GST/HST Ruling

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: 129278

March 30, 2021

Dear [Client]:

Subject: GST/HST RULING
[…][Manual Osteopathic Services]

Thank you for your [correspondence] […], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of osteopathic services made by Osteopathic Manual Practitioners. 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 the following:

1. Osteopathy is a specific manual assessment and treatment methodology whereby an osteopathic practitioner uses palpation skills to assess, treat, and evaluate the various body structures and functions within the musculoskeletal, respiratory, cardiovascular, digestive, reproductive, lymphatic, vascular and neurological systems. Osteopathy uses a variety of techniques and modalities to achieve optimal and balanced health and to maintain or restore normal function.

2. […][Information about organizations for Osteopathic Manual Practitioners in Canada and in the Provinces]

3. […][More Information about organization for Osteopathic Manual Practitioners]

4. There are several providers of manual osteopathic education in Canada. According to your letter, the highest standard of education for Osteopathic Manual Practitioners consists of a minimum five-year post graduate academic, clinical and research program of manual osteopathic education (Program) with faculty consisting of, and clinical supervision by, Osteopathic Manual Practitioners.

5. In order to be admitted to the Program, a prospective student must have obtained a degree from an accredited university and must be registered to practice with a provincial health regulatory college. In Ontario, for instance, the student must be registered with a regulatory college, in accordance with the Regulated Health Professions Act, 1991 and the regulations thereunder. This prerequisite allows the student to interface with patients or clients as a regulated health professional. For example, in Ontario, a physiotherapist with a university degree can seek admission to the Program provided they are registered with the College of Physiotherapists of Ontario.

6. Under this particular standard of education, in order to become an Osteopathic Manual Practitioner, a student must complete a mandatory thesis and dissertation defence within two years of completing the five-year Program. A student must also complete the required number of supervised clinical hours.

7. There are […] educational institutions in Canada that offer this particular standard of manual osteopathic education. The […] Collège d'Études Ostéopathiques (CEO) in Montréal, […] has been operating since 1982. The Canadian College of Osteopathy (CCO), with branches in Toronto, Halifax, Vancouver, Calgary and Winnipeg, […]. The Canadian Academy of Osteopathy and Holistic Health Sciences (CAO) in Hamilton […] [also] offers this standard of education.

8. Students graduate from the CCO and the CEO with a Diploma in Osteopathic Manual Practice and the designation “D.O.M.P.” or a Diploma of Osteopathy (Québec) “DO(Qc)”. Students graduate from the CAO with a Diploma in Osteopathy Manipulative Theory and Practice (DOMTP). According to your letter, [the DO(Qc) designation and] the D.O.M.P. […][designation] […][identify] practitioners as graduates of the CCO and CEO programs in Osteopathic Manual Practice and demonstrate that the manual practitioner has achieved the required standard of education and training in the area of osteopathy, and that this credential verifies that particular individual’s skill and experience.

9. The World Osteopathic Health Organization (WOHO) is an organization that promotes, develops and establishes, throughout the world, the study, philosophic tenets, science, and practice of osteopathy. WOHO seeks to ensure the worldwide availability of manual osteopathic practice of the highest standard and its integration into existing health services in various countries. The requirement of the standard of education in Canada to complete a minimum number of supervised clinical hours (noted in Fact #6 above) is necessary in order to meet the international standards set by WOHO. […][Members of certain organizations for Osteopathic Manual Practitioners in Canada and in the Provinces may be] members of WOHO.

10. In 2003, the World Health Organization (WHO) released a Resolution promoting the integration of traditional/complementary and alternative medicine into national health care systems. In November 2010, the WHO, working in conjunction with the WOHO, released the Benchmarks for Training in Osteopathy (Benchmarks). According to your letter, the Benchmarks publication represents what the community of practitioners, experts and regulators of osteopathy considers to be necessary educational models for osteopathic practitioners and it provides the training benchmarks for practitioners with different healthcare backgrounds as well as contraindications for safe practice of osteopathy. The Canadian educational standard described above meets the standards described in the Benchmarks publication.

11. The services provided by members of […][certain organizations for Osteopathic Manual Practitioners in Canada and in the Provinces] are covered by a number of health and auto insurance plans in Canada (that is, they are covered by certain non-provincial health care insurance plans). You provided a sample of insurance plan coverage […].

Please note that, in this ruling, the terms “manual osteopathic services”, “Osteopathic Manual Practitioner” and “manual osteopathy” do not refer to the profession of osteopathy that is practised by an Osteopathic Physician (as described in Fact #9 above).

RULING REQUESTED

You would like us to confirm that manual osteopathic services provided by Osteopathic Manual Practitioners are exempt from GST/HST pursuant to section 7 of Part II of Schedule V.

RULING GIVEN

Based on the facts set out above, we rule that a supply of manual osteopathic services rendered by an Osteopathic Manual Practitioner is not exempt from GST/HST under section 7 of Part II of Schedule V. Therefore, where no other exempting provision applies, the supply will be taxable for GST/HST purposes at a rate of 5%, 13% or 15%, depending on the province in which the supply is made.

EXPLANATION

Generally, most supplies of property and services made in Canada are subject to GST/HST, unless they are specifically exempt under Schedule V or zero-rated (taxed at 0%) under Schedule VI. Part II of Schedule V sets out the health care services that are exempt from GST/HST. A supply of a health care service rendered by a health care professional that is not included in Part II is generally subject to GST/HST.

Section 7 of Part II of Schedule V

Section 7 of Part II of Schedule V exempts from GST/HST the supply of an optometric, chiropractic, physiotherapy, chiropodic, podiatric, osteopathic, audiological, speech-language pathology, occupational therapy, psychological, midwifery, acupuncture or naturopathic services rendered to an individual when a practitioner provides the service. Therefore, in order for a supply to be exempt pursuant to section 7, the supply must be a supply of a service listed in section 7 and the supply must also be rendered to an individual by a practitioner of that service.

Section 1 of Part II of Schedule V defines “practitioner” in respect of a supply of optometric, chiropractic, physiotherapy, chiropodic, podiatric, osteopathic, audiological, speech-language pathology, occupational therapy, psychological, midwifery, dietetic, acupuncture or naturopathic services to mean a person who

(a) practises the profession of optometry, chiropractic, physiotherapy, chiropody, podiatry, osteopathy, audiology, speech-language pathology, occupational therapy, psychology, midwifery, dietetics, acupuncture or naturopathy as a naturopathic doctor, 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.

For purposes of section 7, to be a practitioner in respect of osteopathic services, a person must be licensed or otherwise certified to practise the profession of osteopathy in the province in which the service is supplied (paragraph (b) of the definition of practitioner), or, where the person is not required to be licensed or otherwise certified to practise the profession in that province, the person must have the qualifications equivalent to those necessary to be so licensed or otherwise certified in another province (paragraph (c) of that definition).

In order to be licensed or otherwise certified to practise a particular health profession in a province, a person must have a licence or other certification required by a provincial regulatory body responsible for the regulation of the health profession in that province. The role of these provincial regulatory bodies and the authority to monitor and regulate their respective health professions is set out in provincial legislation.

In Ontario, the practice of osteopathy is regulated in conjunction with the practice of medicine under the Medicine Act, 1991 and falls under the jurisdiction of the College of Physicians and Surgeons of Ontario (College). Subsection 9(1) of the Medicine Act, 1991 provides, in part, that no person other than a member of the College shall use the title “osteopath” or any variation or equivalent. Further, pursuant to subsection 9(3) of the Medicine Act, 1991, no person other than a member of the College shall hold himself or herself out as a person who is qualified to practise as an osteopath in Ontario.

Therefore, with respect to supplies of services made in Ontario, an Osteopathic Manual Practitioner, such as a person who possesses a Diploma in Osteopathy Manual Practice, is not a practitioner for purposes of section 1 of Part II of Schedule V and, consequently, a supply of manual osteopathic services rendered by such an Osteopathic Manual Practitioner is not exempt under section 7 of Part II of Schedule V.

With respect to supplies of manual osteopathic services made in provinces other than Ontario, the relevant provincial legislation for each province or territory was reviewed in order to identify any provincial licensing or certification requirements. Based on this review, it is our understanding that there are no provincial licensing or certification requirements in any province or territory in Canada for the profession of manual osteopathy and, accordingly, there are no provincial regulatory bodies responsible for the regulation of the profession of manual osteopathy.

