditions are met:

* The PSB did not claim the rebate in the application for any other claim period;

* The application for the subsequent claim period is filed within two years after

* if the person is a registrant, the day on or before which the person is required to file its GST/HST return for the particular claim period, and

* if the person is not a registrant, the day that is three months after the last day of the particular claim period;

* The PSB did not change the claimant type under which it was eligible to claim PSB rebates at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period; and

* The applicable rebate factor(s) did not change at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period.

The ability to carry forward does not apply in situations where a person has claimed a PSB rebate in respect of a property or service and later finds out that it was eligible to claim the rebate at a higher rate. If the Corporation has already claimed a PSB rebate for a claim period and subsequently discovers that the rebate was not claimed at the proper rate, the Corporation must adjust the previously filed rebate application to claim a PSB rebate at the higher rate. The Corporation cannot include the additional rebate amount in the PSB rebate application for a different claim period. For more information on how to adjust a previously filed rebate claim, see "How do you make changes to a rebate application you already filed?" in GST/HST Guide RC4034, GST/HST Public Service Bodies' Rebate. A reassessment or additional assessment of a rebate claim shall not normally be made more than four years after the day the application for the rebate was filed.

For more information on the calculation of the rebate, please refer to the same GST/HST Guide RC4034, GST/HST Public Service Bodies' Rebate.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

The additional information given in this letter is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the additional information provided herein.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 306-807-5296. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

John Ware
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 […]

2 […]

3 In general terms, “non-creditable tax charged” means the GST/HST paid or payable on property or services for which the Corporation cannot claim in any other way other than by claiming the PSB rebate. For more information, see guide RC4034, GST/HST Public Service Bodies' Rebate or GST/HST Memorandum 13.5, Non-creditable Tax Charged.

4 Please note that, […], the Hospice consists of two parts for 83% PSB rebate purposes. One part of the Hospice qualifies as a “qualifying facility” and one part does not qualify as a “qualifying facility”, […][because the health authority only provides funding to the Hospice for] up to [#] beds of [#] total beds.

5 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”.

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 case 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.”

6 As the Corporation is a facility operator, it is not an external supplier, since the definition of “external supplier” in subsection 259(1) excludes a facility operator.

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.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 211272

Dear [Client]:

Subject: GST/HST RULING
Assignment of a right to purchase a residential condominium unit

Thank you for your fax of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the assignment of a right to purchase a residential condominium unit. We apologize for the delay in the response.

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

We understand the following from the documents you provided:

1. You are the authorized representative of […](the Assignor).

2. The Assignor is a non-resident of Canada and a non-registrant for GST/HST purposes.

3. The Assignor is not engaged in a business of purchasing and selling real property in Canada.

4. On [mm/dd/yyyy], the Assignor and […](the Vendor) entered into an agreement of purchase and sale (APS) with respect to a residential condominium unit legally described as: […](the Unit).

5. According to the APS:

a) the Assignor was required to pay, to the Vendor, a purchase price in the amount of $[…] for the Unit; […][GST/HST] was not included in the price.

b) the Assignor was required to pay, to the Vendor, a total deposit amount of $[…] in four installments:

(i) Initial: $[…] (that is, [#]% of the purchase price) due at the time the APS is accepted by the Vendor;

(ii) Second: $[…] (that is, [#]% of the purchase price) due on the later of [mm/dd/yyyy] and the [#] business day after the delivery of a document entitled Amendment to the Purchaser;

(iii) Third: $[…] (that is, [#]% of the purchase price) due on [mm/dd/yyyy]; and

(iv) Fourth: $[…] (that is, [#]% of the purchase price) due on [mm/dd/yyyy].

c) the Assignor was required to pay, to the Vendor, the balance of the purchase price (presumably, $[…], subject to closing adjustments including [GST/HST]) on the closing date.

6. The total deposit amount (that is, $[…]) was paid by the Assignor.

7. No information was provided with respect to financing.

8. The Assignor’s stated primary purpose for entering into the APS with the Vendor was to purchase the Unit to live in with his son while his son attended school in Canada.