As manual osteopathy is not currently regulated as a health profession in any province or territory, Osteopathic Manual Practitioners do not need to be licensed or otherwise certified to practise the profession of osteopathy. As such Osteopathic Manual Practitioners do not meet the requirements to be licensed or certified or have the equivalent qualifications to be licensed or certified in another province and are not “practitioners” for GST/HST purposes. Therefore, supplies made by a Osteopathic Manual Practitioner are not exempt under section 7.

We understand that there has been some confusion regarding the tax status of supplies made by Osteopathic Manual Practitioner . In response to this, the CRA published the article “The application of GST/HST to manual osteopathic services” in Excise and GST/HST News – No. 108 which stated:

There have been no changes to the legislation related to supplies of manual osteopathic services and the CRA has consistently communicated the tax status of these supplies over the years. However, we understand that some in the osteopathic community may have believed that their services were exempt and are not currently registered for the GST/HST. To assist the community, the CRA is taking an educational approach and encouraging the manual osteopathic practitioners to register, if they are not a small supplier. Moving forward, they will need to collect, file, and remit (pay) the GST/HST on their manual osteopathic services.

The CRA reserves the right to assess retroactively where continuous and/or severe non-compliance is observed for the period prior to September 2020. This could be the case where a manual osteopathic practitioner was previously advised that their services were taxable, that they needed to register, and neglected to do so.

The full article can be found on our website.

Section 9 of Part II of Schedule V

Section 9 of Part II of Schedule V exempts a supply (other than a zero-rated supply) of any property or service but only if, and to the extent that, the consideration for the supply is payable or reimbursed by the government of a province under a plan established under an Act of the legislature of the province to provide for health care services for all insured persons of the province. An "insured person" is defined in section 1 of Part II of Schedule V to have the same meaning as in the Canada Health Act. An example of a provincial health insurance plan described in section 9 is the Ontario Health Insurance Plan (OHIP).

It is a question of fact as to whether the consideration (or a portion of the consideration) for the supply of manual osteopathic services is paid or reimbursed by the government of a province under a plan described in section 9 of Part II of Schedule V to the ETA. Where the requirements of section 9 of Part II of Schedule V are met, the supply of manual osteopathic services would be exempt to the extent that the consideration for the supply is payable or reimbursed by a provincial health care plan.

Your [correspondence] […] indicates that the services provided by members of […][certain organizations for Osteopathic Manual Practitioners in Canada and in the Provinces] are covered by a number of health and auto insurance plans in Canada that are not provincial health insurance plans. Section 9 of Part II of Schedule V would not apply to a payment or reimbursement under these insurance plans as these plans are not established under an Act of the legislature of the province to provide for health care services for all insured persons of the province.

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 at 343-573-6076. 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,

Art Blommesteijn
Health Care Sectors Unit
Public Service Body 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: 162951

Dear [Client]:

Subject: GST/HST RULING
Tax status of supplies of real property in […][Province A]

Thank you for your fax of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of real property. I apologize for the delay in responding.

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 you provided in your letter, telephone conversations, the Application for Incorporation, and the Agreement of Purchase and Sale, we understanding following:

1. Your clients are […](the Union) and […](the Corporation).

2. The Trade Union established the Corporation for the purpose of purchasing a parcel of land upon which to construct a building (“Building” hereafter).

3. The [#] members of the Union are the owners of the Corporation.

4. The Corporation is registered as a non-profit organization (NPO). You have indicated that the Corporation is an NPO established primarily for the benefit of organized labour.

5. According to the Letters Patent and the Application for Incorporation of the Corporation Without Share Capital (“Articles” hereafter), the Corporation was incorporated on [mm/dd/yyyy] as a corporation without share capital and the objects for which the Corporation was incorporated are as follows:

a. To promote and foster the interest and well-being of members of [the Union];

b. To provide an organization for the gathering and disseminating of information and services related to employment, benefits and welfare of the members of [the Union]; and

c. To engage in such other complimentary purposes not inconsistent with the objects noted above.

6. The Corporation was registered for GST/HST purposes on [mm/dd/yyyy].

7. According to the Agreement of Purchase and Sale (“Agreement” hereafter) dated [mm/dd/yyyy]:

a. [The Union] agreed to purchase a vacant parcel of land (“Land” hereafter);

b. the address of the Land is […] and is legally described as: […];

c. the closing date of the Agreement is [mm/dd/yyy];

d. HST was not paid on the purchase of the Land.

8. You have indicated that the name on the purchase agreement was incomplete and that the Corporation purchased the Land.

9. The Corporation intends to construct and own a Building on the Land in [Province A] to house the administrative offices of the Union and […][for use by members of the Union].

10. The Corporation will retain the titles to both the Land and the Building.

11. The Union will be the sole tenant of the Building and will pay monthly rent at fair market value (FMV) to the Corporation for the use of the Building.

12. The Corporation will use the rental income to pay its expenses such as property taxes, mortgage payments, repairs and maintenance and utilities.

RULING REQUESTED

You would like to know:

1. Is the ongoing supply of office space made by the Corporation to the Union subject to the HST?

2. Can input tax credits (ITCs) in regards to the construction of the Building be claimed?

3. Does a self-assessment need to be completed when the construction of the Building is substantially completed?

4. Was it appropriate to purchase the Land without paying the HST and does a self-assessment need to be completed on the purchase of the Land?

RULING GIVEN

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

1. The ongoing supply of office space made by the Corporation to the Union is an exempt supply in accordance with section 26 of Part VI of Schedule V. Therefore, the supply is not subject to the HST.

2. The Corporation is not eligible to claim ITCs for tax payable on the construction of the building pursuant to subsection 209(1) in conjunction with subsection 199(2) and 199(4).

3. The Corporation is not required to self-assess the HST on the Building once it is substantially completed.

4. The land was purchased for use otherwise than primarily in commercial activities, therefore, paragraph 228(4)(b) requires the Corporation to self-assess the tax applicable on the acquisition of the land.

EXPLANATION

1. Is the ongoing supply of office space made by the Corporation to the Union subject to the HST?

Generally, supplies of real property are taxable pursuant to section 165 unless specifically exempted.

Part I of Schedule V provides exempting provisions related to real property. However, there are other relevant sections such as section 25 of Part VI of Schedule V, which applies to NPOs, and section 26 of Part VI of Schedule V, which applies to NPOs established primarily for the benefit of organized labour, provide exempting provisions for supplies of real property.

You have indicated that the Corporation is an NPO established primarily for the benefit of organized labour and the Union is a trade union. As such, section 26 of Part VI of Schedule V is applicable. This section exempts supplies made by an NPO established primarily for the benefit of organized labour to a trade union. Therefore, the ongoing supply of office space by the Corporation to the Union is an exempt supply pursuant to section 26 of Part VI of Schedule V.

2. Can ITCs in regards to the construction of the Building be claimed?

Generally, pursuant to subsection 169(1), a person who is registered for GST/HST purposes may claim an ITC for the GST/HST paid or payable on purchases of property to the extent that the property is to be used in the course of commercial activities of the person. Please note that the definition of commercial activity under subsection 123(1) excludes the making of exempt supplies. With respect to the construction of the Building by an NPO, subsection 209(1), in conjunction with subsections 199(2) and 199(4), provides that where an NPO purchases real property, or makes improvements to real property, for use primarily in exempt activities, the NPO is not eligible to claim ITCs for the tax payable on the purchase of, or improvements made to, the real property.

As we have determined above, the ongoing supply of office space made by the Corporation to the Union is an exempt supply under section 26 of Part VI of Schedule V. The Corporation will use the Building primarily in making exempt supplies. Consequently, the Corporation is not entitled to claim ITCs on the tax paid on the purchase of the Land or tax payable on the construction of the Building.

We refer you to GST/HST Memorandum 8.1, General Eligibility Rules for further information on claiming an ITC and GST/HST Memorandum 8.3, Calculating Input Tax Credits.

3. Does a self-assessment need to be completed when the construction of the Building is substantially completed?

As stated in the facts above, the Corporation plans to construct the building and supply office space by way of lease to the Union. The Building will not be used for residential purposes. The real property self-supply provisions in section 191 are only applicable in cases where the real property is used for residential purposes. Therefore, the Corporation is not required to complete a self-assessment of the building when the building is substantially completed.

4. Was it appropriate to purchase the Land without paying the HST and does a self-assessment need to be completed on the purchase of the Land?

Supplies of real property made in Canada are generally taxable under section 165, unless specifically exempted. Generally, the exempting provisions relating to supplies of real property are found in Part I of Schedule V. Assuming the supply of the Land by way of sale to the Corporation (the recipient) was a taxable supply, GST/HST must be collected pursuant to subsection 221(1).

More specifically, paragraph 221(2)(b) relieves a supplier who makes a taxable sale of real property from collecting the tax payable by the recipient of the supply in situations where the recipient is registered for GST/HST purposes.

Therefore, if the Corporation is the recipient of the supply of the Land and is registered for GST/HST purposes at the time the supply was made, then the supplier of the Land is relieved from collecting the HST and HST is not charged on the sale of the Land.

Please note that subsection 123(1) defines recipient of a supply of property or a service to mean

(a) Where consideration for the supply is payable under an agreement for the supply, the person who is liable under the agreement to pay that consideration,

(b) Where paragraph (a) does not apply and consideration is payable for the supply, the person who is liable to pay that consideration, and

(c) Where no consideration is payable for the supply,

(i) In the case of a supply of property by sale, the person to whom the property is delivered or made available,

(ii) In the case of a supply of property otherwise than by way of sale, the person to whom possession or use of the property is given or made available, and

(iii) In the case of a supply of a service, the person to whom the service is rendered,

And any reference to a person to whom a supply is made shall be read as a reference to the recipient of the supply

That being said, where subsection 221(2)(b) applies, the recipient of the supply of real property is required to self-assess the tax payable under subsection 228(4), which states

(4) Where tax under Division II is payable by a person in respect of a supply of real property and the supplier is not required to collect the tax and is not deemed to have collected the tax,

(a) where the person is a registrant and acquired the property for use or supply primarily in the course of commercial activities of the person, the person shall, on or before the day on or before which the person's return for the reporting period in which the tax became payable is required to be filed, pay the tax to the Receiver General and report the tax in that return; and

(b) in any other case, the person shall, on or before the last day of the month following the calendar month in which the tax became payable, pay the tax to the Receiver General and file with the Minister in prescribed manner a return in respect of the tax in prescribed form containing prescribed information.

You indicated […] on [mm/dd/yyyy] and [mm/dd/yyyy] that the Corporation was the recipient of the land. It was purchased for use otherwise than primarily in commercial activities (e.g., uses the property 50% or more in making exempt supplies such as the supply of office space made by the Corporation to the Union described above), paragraph 228(4)(b) requires the Corporation, which is registered, to self-assess the tax applicable to the acquisition of the land by filing return GST60, GST/HST Return for Acquisition of Real Property. This form is required to be filed, along with the relevant payment, by the end of the month following the calendar month in which the purchase of the real property took place.

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 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 2 Unit
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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 144550
Business Number: […]

December 18, 2012

Dear [Client]:

Subject:	GST/HST RULING
		GST/HST Application to the importations of phosphoric acid and phosphate rock

Thank you for your letter of May 4, 2012, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the importations of phosphoric acid and phosphate rock.

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. […] (the Company) is a supplier of agricultural products and services in […].

2. The Company imports two products (the Products) for […]: phosphoric acid (Product A) and phosphate rock (Product B).

3. Product A is a liquid material […].

4. Product B is a raw material […]. Product B can be supplied in various sizes, from granular to larger rock sized.

5. The Products are not suitable for use as fertilizer at the time of import.

RULING REQUESTED

You would like to know if the importations of phosphoric acid and phosphate rock are non-taxable importations for GST/HST purposes.

RULING GIVEN

Based on the facts set out above, we rule that importations of phosphoric acid and phosphate rock are taxable importations for GST/HST purposes.

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

Most supplies of goods and services that are made in the participating provinces are taxable supplies subject to the HST (15% in Nova Scotia, 13% in Ontario, New Brunswick, Newfoundland and Labrador, and 12% in British Columbia), and subject to 5% GST in all other provinces, unless a relieving provision applies.

Pursuant to section 6 of Schedule VII to the ETA, importations of goods are non-taxable where the supply of the good is included in any of Parts I to IV and VIII, other than section 3.1 of Part IV of Schedule VI to the ETA. Under section 5 of Part IV of Schedule VI to the ETA a supply of fertilizer (other than a good sold as soil or as a soil mixture, whether or not containing fertilizer) made to a recipient at any time is zero-rated when it is supplied in bulk or in a container that contains at least 25 kg, where the total amount of the fertilizer supplied to the recipient at that time is 500 kg or more. Therefore, if the Products are fertilizers for purposes of section 5 of Schedule VI to the ETA, the importations would be considered non-taxable as per section 6 of Schedule VII to the ETA, where the packaging and quantity criteria are met.

To determine whether supplies of Products A or B qualify as a fertilizer, the GST/HST treatment is explained in GST/HST Memorandum 4.4, Agriculture and Fishing, and GST/HST Info Sheet GI-048 Fertilizer and Pesticides. GI-048 lists four requirements all of which must be met for a product to be considered a fertilizer for GST/HST purposes.

1. The product directly provides plant nutrients.

2. The product contains one or more of the major or lesser plant nutrients.

3. The product label contains a “guaranteed analysis” that is verified by a laboratory analysis, and if the product contains major plant nutrients, the “grade” is displayed as part of the product name.

4. The product being supplied is marketed, advertised, packaged, labelled, or sold for use as a fertilizer.

Product A and Product B do not meet all of the requirements above. For example, the Products are not supplied with a “guaranteed analysis” verified by a laboratory analysis since the Products are not supplied as fertilizers and are not considered to be fertilizers under the Fertilizers Act. Product A and Product B require further processing to become fertilizers. As such, the supplies of the Products are not zero-rated under section 5 of Schedule VI to the ETA and there are no other provisions that would apply to include the Products as non-taxable importations under Schedule VII to the ETA. As such, the importations of the Products are taxable importations for GST/HST purposes.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-5124. 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,

Angela Stachowski
Goods Unit
General Operations and Border Issues 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
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 94993
Business Number: […]

November 29, 2012

Dear [Client]:

Subject:	GST/HST RULING 
		Appraisals of damaged property and the GST/HST

Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to real estate valuations by your company and our subsequent telephone conversation of [mm/dd/yyyy].

As we discussed, and further to our letter of [mm/dd/yyyy], one of the requirements for an appraisal of damaged property to be an exempt supply is for the person supplying the appraisal to inspect the property. However, there are also other conditions that apply. The requirements that would need to be satisfied to make a real estate valuation of a damaged or destroyed property an exempt supply are set out in paragraphs (j), (j.1) and (r) of the definition of financial service in subsection 123(1) of Part IX of the Excise Tax Act (the ETA). Of those requirements, the ones that would apply to your company’s real estate appraisals are:

* Your company must be supplying the appraisal service to an insurer or a provincially licensed insurance adjuster for the purpose of satisfying an insurance claim.

* Your appraisal must be of the damage caused to the property.

and

* Your company as the supplier of the appraisal must be the person to inspect the property.

Where your company is supplying a real estate appraisal in the case of a loss of property (e.g., where the property has been completely destroyed), the requirements are similar:

* Your company must be supplying the appraisal service to an insurer or a provincially licensed insurance adjuster for the purpose of satisfying an insurance claim.

* Your appraisal must be of the value of the property.

and

* Your company, as the supplier of the appraisal, must be the person to inspect the site where the property was located before its loss.

Note that the appraisal would not be exempt if it were supplied by an accountant, actuary, lawyer or notary in the course of a professional practice.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4394. 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,

Doris McMullan
Insurance and ITC Allocations Unit
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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 84165
Business Number: […]

October 24, 2012

Dear [Client]:

Subject:	GST/HST RULING
		Application of GST/HST to an appraisal/inspection fee

Thank you for your fax of [mm/dd/yyyy], and your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to an appraisal/inspection fee. We apologize for the length of time it has taken us to respond to your query.

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 […] (your company) is a construction company that as part of its business activities performs on-site assessments of damaged property at the request of […] (the insurance company). The on-site assessment consists of visiting the site of the damaged property, taking pictures, determining the cause of the damage, and estimating the cost of repairs. A detailed report containing this information is sent to the insurance company. If your company is not awarded the repair contract, you charge the insurance company a $[…] fee to cover the service of inspecting, appraising and producing the cost-of-repair estimate.

RULING REQUESTED

You would like to know if you are to charge GST/HST for this service.

RULING GIVEN

Based on the facts set out above, we rule that your company’s supply of this service of inspecting, appraising and producing a cost-of-repair estimate is not a taxable supply. It is an exempt supply to which GST/HST does not apply.