9. The Assignor states that the plans changed and his son decided to study in […][another country] instead. Therefore, the Unit was no longer required.

10. On [mm/dd/yyyy], the Assignor entered into […](the Assignment Agreement) with […](the Assignees) with respect to the Unit.

11. […] (Footnote 1), […][a strong regional real estate market was reported by […] during the month that the sale took place].

12. According to the Assignment Agreement, the Assignor’s Statement of adjustments and the Assignor’s signed direction to […](the Assignor’s legal representative) entitled “Order to pay”:

a) the Assignee was required to pay, to the Assignor, an assignment amount of $[…] for the assignment of his rights in the APS. $[…] was payable as a deposit and the remaining balance of $[…] was payable to the assignee’s solicitor within [#] business days of receiving the fully executed assignment contract signed by the Vendor, and to the assignor’s solicitor within [#] business days of receiving the fully executed assignment contract signed by the Vendor;

b) the assignment amount included an amount to reimburse the Assignor for the Deposit of $[…] that was paid according to the APS, thus the Assignor’s profit before assignment fees and commissions was $[…];

c) the Assignor was required to pay, to the Vendor, an assignment and filing fee totalling $[…];

d) the Assignor was responsible for paying real estate commission to both the listing and selling agents in respect of the assignment of the Assignor’s rights in the APS, which was a total of $[…];

e) the Assignor’s accountancy fees, $[…], and legal fees and related disbursements, estimated to be $[…], totalled $[…];

f) the Assignor’s loss after fees and commissions was $[…]; and

g) the assignment amount (that is, $[…]) was inclusive of any [GST/HST] payable with respect to the assignment of the Assignor’s rights in the APS, and the Assignor must remit any [GST/HST] payable.

13. In a signed document […], the Assignor and Assignees agree and acknowledge that the Assignees are third parties to the Assignor.

14. At the time that the Assignor assigned their rights in the APS to the Assignees, the Unit had not been registered as a condominium complex, and was not occupied.

RULING REQUESTED

You would like a ruling that the Assignor is not a builder of the Unit under paragraph (d) of the definition of “builder” in subsection 123(1) and that the Assignor’s assignment of his rights pursuant to the Agreement is an exempt supply under section 2 of Part I of Schedule V.

RULING GIVEN

Based on the information set out in the statement of facts, we rule that the Assignor is not a builder of the Unit under paragraph (d) of the definition of “builder” in subsection 123(1) and that the assignment of rights under the Agreement by the Assignor is an exempt supply.

EXPLANATION

Upon entering into an agreement for the purchase and sale of a new residential condominium unit that has yet to be constructed, the purchaser is considered to have acquired an interest in the residential condominium unit. An assignment of such an agreement of purchase and sale is considered to be a supply by way of sale of the interest in the residential condominium unit. Pursuant to section 2 of Part I of Schedule V, the supply by way of sale of an interest in a residential condominium unit (for example, the assignment of the Agreement with respect to the Unit) is generally an exempt supply for GST/HST purposes where the person selling the interest is not a builder of the residential condominium unit.

The term “builder” is defined in subsection 123(1). Generally, paragraph (d) of the definition provides that a person is a builder of a residential complex (for example, a residential condominium unit) where the person acquires an interest in the complex

(i) in the case of a condominium complex or residential condominium unit, at a time when the complex is not registered as a condominium, or

(ii) in any case, before it has been occupied by an individual as a place of residence or lodging,

for the primary purpose of

(iii) making one or more supplies of the complex or parts thereof or interests therein by way of sale, or

(iv) making one or more supplies of the complex or parts thereof by way of lease, licence or similar arrangement to persons (other than to individuals who are acquiring the complex or parts otherwise than in the course of a business or an adventure or concern in the nature of trade).

However, a person that meets the conditions in paragraph (d) of the definition of “builder” might nonetheless be excluded from the definition if the person meets the conditions set out in subparagraph (f)(iii). Generally, subparagraph (f)(iii) of the definition provides that a person is not a builder of a residential complex if the person is an individual who acquires the complex or interest in it, otherwise than in the course of a business or an adventure or concern in the nature of trade.