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

For a service supplied by your company to an insurer (or an insurance adjuster) to be exempt, the service must satisfy one of the exempting provisions set out in the ETA. In this particular situation – the service of inspecting, appraising and producing a cost-of-repair estimate concerning damaged property – the service would be exempt under the definition of financial service in subsection 123(1) if it complied with paragraph (j.1) of that definition and was not excluded by paragraph (r).

In other words, your company’s service would be exempt if the following conditions were met:

* the service is provided to an insurer or a person who supplies a service which is referred to in paragraph (j) (i.e., a provincially licensed adjuster who provides a service of investigating and recommending the compensation in satisfying an insurance claim that is not in the nature of accident and sickness or life insurance);

* the service is not provided by an accountant, actuary, lawyer or notary in the course of a professional practice; and

* your company inspects the property and provides an appraisal of the damage caused to the property.

Since your company’s charge is for a service where your company inspected the damaged premises to prepare its report and since you are supplying this service of inspecting, appraising and producing a cost-of-repair estimate to an insurance company, your company’s service is an exempt supply and you do not charge GST/HST for this service.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4394. 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,

Doris McMullan
Insurance and ITC Allocation Unit
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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 140160
Business Number: […]

November 2, 2012

Dear [Client]:

Subject:	GST/HST RULING AND INTERPRETATION
		Application of GST/HST with respect to a […][program]

Thank you for your fax of November 17, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies provided by […][(the “Operator”)], a […][program] operator, and […][(the “Company”)]. We apologize for the delay in replying.

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.

We understand that:

1. The Operator is a corporation that is resident in […][Province 1] and is registered for purposes of the GST/HST. The Company is a corporation that is resident in [Province 1] and is registered for purposes of the GST/HST.

2. The Operator has developed a [program] that consists of a secure network and various business, communications and software systems.

3. The clients of the Operator are businesses that supply taxable goods and services and independent contract agents ("ICAs") who are contracted by the businesses to provide […] services. […].

4. The ICAs are provided access to, and the use of, the [program] to provide their […] services. […]. There are no restrictions with respect to where the [program] may be accessed and used by the businesses and the ICAs.

5. The performance of the ICAs can be monitored by the businesses through […]. The ICAs are not employees of the businesses. The ICAs work remotely from in or outside Canada […] to provide their services to the businesses.

6. The businesses and the ICAs may or may not be registered for GST/HST purposes and may or may not be residents of Canada.

7. […][billing practices].

[…]

RULING REQUESTED

You would like to know the following:

1. Is the GST/HST applicable to the supply of access to, and use of, the [program] made by the Operator to non-resident non-registered businesses?

2. Is the GST/HST applicable to the supply of access to, and use of, the [program] made by the Operator to non-resident non-registered ICAs?

RULING GIVEN

1. The supply made by the Operator to non-resident non-registered businesses of the right of access to, and use of, the [program] is a zero-rated supply of intangible personal property under section 10.1 of Part V of Schedule VI.

2. The supply made by the Operator to non-resident non-registered ICAs of the right of access to, and use of, the [program] is a zero-rated supply of intangible personal property under section 10.1 of Part V of Schedule VI.

EXPLANATION

A taxable (other than zero-rated) supply of property or a service that is made in Canada is subject to the GST at a rate of 5% if made in a non-participating province and is subject to the HST at the applicable rate if it is made in a participating province.

The supply of the right to access and use the [program] made by the Operator to the business and ICAs is a taxable supply of intangible personal property (IPP). Paragraph 142(1)(c) deems a supply of IPP to be made in Canada if the property may be used in whole or in part in Canada. In contrast, paragraph 142(2)(c) deems a supply of IPP to be made outside Canada if the property may not be used in Canada. The supply of the IPP made by the Operator is a taxable supply that is deemed to be made in Canada, pursuant to paragraph 142(1)(c) as the IPP may be used in Canada.

A supply of IPP that is made in Canada may be zero-rated (taxed at 0%) in certain circumstances if it is made to a non-resident person who is not registered for purposes of the GST/HST. Section 10.1 of Part V of Schedule VI zero-rates a supply of IPP made to a non-resident person who is not registered for purposes of the GST/HST at the time the supply is made, but not including

(a) a supply made to an individual unless that individual is outside Canada at the time the supply is made;

(b) a supply of IPP 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 (Part V) or Part VII or IX;

(c) a supply that is the making available of a telecommunications facility that is tangible personal property for use in providing a service described in paragraph (a) of the definition of “telecommunication service” in subsection 123(1);

(d) a supply of IPP that may only be used in Canada; or

(e) a prescribed supply.

As the exclusions in section 10.1 of Part V of Schedule VI do not apply in this case, the supply of IPP made by the Operator to non-resident non-registered businesses and to non-resident non-registered ICAs is zero-rated pursuant to that provision.

To support the zero-rating of supplies under section 10.1 of Part V of Schedule VI, suppliers must verify and maintain satisfactory evidence that the supplies are made to non-residents of Canada. For more information, please see GST/HST Info Sheet G-034 Exports of Intangible Personal Property available on the CRA web site at: http://www.cra-arc.gc.ca/E/pub/gi/gi-034/README.html.

If a taxable supply is determined to be made in Canada and is not zero-rated (which would be the case where the business or ICA is a resident or is registered for GST/HST purposes), it must then be determined if the supply is made in a participating province. Under section 144.1, a supply that is made in Canada is also considered to be made in a 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, a supply of property or a service is deemed to be made in a province if the property or service is prescribed to be made in the province under the New Harmonized Value-Added Tax System Regulations (the "Regulations”).

The place of supply rules that determine the province in which a supply, including a supply of IPP, is made are explained in GST/HST Technical Information Bulletin B-103 Place of supply rules for determining whether a supply is made in a province (available on the CRA web site at: http//www.cra-arc.gc.ca/E/pub/gm/b-0103README.html). Generally, as explained in this publication, a supply of IPP for which there are no restrictions with respect to where it may be used in Canada is deemed to be made in a province if the supplier obtains an address of the recipient in the province in the ordinary course of its business.

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.

INTERPRETATION REQUESTED

1. How does the GST/HST apply to the supply of the […] services made by the ICAs to the businesses?

2. How does the GST/HST apply to the supply of the […] service made by the Company to the businesses and the ICAs?

INTERPRETATION GIVEN

1. A taxable (other than zero-rated) supply of a service, such as the service supplied by an ICA to a business, that is made in Canada is subject to GST at a rate of 5% if made in a non-participating province and is subject to HST at the applicable rate if it is made in a participating province.

Pursuant to paragraph 142(1)(g), a supply of a service is deemed to be made in Canada if the service is, or is to be, performed in whole or in part in Canada. A supply of a service is deemed to be made outside Canada pursuant to paragraph 142(2)(g), if the service is, or is to be, performed wholly outside Canada.

Therefore, if a service supplied by an ICA to a business is performed wholly outside Canada, the supply is deemed to be made outside Canada and is not subject to GST/HST. An ICA that does not make supplies in Canada is not required to be registered for GST/HST purposes.

If a taxable supply of a service, such as the service supplied by an ICA, is made in Canada to a non-resident person, there are provisions in Part V of Schedule VI that may apply to zero-rate the supply. The general zero-rating provision for services is section 7 which zero-rates a supply of a service made to a non-resident person, but not including a supply of

(a) a service made to an individual who is in Canada at any time when the individual has contact with the supplier in relation to the supply;

(a.1) a service that is rendered to an individual while that individual is in Canada;

(b) an advisory, consulting or professional service;

(c) a postal service;

(d) a service in respect of real property situated in Canada;

(e) a service in respect of tangible personal property that is situated in Canada at the time the service is performed;

(f) a service of acting as an agent of the non-resident person or of arranging for, procuring or soliciting orders for supplies by or to the person;

(g) a transportation service; or

(h) a telecommunication service.

This provision would zero-rate the supply of the service made by an ICA to a non-resident business where none of the exclusions in the provision apply.

Depending on the circumstances, the service supplied by an ICA may be zero-rated under section 5 of Part V of Schedule VI which zero-rates a supply made to a non-resident person of acting as an agent of the person, or of arranging for, procuring or soliciting orders for supplies by or to the person, where the service is in respect of:

(a) a supply that is zero-rated under any other section of Part V of Schedule VI or,

(b) a supply made outside Canada by or to the person.

To support the zero-rating of supplies of services under section 5 or 7 of Part V of Schedule VI, suppliers must verify and maintain satisfactory evidence that the supplies are made to a non-resident of Canada. For more information, please see GST/HST Memoranda Series Chapter 4.5.1 Exports - Determining Residence Status available on the CRA web site at: http://www.cra-arc.gc.ca/E/pub/gm/4-5-1/README.html. For more information regarding the zero-rating of supplies of services, please see GST/HST Memoranda Series Chapter 4.5.3 Exports - Services and Intellectual Property available on the CRA web site at: http://www.cra-arc.gc.ca/E/pub/gm/4-5-3/README.html.

If the taxable supply of a service that is made in Canada by an ICA does not qualify for zero-rating, the province in which the supply is made must be determined for HST purposes.

A supply of a general service, such as the service supplied by the ICAs to the businesses, that is made in Canada is made in a province under subsection 13(1) of the Regulations if, in the ordinary course of business of the supplier, the supplier obtains an address in the province that is

(a) if the supplier obtains only one address that is a home or a business address in Canada of the recipient, the home or business address in Canada obtained by the supplier,

(b) if the supplier obtains more than one address described in paragraph (a), the address described in that paragraph that is most closely connected with the supply, or

(c) in any other case, the address in Canada of the recipient that is most closely connected with the supply.

The business address of the recipient from which the supplier is hired pursuant to the agreement for the supply (the “contracting address”) is generally the address that is most closely connected with the supply. This address will therefore determine the province in which the supply of the service is made where it is in Canada and is obtained by the supplier in the ordinary course of its business. The determination of the place of supply can therefore be made with certainty at the time the supply is first made where the contracting address is identified in the agreement for the supply or, if it is not identified in the agreement, has otherwise been obtained by the supplier in the ordinary course of its business.

For further information regarding the place of supply rules that determine the province in which a supply of a service is made, please see GST/HST Technical Information Bulletin B-103 Place of supply rules for determining whether a supply is made in a province (available on the CRA web site at: http//www.cra-arc.gc.ca/E/pub/gm/b-0103README.html).

2. The previously explained place of supply rules for services and the zero-rating rule for services in section 7 of Part V of Schedule VI would also be the relevant rules for purposes of determining the application of GST/HST to the taxable […] service supplied by the Company to the ICAs and to the businesses.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 957-7841. 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,

Dwayne Moore
Border Issues Unit
General Operations and Border Issues 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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 116823
Business Number: […]

November 28, 2012

Dear [Client]:

Subject:	GST/HST RULING
		Application of GST/HST to Missionary Activities

Thank you for your letter of July 28th, 2009, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the missionary activities you carried out in […][Country X]. We apologise for our delay in responding.

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:

1. You […] worked as missionaries in [Country X] from [yyyy] to [yyyy]. During this period, you resided in [Country X] […].

2. While you were in [Country X] you owned no property in Canada. […] was used as your Canadian address. During periods of time when you would visit […][Province A] you would reside in that residence.

3. Your mission work in [Country X] involved building Christian churches and community-use buildings, preaching Christian doctrine, and training local church workers. […].

4. When you commenced your missionary activities in [Country X] your missionary work […][was] funded by an organization named the […][Organization].

5. In [yyyy] the [Organization] merged with another organisation, which required you to find another source of funding for your missionary activities. You then approached […] (the Funder) to support your missionary activities in [Country X].

6. The Funder is a registered charity within the meaning of the Income Tax Act. Its operations are conducted out of its offices located in the [Province A]. The Funder’s charitable object is to conduct Christian religious and missionary services as a religious missionary order. Its primary strategy to achieve this object is to: […][direct quote]

7. In its Registered Charity Information Return (T3010A) filed for its year ending [mm/dd/yyyy], the Funder reported the following:

* It had a total income of $[…], all of which was derived from tax-receipted gifts.

* Its total annual expenditures were $[…], of which the sum of $[…] was spent on its charitable activities and $[…] was spent on administrative costs.

* It distributed a total of $[…] for missionary work in [Country X], […][other Countries].

* The recipients of these funds were intermediaries working “under agency agreement, contract, joint-venture or similar arrangements” (as opposed to legal agents, employees or volunteers of the Funder).

8. The Funder covers its administration costs by using a portion of the tax-receipted funds donated by third parties to its missionary work.

9. You obtained funding each year by providing a project plan for the year ahead including a project budget. The Board of Directors of the Funder evaluated the project plan and once the Funder was satisfied that the project was in line with its own charitable objects, it approved funding of the project. After the first year of funding you would also provide a report on the missionary work completed in the previous year.

10. Each year you would enter into a Joint Venture Agreement with the Funder for that year. The Joint Venture Agreement stated that you worked in [Country X] as independent contractors. At no time while you received funding from the Funder did you consider yourselves employees, legal agents or authorized representatives of the Funder. You had no ability to make agreements on behalf of the Funder. The only direct oversight the Funder imposed on your project was the requirement to provide a written report at the end of each year to explain how the funding was used.

11. It was your responsibility to find churches and individuals in [Province A] to make donations to the Funder which would be used to finance your activities. To this end you would return to [Province A] for approximately [#] months each year to speak at various churches. During these speaking sessions you would both describe the work you had done to date and also request that donations be made to the Funder designated for use to support your missionary work in the upcoming year.

12. You understood that any money donated by third parties to the Funder in support your missionary work was subject to the Funder’s designated gift policy.

13. The Funder’s […] policy is stated on their website as follows: […]

14. Between [yyyy] and [yyyy] you received the following amounts from the Funder: […]

All of these amounts were paid to you out of tax-receipted funds which third party donors had donated to the Funder to support your mission work. These amounts were used by you exclusively to fund your missionary activities, which included the living expenses of your family.

15. As far as you are aware, no third party donor has ever received a direct or indirect benefit from the missionary work you performed in [Country X].

16. During this time period, you did not receive any other financial support for your missionary activities nor did you acquire any property or other assets in [Country X].

17. As you considered yourself self employed individuals, you reported the income received from the Funder as business income.

18. As a result of filing your [yyyy] income tax return showing gross business income of $[…], you received notices to file GST/HST returns and to remit any GST/HST collected or collectable on the funds you received from the Funder.

RULING REQUESTED

You would like to know if you are liable for GST/HST collected or collectable on funds provided to you by the Funder.

RULING GIVEN

Based on the facts set out above, we rule that that the funding provided by the Funder to […][you] is a grant and not consideration for a supply and therefore, not subject to the GST/HST.

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 Funder is a registered charity for purposes of the ITA and a charity for ETA purposes. The Funder’s charitable object is the conducting of Christian religious and missionary services. Its primary activity is to fund missionary work that is consistent with the Funder’s charitable purposes. The Funder is funded in large part, by tax-receiptable donations from third parties. While individual missionaries are expected to actively fund-raise to support their missionary work, the funds raised are provided in the form of donations to the Funder and not to the missionary. The Funder issues tax receipts for those donations received. It uses some of the donation funds it receives to pay for its administration costs of operating the funding program.

Although a third party can designate that its donations be used to support specific missionaries or ministries, the granting of the funding to a particular missionary is in the absolute discretion of the Board of Directors. The Funder restricts funding to an eligible missionary based on the budget filed by the missionary, and not solely on the amounts donated by third parties. All missionaries who receive funding from the Funder must submit annual reports to the Funder detailing the work undertaken with the funds together with an annual financial report accounting for the use of the funds provided.

In accordance with the guidelines set out in the TIB-067 Goods and Services Tax Treatment of Grants and Subsidies, in general, transfer payments made for a public purpose or for charitable purposes will not be consideration for a supply under the ETA unless there is a “direct link” between the payment and a provision of goods and services made to the grantor of the funding or a specified third party.

In this case, you had been engaged in your missionary activities since [yyyy], [#] years before first approaching the Funder for financial support. The only connection between your missionary work and the funder is the similarity of subject matter that allowed your missionary activities to fall within the charitable objects of the Funder.

The payment of money by the Funder to you was made for charitable purposes as it is provided pursuant to an on-going funding program under which the Funder provides funding to eligible missionaries who are undertaking missionary work that is consistent with the charitable purposes of the Funder. It is our view that there is no direct link between the payment of the funding to you and a provision of goods and services to the Funder or a specified third party.