The matter of whether an individual is a builder of a residential complex under paragraph (d) of the definition of “builder” in subsection 123(1) depends, in part, on the primary purpose for which the individual acquires an interest in the complex. The primary purpose for which the individual acquires the interest in the complex is a question of fact that can only be judged by outward indicators (that is, the presence or absence of physical actions and/or evidence).

Generally, if an individual acquires an interest in a residential complex (that is, acquires the interest in the complex before it has been occupied by an individual as a place of residence or lodging) and sells the interest before or while the complex is under construction, then the action of selling the interest is viewed strongly as evidence that the individual acquired the interest in the complex for the primary purpose of selling the interest in the course of a business or an adventure or concern in the nature of trade.

By definition, the Assignor did not sell their interest in the course of a business as they are not engaged in buying and selling real property on a regular or continuous basis. They are also not considered to have sold their interest in the course of an adventure or concern in the nature of trade as this would have required a profit-making scheme. As summarized in Fact #12, the interest in the Unit was sold at a loss when closing costs were factored into the sales figures. As stated in Fact #11, the Unit’s geographical location placed it in a strong housing market where the Assignor could likely have sold it at a higher price. The choice to sell at a loss shows the Assignor’s motivation to sell was not for profit. Therefore, the Assignor sold their interest in the Unit otherwise than in the course of a business or an adventure or concern in the nature of trade. Consequently, the Assignor is not a builder of the Unit under paragraph (d) of the definition of “builder” in subsection 123(1). The exemption in Section 2 of Part I of Schedule V applies to make the Assignor’s sale of the interest in the Unit an exempt supply, therefore GST/HST does not apply to the sale.

Recovering the [GST/HST] paid in error

Where the Assignor has paid the [GST/HST] in error on the exempt sale, they may be entitled to make an application under subsection 261(1) for a rebate of the tax paid in error by completing and submitting application form GST189, General Application for GST/HST Rebates. It should be noted that a rebate application made under section 261 cannot include amounts that were paid in error more than two years before the application is filed.

For further information on claiming a rebate of tax paid in error, including the documentation required to be included with your claim, please refer to Guide RC4033, General Application for GST/HST Rebates.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the interpretation(s) or the additional information provided herein.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 506-349-7596. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Nicole Collins
Real Property Unit 2
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 [...][real estate report]

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.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

Case Number: 213839

[Addressee]

Dear [Client]:

Subject: GST/HST Ruling
Sale of Vacant Land

Thank you for your fax of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the sale of vacant land.

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

We understand the following from the documents and information you provided on [mm/dd/yyyy]:

1. On [mm/dd/yyyy], you [...] purchased two adjacent parcels of waterfront property (parcels 1 and 2) in [City 1, Province 1].

2. During the same year, each parcel was subdivided into two, resulting in the following four parcels:

* PID [#] (parcel 1-A)

* PID [#] (parcel 1-B)

* PID [#] (parcel 2-A)

* PID [#] (parcel 2-B)

3. On [mm/dd/yyyy], you purchased a parcel of land abutting the other four parcels noted in Fact #2, PID [#] (parcel 3).

4. All parcels consist of vacant land.

5. On [mm/dd/yyyy], the plan of subdivision [#] (the “Plan”) was registered in [City 1], under the provincial laws of [Province 1]. Under that plan, part of parcel 3 was added to each of parcels 1-A, 1-B, 2-A, and 2-B in such a way as to enlarge each one by extending the boundary lines of those four waterfront parcels into parcel 3. This resulted in the creation of parcels 1-AD, 1-BC, 2-AB and 2-BA, which kept the same PID numbers as parcels 1-A, 1-B, 2-A, and 2-B, respectively.

6. You intend to list for sale each of the four parcels, and each is intended to be sold to an unrelated person.

7. You are not in the business of buying and selling real property, and you are not registered for GST/HST purposes.

RULING REQUESTED

You would like to know whether the sale of parcels 1-AD, 1-BC, 2-AB or 2-BA would be subject to GST/HST.