Based on the information provided, at no time were you providing services to the Funder. Rather the funds you received were used to support your on-going missionary activities. You were never contractually obligated to provide services to the Funder or to specified third parties in exchange for the funding.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-0329. 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,

Michael Mavis
Charities, Non-Profit Organizations and Educational Services Unit 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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 122945
Business Number: […]

November 27, 2012

Dear [Client]:

Subject:	GST/HST RULING
		Registered Nurse Rehabilitation Case Manager

Thank you for your fax of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the rehabilitation case management services that you provide. More specifically, you are requesting that we reconsider our ruling of [mm/dd/yyyy] in which we ruled that your services were not exempt nursing services pursuant to section 6 of Part II of Schedule V to the Excise Tax Act (ETA). Please note that this letter supersedes our previous ruling dated [mm/dd/yyyy] on the subject. We apologize for the delay in responding.

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 ETA unless otherwise specified.

STATEMENT OF FACTS

We understand the following:

1. You are a […] Registered Nurse in the Province of Ontario. You are in good standing with the College of Nurses of Ontario (the “College”).

2. You are a GST/HST registrant.

3. You work with clients/patients who have sustained catastrophic injuries […].

4. Your clients are referred to you by their legal representatives, discharge planners at hospitals, physicians, or nurse practitioners.

5. […].

6. The services that you provide often begin while the client in still in the hospital. You work closely with multidisciplinary rehab team towards your client’s discharge planning and community reintegration.

7. Your clients hire you as a registered nurse and you charge for your services […].

8. Based on the information provided we understand that you provide the following services to you clients:

* Assessment of your clients’ health care needs.

* Collaborating with other health care providers in respect of your clients’ care.

* Determining appropriate health care services, treatments and equipment.

* Counselling clients.

* Teaching the families of your clients on how to care for the client.

* Analyzing the findings of your clients’ health care assessments.

* Providing professional advice.

* Providing written reports to your clients’ insurance companies.

RULING REQUESTED

You would like to know if the supplies of your services are exempt nursing services pursuant to section 6 of Part II of Schedule V to the ETA.

RULING GIVEN

Based on the facts set out above and the information provided, we rule that the services that you provide are exempt nursing services pursuant to section 6 of Part II of Schedule V to 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

Generally, most supplies of property and services made in Canada are taxable for GST/HST purposes, unless they are exempt supplies. Exempt supplies are listed in Schedule V. Part II of Schedule V provides that certain health care services are exempt from GST/HST. In order for a supply of property or a service to be exempt from GST/HST under Part II of Schedule V, a specific exempting provision included in Part II must apply to that particular supply.

In addition, it should be noted that the GST/HST is a transactional tax and as such, the exempting provisions in Part II of Schedule V apply on a supply-by-supply basis. These provisions set out specific criteria that must be met in order for a particular supply of a service to fall within those provisions. For every supply or transaction, the supplier must determine whether these criteria are met or whether the tax is applicable. Because of these criteria it is possible for a supplier to make a mix of taxable and exempt supplies and for the tax status of a supply to differ depending on the circumstances. Thus, regardless of the manner in which nursing services may be defined, the tax status of a particular supply of nursing services is also conditional on whether the supply meets all of the criteria set out in the exempting provision, as explained below.

Section 6 of Part II of Schedule V

Section 6 of Part II of Schedule V exempts a supply made after February 26, 2008 (Footnote 1) , of a nursing service rendered to an individual by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse, if the service is rendered within a nurse-patient relationship. Given the preceding, there are three criteria that the supply must meet to be exempt; i.e., it must be a service that:

* is rendered by a registered or licensed nurse;
* falls within the scope of nursing services; and
* is rendered to an individual within a nurse-patient relationship.

Under a transactional tax system such as the GST/HST, exempt status applies to the supply and not to the supplier. Each supply (as provided for under each contract) is evaluated to determine if it is a nursing service rendered by a registered or licensed nurse to an individual within a nurse-patient relationship. This evaluation would include an analysis of the terms and conditions of the relevant contract or agreement for the supply to determine whether the supply satisfies the criteria of section 6 of Part II of Schedule V. Accordingly, regardless of whether an activity may be characterized as a nursing service, the supply of that service must meet all the criteria of section 6 of Part II of Schedule V to be exempt. There criteria are discussed below.

Rendered by a registered or licensed nurse

In your recent letter you advised that the Regulated Health Professions Act, S.O. 1991, c. 18, and the Nursing Act, S.O. 1991, c. 32, contain definitions for nursing services. You expressed the view that the CRA should consider this provincial legislation.

Because of the reference to the specific titles in the exempting provision; i.e., only the services rendered by licensed or registered nurses are exempt, we do consider the provincial legislation of the nursing profession for purposes of administering the ETA. As such, we consider a registered or licensed nurse to be an individual who meets certain standards of education, clinical competence and registration or other licensing requirements as set out by provincial legislation governing the nursing profession.

Since the services in question are supplied in Ontario, we consider the manner in which the nursing profession is regulated by the laws of that province. As you noted, nurses in Ontario are regulated under the Nursing Act and the Regulated Health Professions Act. Regulations under the Nursing Act establish the requirements that must be met for registration as an RN or RPN and titles used by nurses are protected under this Act. These provincial Acts provide the legal framework for nursing as a self-regulating profession. In addition, the College has been delegated the authority under these provincial Acts for the regulation and registration of individuals who are qualified to practice the nursing profession in Ontario.

Scope of nursing services

As noted above, we do consider the manner in which the nursing profession is regulated by provincial laws. Based on a review of the Nursing Act and the Regulated Health Professions Act as well as the College’s standards and guidelines, we understand that the scope of practice for nursing in Ontario is the promotion of health and the assessment of, the provision of care for, and the treatment of, health conditions by supportive, preventative, therapeutic, palliative and rehabilitative means in order for a patient to attain or maintain optimal function. Nurses are authorized to perform various controlled acts when rendering nursing care to their patients. Core nursing services generally focus on the diagnosis and treatment of health problems of a patient, administration of medications and other interventions.

Various Fact Sheets produced by the College set out guidelines for registered nurses to determine whether they are practicing nursing. According to the Fact Sheet entitled What is Nursing?, nursing roles may include clinical, practitioner, administrator, teacher, and researcher. They work in many different settings, including hospitals, long-term care facilities, clients’ homes, clinics, industries, and classrooms.

The Fact Sheet entitled Am I Practicing Nursing? contains a checklist of questions that registered nurses may use to determine if a particular activity they are engaged in falls with the practice of nursing. These questions include whether the activity involves the nurse applying nursing knowledge, skill and judgment and whether the nurse has a direct or indirect effect on the recipient of a health care service in Ontario. As well, there is a list of activities registered nurses would check involving assessment, planning, intervening, evaluating, and other activities, and a list of various settings in which registered nurses undertake these activities, such as in an acute care hospital, a long-term care facility, independent practice, educational institution, and a government agency.

Based on a review of this information and our research, we understand that registered nurses may work in a wide variety of practice settings, be engaged in a variety of activities for which his or her particular knowledge and qualifications may be relevant to the recipient of his or her supplies, and that nursing roles and responsibilities are continually evolving and changing. For instance, registered nurses may perform supervisory, administrative, consultant, teaching and researching activities.

However, it is important to note that even where an activity falls into the practice of nursing, as noted above and further explained below, that activity will not be an exempt supply for purposes of section 6 of Part II of Schedule V where it does not constitute a nursing service rendered to an individual within a nurse-patient relationship.

Some of these activities that would not constitute a nursing service rendered to an individual within a nurse-patient relationship are communicating with communities or populations, managing nursing resources such as staff, facilities and equipment, developing learning resources for nurses or other health care providers, and providing or developing health education for organizations.

Rendered to an individual within a nurse-patient relationship

The reference to “patient” can denote an individual who is experiencing an illness that requires acute or chronic care. A registered or licensed nurse establishes and maintains a nurse-patient relationship by using nursing knowledge and skills to render patient care services involving supportive, therapeutic, palliative and rehabilitative services to assist the patient in attaining or maintaining optimal function, such as treating the health problems of a patient, administering medications and performing other interventions. Thus we interpret this criterion in section 6 of Part II of Schedule V as meaning nursing services that involve personal interaction between a nurse and an individual who is a patient where there is an established or ongoing relationship between the nurse and the patient and the nurse is a direct care provider of the patient.

Accordingly, when a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse, renders nursing services to an individual in the capacity of a care provider, i.e., in a professional nurse-patient therapeutic relationship, these nursing services will be exempt.