RULING GIVEN

Based on the facts set out above, we rule that the sale of any of parcels 1-AD, 1-BC, 2-AB or 2-BA would be a taxable supply subject to the GST/HST.

EXPLANATION

Generally, all sales of real property made in Canada are taxable unless specifically exempted.

Subsection 9(2) of Part I of Schedule V exempts the sale of real property by an individual, subject to certain exceptions. In particular, the sale of real property by an individual is excluded from the subsection 9(2) exemption pursuant to paragraph 9(2)(c), if the individual sells part of a parcel of land which the individual has subdivided or severed. However, paragraph 9(2)(c) will not apply in the case of the following exceptions:

* where the parcel of land was subdivided or severed into only two parts, and the individual did not subdivide or sever that parcel from another parcel of land, or

* where the recipient in the sale of a part of the subdivided or severed land is a related individual, former spouse or former common-law partner of the individual, and is acquiring the land for their own personal use and enjoyment, even if the land has been severed or subdivided into more than two parts.

As per the facts provided, the real property subject to a supply in the present case is any of parcels 1-AD, 1-BC, 2-AB or 2-BA. For the purposes of paragraph 9(2)(c), each of these parcels is comprised of a part of parcel 1 or 2, as well as a part of parcel 3.

There is no statutory definition of the words “subdivide” or “sever” provided in the ETA. We consider that it is relevant to look to the ordinary meaning of the words as well as to any special meaning which may attach to the words in the context of real property law and as a result of their use in the ETA.

Black’s Law Dictionary 11th edition defines subdivision as follows:

subdivision… The division of a thing into smaller parts. A parcel of land in a larger development.

legal subdivision… The governmentally approved division of a tract of land into smaller parcels using ordinary and legally recognized methods for surveying and platting land and publicly recording the results.

[…][The relevant Province 1 Legislation] defines subdivision as follows:

[…];

[…][The relevant City 1 By-law] defines subdivision as follows:

[…].

Black’s Law Dictionary 11th edition defines severance as follows:

severance… The act of cutting off or severing; the quality, state, or condition of being cut off or severed.

The word “sever” or “severance” is not defined in […][the relevant Province 1 Legislation] or in […][the relevant City 1 By-law].

We consider that parcel 3 in this case was severed into four parts, further to the addition of the four parts of parcel 3 to enlarge parcels 1-A, 1-B, 2-A and 2-B. Even though the parcel identification numbers remain identical, it is clear that the land composing the remaining four parcels has changed after the consolidation, and includes parts of parcel 3, as well as the subdivided parts of parcel 1 and 2.

As Parcel 3 is considered to have been severed into four parts, once these parts are added to the four other parcels, each of the remaining parcels (1-AD, 1-BC, 2-AB, 2-BA) are comprised of part of a parcel (parcel 3) that was severed into more than two parts, even if another part of the real property (parcels 1-A, 1-B, 2-A, 2-B) is part of a parcel (parcel 1 or 2) which was not severed or subdivided in more than two parts.

The sale of any of the resulting parcels is consequently taxable, as it will be excluded from exemption by reason of paragraph 9(2)(c) of Part I of Schedule V, unless the exception to exclusion in subparagraph 9(2)(c)(ii) applies, for land sold to a related individual or former spouse for personal use and enjoyment.

For more information, please refer to GST/HST Memorandum 19-5, Land and Associated Real Property.

ADDITIONAL INFORMATION

Taxable sale of real property by a non-registrant

When you are not registered for GST/HST purposes, and you make a taxable sale of real property, you generally must charge and collect the tax on the sale, even though you are not registered.

When you collect an amount of tax on a taxable sale of real property, you must then report the tax on line 103 of Form GST62, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return (Non-personalized), by the end of the month following the month in which the tax became collectible and remit the net tax due with that return. Only Form GST62 in a pre-printed format may be used, therefore, to order a pre-printed Form GST62 go to canada.ca/get-cra-forms.

Please note that you do not collect the tax from the purchaser when you make a taxable sale of real property, if the purchaser is registered for GST/HST purposes. In this case, the purchaser has to pay any tax due on their purchase directly to the CRA.

For more information please refer to GST/HST Guide RC4022, General Information for GST/HST Registrants, under the heading of “Who remits the tax for a taxable sale of real property – Vendor or purchaser?”.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 514-213-6075. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Stéphanie Blanchette
Real Property Unit 2
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

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.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 216320

Dear [Client]:

Subject: GST/HST RULING
Transfer of ownership of a Trailer

Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the transfer of ownership of your […][travel trailer].

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

We understand the following further to the documents and information you provided on [mm/dd/yyyy]:

1. You […], along with […](the “Co-owners”), own a […][yyyy model […] travel trailer] (VIN [#])[the Trailer], […].

2. […][The Trailer] was acquired on [mm/dd/yyyy], from […] (the “Vendor”).

3. […].

4. […].

5. [The Trailer] was never used in any business, adventure or concern in the nature of trade or supplied by way of lease, licence or similar arrangement.

6. You and the Co-owners are not in the business of buying and selling personal property […].

7. You and the Co-owners are not registered for GST/HST purposes.

8. Since the Co-owners no longer wish to use [the Trailer] due to their age, they intend to transfer their part of ownership in [the Trailer] to You.

RULING REQUESTED

You would like to know if the transfer of [the Co-owners’ part of] ownership of [the Trailer], from [the Co-Owners] to you, would be subject to the GST/HST.

RULING GIVEN

Based on the facts set out above, we rule that the transfer of [the Co-owners’ part of] ownership of [the Trailer], from [the Co-owners] to you, would not be subject to the GST/HST.

EXPLANATION

Section 165 provides that every recipient of a taxable supply made in Canada shall pay tax in respect of the supply. A “taxable supply” is defined in subsection 123(1) as a “supply that is made in the course of a commercial activity”.

As per subsection 123(1), “supply” means “the provision of property or a service in any manner, including sale, transfer, barter, exchange, licence, rental, lease, gift or disposition”.

A “commercial activity”, as defined in subsection 123(1), means a “business carried on by a person”, “an adventure or concern in the nature of trade”, or the “supply by the person of real property”, and excludes the making of exempt supplies.

In order to determine if […][the transaction] is subject to GST/HST, we must first analyze if it constitutes a “supply” in itself.

Based on our understanding of the information provided to us, we have determined the transfer of ownership of [the Trailer] to be a supply of personal property. As per the definition of supply in subsection 123(1), the transfer of ownership from the Co-owners to You is the “provision of property in any manner”. Moreover, since [the Trailer] is not real property, it is personal property, as per subsection 123(1).

For the supply to be subject to GST/HST as a taxable supply, it needs to be made in the course of a commercial activity. Since the supply of […][the Co-owners’ part of ownership of the Trailer] to You is not made in the course of a business, adventure or concern in the nature of trade, nor does it constitute the supply of real property, it is not a taxable supply.

Consequently, the supply of [the Trailer] is not subject to GST/HST.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly […]. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Stéphanie Blanchette
Real Property Unit 2
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

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.

[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

Case Number: 99181

February 14, 2012

Dear [Client]:

Subject:

GST/HST RULING
Supply of Intangible Personal Property [to a non-resident recipient]

Thank you for your fax of October 29, 2007 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of intangible personal property. We apologize for the delay in replying.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.

Statement of Facts

We understand the facts as submitted to be:

[...] (the 'Resident Supplier') is a Canadian resident company registered for GST/HST purposes.

[...] (the 'Non-Resident Recipient') is a non-resident, non-registrant company located in [...][Country X].

As described in the provided Agreement between the parties, effective [mm/dd/yyyy], the Resident Supplier has agreed to supply the Non-Resident Recipient with the non-exclusive use rights to information belonging to the Resident Supplier for an up front payment of CD$[...] and contingent payments of CD$[...] in each of the succeeding [...] years.

The Agreement contains no terms or conditions with respect to the location of the [...] use of the rights.