If the service does not involve a relationship between the registered nurse and the individual and the nurse is not a care provider of the individual, this would indicate that there is no nurse-patient relationship. Accordingly a service provided by a registered nurse will not be exempt for GST/HST purposes even if the service is provided within the scope of a nursing practice if that service is not within the context of a nurse-patient relationship.

Our review of the material produced by the College indicates that people receiving services from registered or licensed nurses are often referred to as “clients” rather than “patients”. For instance, the College states that the term “client” better represents the diverse practices of nurses than “patient”. The College explains that in most circumstances the client is an individual but a client could also include family members and decision-makers of the individual. A client may also be a family, a group, such as in a therapy session or a community, such as in a public health setting. Clients could also include students in an educational setting, staff in an administrative setting, and study participants in a research setting.

Regardless of how broad the scope of a nursing practice may be, it is important to clarify that only those clients who are individuals receiving patient care services would fall within section 6 of Part II of Schedule V. In contrast, services rendered by a registered nurse to communities in a public health setting, students in an educational setting, staff in an administrative setting, and study participants in a research setting would not fall within this particular exempting provision.

Based on the information provided, the services that you supply to your clients would be considered nursing services for purposes of the ETA. You are hired as a registered nurse […]. In providing your services you use nursing knowledge and skills in respect of therapeutic care of your clients within a nurse-patient relationship. Examples of such services that you provide include assessing your clients’ health care needs, counselling clients, providing professional advice, and determining appropriate health care services, treatments and equipment.

It is important to note that not all case management services performed by a registered nurse would be considered to be nursing services for purposes of section 6 of Part II of Schedule V. Services that are administrative in nature as opposed to ones that are in respect of therapeutic care of the client would not be rendered to an individual within a nurse-patient relationship and would not meet the exempting provision of section 6. The determination of whether or not case management services meet the conditions of section 6 is done on a case-by-case basis by examining the types of services being performed and the context in which they are delivered. Accordingly a service provided by a registered nurse of supervising or directing others to provide care to an individual or of providing a case management service will not be exempt for purposes of the GST/HST even if the service is provided within the scope of a nursing practice, if that service does not involve the provision of care by the registered nurse to the individual within a nurse-patient relationship.

Therefore, the fact that a registered nurse might be, because of his or her knowledge, perfectly suited for the role of case manager does not automatically entail that all case management services are nursing services or that they are nursing services rendered to an individual within a nurse-patient relationship.

We also note that you are hired and paid as a registered nurse; in cases where a registered nurse accepts a position in a role other than that of a registered nurse (such as an unregulated care provider) there would not be a nurse-patient relationship and the supplies of the service would not be exempt under section 6 of Part II of Schedule V. The College’s Fact Sheet Working in Different Roles states that a nurse is expected to fulfill only the requirements of the position’s job description and knowing and performing within the limits of that job. This demonstrates that there would not be a nurse-patient relationship when a registered nurse is working in a role other than that of a registered nurse.

In your letter you inquired about the period of 2006 until July 2010 where […] the GST was included in [your fees]. You believe that you should be compensated and state that the GST was coming directly off your hourly wage.

The amount of consideration paid for a supply and whether that amount is tax-included is a private or contractual matter between a supplier and his or her clients. For GST/HST purposes subsections 165(1) and (2) of the ETA state that it is the recipient of the supply who pays the GST/HST. This means that, […], it was your clients who were paying the GST on the consideration for your services rather than the GST coming off the amount you received for your services.

Under subsection 232(1), where you have charged an amount as GST/HST in error on an exempt supply, you have the option to adjust, refund or credit the excess tax to the person within two years after the day the amount was so charged or collected. If you choose to adjust, refund, or credit the excess amount of GST/HST, a credit note containing prescribed information must be issued. You may also make an adjustment to your net tax calculation to account for any adjustment, refund or credit of an amount of tax paid in error to the extent that the amount was included in determining the net tax for the reporting period or a prior reporting period.

If you choose not to adjust, refund, or credit amounts of GST/HST collected in error, you are not required to issue a credit note, and there will be no corresponding adjustment to your net tax. In this situation, the person who has paid the tax in error may be able recover this amount by filing a general rebate application with the CRA within two years after the day the amount was paid or remitted by the person.

For more information, including the prescribed information to be included on a credit note, please refer to GST/HST Memoranda Series 12.2, Refund, Adjustment, or Credit of the GST/HST Under Section 232 of the Excise Tax Act, available on CRA's website.

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,

Arthur Blommesteijn
Municipalities and Healthcare Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 To be exempt under section 6 of Part II of Schedule V, a supply made before February 27, 2008 has to be a supply of a nursing service rendered by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse, where the service is rendered to an individual in a health care facility or in the individual’s place of residence; the service is a private-duty nursing service; or the supply is made to a public sector body.

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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 147921
Business Number: […]

October 10, 2012

Dear [Client]:

Subject:	GST/HST RULING
		Value of temporary importation of leased bus

Thank you for your letter of [mm/dd/yyyy], […], in which you request authorization for partial relief from the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) with respect to the importation of a leased bus.

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.  

We understand that:

* […] (the “Lessee”) has entered into an agreement to lease the following bus from […] (the “Lessor”), a non-resident person with whom the Lessee deals at arm’s length:

Bus Type	Model Number	Serial Number	Registration Number

[…]		Not applicable	[…]		Not applicable

* The lease agreement is for a period beginning on [mm/dd/yyyy] and ending on [mm/dd/yyyy].

* The bus will be imported at […] on [mm/dd/yyyy] and will be exported on [mm/dd/yyyy].

* The total number of months that the bus is to be held in Canada by the Lessee under a lease with the Lessor will not exceed 24 months.

Based on the information provided as set out above, authorization is hereby granted to determine the value of the imported bus under subsection 215(2) of the Excise Tax Act and section 14 of the Value of Imported Goods (GST/HST) Regulations, as 1/60th of the value for duty of the bus for each month or part of a month that the bus remains in Canada, plus any remaining duties payable in respect of the bus. This authorization will expire on [mm/dd/yyyy] if the bus is not imported on or before that date. Any request for an extension to the authorization period should be submitted to this office for approval prior to the expiry date of the authorization.

In order to qualify for partial relief pursuant to section 14 of the Value of Imported Goods (GST/HST) Regulations, an imported conveyance must be exported on or before the earlier of the day that is 24 months after the day on which the conveyance is imported, and the day on which the lease is terminated. Also, if the conveyance is imported more than once, the cumulative number of months in the periods throughout which the conveyance is held in Canada by the lessee under a lease with the lessor must not exceed 24 months.

The importer is required to meet the Customs requirements as outlined in Customs Memorandum D8-1-1 Temporary Importation (Tariff Item No. 9993.00.00) Regulations with respect to the processing and control of temporary import documents and export documentation and procedures.

A copy of this letter has been sent to the Canada Border Services Agency, Canada Border Services Office […]. Please contact this office prior to the importation of the bus for additional information regarding import procedures and export requirements.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-8253. 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,

Gunar Ozols
Goods Unit
General Operations and Border Issues 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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 139596

Business Number: […]

August 31, 2012

Dear [Client]:

Subject:	GST/HST RULING
		Tax Status of supplies of […][Orthopaedic] Devices

Thank you for your fax of October 21, 2011, and telephone conversations with Art Blommesteijn and Chantal Desrosiers of our office concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supplies of various medical devices by the […][Organization].

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 the information provided, we understand the following:

1. The [organization] is a registrant for GST/HST purposes under Business Number […].

2. The [organization] supplies […] medical devices referred to as […]. These devices are […][Product 1] and […][Product 2].

3. The [organization] supplies [Product 1] and [Product 2] […] to individuals on a written order of a medical practitioner.

4. [Product 1] is […].

5. [Product 1] treatments are […].

6. [Product 1] is a portable device that a patient can use in their own home, at work, or while travelling. This eliminates the need for the patient to visit a clinic or other facility for treatments.

7. [Product 1] is […] for single patient use only, […].

8. [Product 2][…]
9. [Product 2] is a […]

10. [Product 2] devices are cord free and portable; patients can have their treatments independently without the need to attend a hospital or clinic. […].

11. [Product 2] devices are licensed for single patient use only, […]..

RULING REQUESTED

You would like to know if the supplies of [Product 1] and [Product 2] are zero-rated pursuant to section 23 of Part II of Schedule VI to the ETA when the devices are supplied on the written order of a medical practitioner for use by a consumer named in the order.