Ruling Requested

You would like to know if the supply of the rights by the Resident Supplier to the Non-Resident Recipient is a zero-rated supply.

Ruling Given

Based on the facts set out above, we rule that the supply of the rights by the Resident Supplier to the Non-Resident Recipient is a zero-rated supply of intangible personal property pursuant to section 10.1 of Part V of Schedule VI of the ETA.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

The supply of the rights is a supply intangible personal property.

Pursuant to paragraph 142(1)(c) of the ETA, a supply of intangible personal property is deemed made in Canada if,
(i) the property may be used in whole or in part in Canada, or
(ii) the property relates to real property situated in Canada, to tangible personal property ordinarily situated in Canada or to a service to be performed in Canada;

Since the rights supplied can be used in whole or in part in Canada, the supply is deemed made in Canada.

A supply of intangible personal property that is deemed made in Canada may be a zero-rated (taxable at 0%) supply under Part V of Schedule VI to the ETA.

Pursuant to section 10.1 of Part V of Schedule VI, a supply of intangible personal property is zero-rated where the supply is made to a non-resident person who is not registered under Subdivision d of Division V of Part IX of the ETA at the time the supply is made, but not including:

(a) a supply made to an individual unless the individual is outside Canada at that time;
(b) a supply of intangible personal property that relates to
(i) real property situated in Canada,
(ii) tangible personal property ordinarily situated in Canada, or
(iii) a service the supply of which is made in Canada and is not a zero-rated supply described by any section of this Part or Part VII or IX;
(c) a supply that is the making available of a telecommunications facility that is intangible personal property for use in providing a service described in paragraph (a) of the definition "telecommunication service" in subsection 123(1) of the ETA;
(d) a supply of intangible personal property that may only be used in Canada; or
(e) a prescribed supply.

Based on the facts, none of the exclusions apply in this case and therefore the supply of the IPP is a zero-rated supply.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 957-8220.

Yours truly,
Kevin W. Smith
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

UNCLASSIFIED

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.

[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

Case Number: 140575

March 5, 2012

Dear [Client]:

Subject:

GST/HST RULING
Services Rendered in Connection with Litigation

Thank you for your letter of November 11, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to certain services provided by [...]([...][the Company]) to [...]([...][ABC]) in connection with [...][litigation].

HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

Statement of Facts

We understand the following:

1. [...]. [The Company] is registered for GST/HST purposes.

2. [The Company] was hired by [ABC] [...] to provide services to [ABC] in respect of the [litigation].

3. [The Company] was hired by [ABC] after [...] in respect of the [litigation].

4. According to [...] (Statement of Work) to the agreement between [the Company] and [ABC], [the Company] is being hired [...][Direct quote]. In addition, the assistance of [the Company] is required to [...]
5. Also according to [...] the agreement between [the Company] and [ABC], [the Company] will be requested to carry out a number of services and deliverables including: [...]

6. The [litigation] is under the jurisdiction of the [...], which was established under the laws of [...][participating province X].

Ruling Requested

You request a ruling that the services described above and in the [Statement of Work] that are supplied by [the Company] to [ABC] are services in connection with litigation in [participating province X] that are made in [participating province X] and subject to HST at a rate of [...]%.

Ruling Given

Based on the information provided, we rule that the services described above and in the [Statement of Work] that are supplied by [the Company] to [ABC] are services in connection with litigation in [participating province X] that are made in [participating province X] and subject to HST at a rate of [...]%.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

A taxable supply (other than a zero-rated supply) of a service made in Canada is subject to GST at 5% when it is deemed to be made in a non-participating province, and is subject to HST at the applicable rate when it is deemed to be made in a participating province. The participating provinces are Ontario, Nova Scotia, New Brunswick, British Columbia, and Newfoundland and Labrador.

The ETA has various rules to determine whether a supply that is made in Canada is made in a province. Under section 144.1, a supply that is made in Canada is also considered to be made in a particular province if it is determined to be made in the province under the place of supply rules in Schedule IX. In any other case, the supply is deemed to be made in a non-participating province. Pursuant to section 3 of Part IX of Schedule IX, notwithstanding the rules in Schedule IX, a supply is made in a province if the supply is prescribed by regulation to be made in the province.

Section 27 of Part 1 (Place of Supply) of the New Harmonized Value-Added Tax System Regulations (Regulations) reads as follows:

27. Services rendered in connection with litigation - A supply of a service rendered in connection with criminal, civil or administrative litigation (other than a service rendered before the commencement of such litigation) that is under the jurisdiction of a court or other tribunal established under the laws of a province, or in the nature of an appeal from a decision of a court or other tribunal established under the laws of a province, is made in that province.

The determination of when civil litigation commences for purposes of section 27 of the Regulations is made based on the same guidelines that are set out in GST/HST Policy Statement P-206 - Litigation Services Supplied to Non-Resident Individuals. In accordance with these guidelines, the Canada Revenue Agency generally considers that civil litigation commences on the day that the originating process (i.e., Statement of Claim, Writ of Summons in the province of Quebec, Notice of Application, Petition, etc.) is filed with the court in accordance with the rules of civil procedure in a particular provincial or territorial jurisdiction.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-8812. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,
Jeff Frobel
Industry Sector Specialist
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

UNCLASSIFIED

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.

[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

Case Number: 141139

January 9, 2012

Dear [Client]:

Subject:

GST/HST RULING
Temporary Importation - Racing [...] Equipment

Thank you for your letter of January 5, 2012 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the temporary importation of [...] [racing] equipment.

HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

Statement of Facts

We understand the facts to be as follows:

1. Your client, [...] [the Company] is a non-resident located in [...] [Country X] and is in the business of [...].

2. [The Company] is planning to temporarily import [racing] equipment [...].

3. [...].

4. The [racing] equipment [...] [is] not for sale, for lease or for further manufacturing or further processing.

5. The Canada Border Services Agency has determined that the conditions of item 38 of the schedule to the Temporary Importation (Excise Levies and Additional Duties) Regulations are met for the temporary importation of the [racing] equipment.

Ruling Requested

You would like to know whether the temporary importation by [the Company] of [racing] equipment is a non-taxable importation for GST/HST purposes.

Ruling Given

Based on the facts set out above, we rule that the importation by [the Company] of the [racing] equipment is a non-taxable importation for GST/HST purposes pursuant to section 8 of Schedule VII to the Excise Tax Act (ETA), section 213 of the ETA and subparagraph 3(i)(ii) of the Non-Taxable Imported Goods (GST/HST) Regulations.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

Generally, all goods imported into Canada are taxable for GST/HST purposes unless specifically relieved under section 213 of the ETA. Importations of goods relieved of tax under section 213 are set out in Schedule VII to the ETA. Section 8 of Schedule VII to the ETA deems prescribed goods that are imported in prescribed circumstances into Canada to be non-taxable for GST/HST purposes. Subparagraph 3(i)(ii) of the Non-Taxable Imported Goods (GST/HST) Regulations includes goods described in item 38 of the schedule to the Temporary Importation (Excise Levies and Additional Duties) Regulations when a non-resident person imports the goods in circumstances where the terms and conditions of the regulations have been met.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-4294. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,
Donato Licursi
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

UNCLASSIFIED

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.

[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

Case Number: 142629

Business Number: [...]

March 14, 2012

Dear [Client]:

Subject:

GST/HST RULING
Application of GST/HST to the sale [...] of coins

Thank you for your faxes of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale [...] of coins.

HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

Statement of Facts

Based on our conversation in [mm/yyyy], the information available on your website and the product information you provided by fax, we understand the following:

1. [...] (Coin Seller) is [...]

2. Coin Seller is registered for GST/HST purposes under Business Number [...].

3. Coin Seller understands that some coins are exempt from GST/HST if they meet a certain level of purity. Accordingly, some coins sold [...] are treated by Coin Seller as exempt supplies.

4. The following [coins] [...] will be sold by Coin Seller:

• [...][Coins A]
• [...][Coins B]

5. The [...] coins come in [...].

6. [...]. [Quantity to be sold described]
7. [...]. [Availability of some coins described]
Ruling Requested

You would like to know whether:

1. The sale made by the Coin Seller of [...][Coins A] is a taxable supply.

2. The sale made by the Coin Seller of [...][Coins B] is a taxable supply.

Ruling Given

Based on the facts set out above, we rule that:

1. The sale made by the Coin Seller of [Coins A] is a taxable supply.

2. The sale made by the Coin Seller of [Coins B] is a taxable supply.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

Supplies of goods and services that are made in Canada are taxable supplies subject to the GST in the non-participating provinces and HST in the participating provinces, unless the supply is specifically identified as being an exempt supply or a zero-rated supply. "Zero-rated supplies" are taxable at the rate of 0% and are listed in Schedule VI. "Exempt supplies" are listed in Schedule V and are not subject to the GST/HST.

Supplies of financial services are exempt under Part VII of Schedule V unless they are specifically listed as zero-rated under Part IX of Schedule VI. A financial service generally involves a transaction relating to a financial instrument or money. For example, paragraph (a) of the definition of financial service in subsection 123(1) provides that the exchange, payment, issue, receipt or transfer of money is a financial service.

Money is defined in subsection 123(1) to include currency, whether Canadian or foreign however, it does not include currency with a fair market value that exceeds its stated value as legal tender in the country of issuance or currency that is supplied or held for its numismatic value. [Coins A] and [Coins B] are not considered money since each of these coins is currency with a fair market value that exceeds its stated value as legal tender in the country of issuance, and is currency supplied or held for their numismatic value.

Where the coin is not included in the definition of money as discussed above, the supply of a coin would generally be taxable unless the supply is a financial service under paragraph (d) of that definition. Paragraph (d) of the definition of financial service in subsection 123(1) includes the transfer of ownership of a financial instrument.

The definition of a financial instrument in subsection 123(1) includes a "precious metal". A precious metal is defined in that same subsection to mean "a bar, ingot, coin or wafer that is composed of gold, silver or platinum and is refined to a purity level of at least
(a) 99.5% in the case of gold and platinum, and
(b) 99.9% in the case of silver.

In this context, a bar, ingot or wafer at the required purity levels must be generally recognized and accepted for trading on Canadian financial markets. Typically, these products will bear markings that indicate the purity level of the metal and have an identification mark of the issuing financial institution or refinery. With respect to a "coin", only those metals at the required purity levels that have been issued by a government authority and that may be used as currency will qualify as a "precious metal". On its own, the sale of a coin that is a precious metal would be an exempt supply and the sale of a coin that is not money and not a precious metal would be a taxable supply.

[Coins A] and [Coins B] [...] contain elements that are precious metals. Specifically, [...] coins [...] meet the definition of precious metal. However, [...][coins] does not meet the purity level required to be considered a precious metal.

As [...][Coins A and Coins B] [contain] elements that would be taxable and others that would be exempt, it must first be determined whether a single supply or multiple supplies are being provided by the Coin Seller.

For GST/HST purposes, the determination of whether a transaction consisting of several elements is to be regarded as a single supply or multiple supplies is based on a determination of fact. GST/HST Policy Statement, P-77R2 - Single and Multiple Supplies, provides additional information on how to determine whether there is a single supply or there are multiple supplies.

When performing an analysis, it is important that the analysis be confined to the transaction at issue, rather than referring to other possible transactions containing the same or similar elements. This process should not involve artificially splitting something that commercially is a single supply.

[...]. None of [Coins A or Coins B] can be substituted for another and the intention of the consumer is to purchase [Coins A or Coins B] as a single product. [...][Coins A and Coins B are each] a single supply. Even if an element of [Coins A or Coins B] is a precious metal, the predominant element of the supply is a taxable supply of [Coins A or Coins B] and therefore, [Coins A and Coins B are] each [...] a single taxable supply.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9211. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,
Hélène Bustamante
Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

UNCLASSIFIED