RULING GIVEN

Based on the facts set out above, we rule that the supplies of [Product 1] and [Product 2] are orthopaedic devices which are zero-rated pursuant to section 23 of Part II of Schedule VI to the ETA when supplied on the written order of a specified professional.

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 supplies of goods and services made in Canada are subject to the GST/HST unless specifically relieved under the ETA. There are exceptions for medical devices that are specifically identified in Part II of Schedule VI as being zero-rated; i.e., the tax applies at the rate of 0%. If a medical device is not included in Part II of Schedule VI, then the supply of the medical device remains subject to tax at the rate of 5%, 12%, 13%, or 15% as applicable.

General Information - Part II Schedule VI

Part II of Schedule VI lists medical devices for human use that are zero-rated (taxable at 0%) under the ETA. Some devices are zero-rated in their own right (e.g. supplies of artificial eyes, artificial teeth, hearing aids) while other devices are zero-rated only when supplied under certain conditions (e.g. on the written order of a specified professional for use by a consumer named in the order, or specially designed for use by an individual with a disability).

Section 23 of Part II of Schedule VI

Section 23 of Part II of Schedule VI zero-rates “A supply of an orthotic or orthopaedic device that is made to order for an individual or is supplied on the written order of a specified professional for use by a consumer named in the order.”

For purposes of Part II of Schedule VI, including section 23, the term “specified professional” means a person who is entitled under the laws of a province to practise the profession of medicine, physiotherapy or occupational therapy; or a registered nurse.

For supplies made before March 30, 2012, section 23 read “A supply of an orthotic or orthopaedic device that is made to order for an individual or is supplied on the written order of a medical practitioner for use by a consumer named in the order.

The term “medical practitioner” was defined in section 1 of Part II of Schedule VI as a person who is entitled under the laws of a province to practise the profession of medicine.

For an orthotic or orthopaedic device to be zero-rated pursuant to section 23 it would have to either be:

i. made to order for an individual, or
ii. supplied on the written order of a specified professional, or a medical practitioner for supplies made before March 30, 2012, for use by a consumer named in the order.

The terms “orthotic” and “orthopaedic” are not defined in the ETA; therefore, we can consider their common or ordinary meaning. According to Dorland's Illustrated Medical Dictionary 30th Edition (Dorland’s) the term “ortho” means “a combining form meaning straight, normal, or correct”. “Orthotic” is defined by Dorland’s as “serving to protect or to restore or improve function; pertaining to the use of or application of orthoses” where “orthoses” is “an orthopedic appliance or apparatus used to support, align, prevent, or correct deformities or to improve the function of movable parts of the body”.

Dorland’s defines the term “orthopedic” (the alternate spelling of the word “orthopaedic”) to mean “pertaining to the correction of deformities of the musculoskeletal system; pertaining to orthopedics”. “Orthopedics” is defined by Dorland’s to be “that branch of surgery which is specially concerned with the preservation and restoration of the function of the skeletal system, its articulations, and associated structures”.

These common or ordinary meanings of the terms “orthotic” and “orthopedic” suggest that orthotic or orthopedic devices are those devices that are designed to brace, support or align joints, muscles or skeletal parts. In other words, orthotic and orthopedic devices are concerned with the musculoskeletal system, and are used to correct, support or maintain weak or ineffective functions of movable body parts. A device may properly be said to be “orthopedic” where it is directly used to remedy a defect in a patient's musculoskeletal system.

Section 23 does not unconditionally zero-rate orthotic or orthopaedic devices; supplies of these devices must meet either of the two conditions of the section. [Product 1] and [Product 2] […] are sold in standard sizes and would not be considered made to order for an individual. [Product 1] and [Product 2] […] would have to be supplied on the written order of a specified professional or medical practitioner (depending on when the supply was made) for use by an consumer named in the order. Please note that the definition of “consumer” in subsection 123(1) of the ETA excludes individuals who use the property in a commercial activity or in the making of an exempt supply

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,

Art Blommesteijn
Health Care Sectors 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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 85927

August 14, 2012

[Dear Client]

Subject: 	GST/HST RULING
		[…] [Supply of Breast Implants]

This is further to the letter of [mm/dd/yyyy] […] and subsequent telephone conversations concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of silicone and saline filled breast implants. We apologize for the delay in responding.

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 (the ETA) and the regulations thereunder, unless otherwise specified.

STATEMENT OF FACTS

On the basis of the letter and attachments and the information available on the Corporation’s Web site at […], our understanding of the facts is as follows:

1. […] (the Corporation) operates a private, […] surgical facility (the Facility) located in [Province A].

2. The Corporation acquires the breast implants for consumption, use or supply in the course of its activities undertaken at the Facility in connection with both reconstructive and cosmetic breast implant surgery performed by physicians on patients of the Corporation.

3. […].

4. […].

5. The Facility has [#] surgeons and […].

6. The Corporation offers access to a wide range of day care surgeries at the Facility. […]

7. The Corporation describes on its Website […]
8. On its Web site, […]

9. Breast surgery performed by physicians at the Facility includes breast augmentation, reduction and reconstruction procedures. […]

10. […]
11. […]
12. […]

13. The breast implants in question are silicone shells that are filled with liquid solutions of saline or silicone. […]

14. The breast implants are designed to be surgically implanted for one of three purposes:

(a) To take the place of breast tissue that has been:

(i) removed surgically, such as during a mastectomy procedure;
(ii) damaged or destroyed by illness or accident; or
(iii) diminished as a result of breast-feeding infants.

(b) To correct co[n]genital asymmetry.

(c) To add volume to breasts for cosmetic purposes.

15. The following charges are made for the surgeries that are performed for cosmetic purposes:

(a) The surgeon charges the patient a professional fee for his or her surgical services.

(b) The Corporation charges the patient a facility fee for the use of the Facility.

(c) The Corporation charges the patient for the breast implants.

RULING REQUESTED

You would like to know whether the following supplies are zero-rated pursuant to section 25 of Part II of Schedule VI:

* When the Corporation makes a supply of breast implants to the patient where this is a separate supply from the surgical services supplied by the physician to the patient. The breast implants may be consumed, used or supplied by the Corporation in respect of a supply of reconstruction surgery or a supply of cosmetic surgery.

* When the Corporation acquires breast implants from its supplier.

RULING GIVEN

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

* When the supply of breast implants made by the Corporation to a patient of the Facility is for medical or reconstructive purposes or is in respect of another supply (the surgical service supplied by a physician) that is for medical or reconstructive purposes, the supply is exempt pursuant to section 2 of Part II of Schedule V.

* When the supply of the breast implants made by the Corporation to a patient of the Facility is for cosmetic purposes or is in respect of another supply (the surgical service supplied by a physician) that is for cosmetic purposes, the supply is taxable and the consideration for the supply is subject to the HST at the rate of […]%, as the supply is made in [Province A], pursuant to sections 1.1 and 2 of Part II of Schedule V, and section 1.2 of Part II of Schedule VI.

* When the Corporation acquires the breast implants for general inventory purposes from a supplier such as a manufacturer or distributor, this supply made to the Corporation is zero-rated pursuant to section 25 of Part II of Schedule VI.

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 GST/HST is a transaction-based tax. The general rule in section 165 is that every recipient of a taxable supply, other than a zero-rated supply, made in Canada shall pay tax calculated at the rate of 5%, 12%, 13%, or 15% (depending on the place of supply) on the value of the consideration for the supply. The tax rate in respect of a zero-rated supply is 0%. A zero-rated supply is a supply that is included in Schedule VI. An exempt supply is a supply that is not subject to GST/HST and that is included in Schedule V.

Please note that the GST/HST applies equally to imported goods as well as to goods supplied in Canada. Section 212 requires every person who is liable under the Customs Act to pay duty on imported goods, or who would be so liable if the goods were subject to duty, to pay GST on the goods calculated at the rate of 5% on the value of the goods. Section 212.1 imposes the provincial component of the HST in respect of non-commercial importations by residents of the participating provinces. This tax applies in addition to the tax imposed under section 212. If the supply of a medical device is included in Part II of Schedule VI that device may be imported on a non-taxable basis pursuant to section 6 of Schedule VII.

Medical or surgical prosthesis

On the basis of the letter and our additional research, we understand that a breast implant may be used for several purposes: as a substitute for natural tissue that is missing due to disease or surgery; to correct a malformation or a physical deformity; and for purely aesthetic purposes such as breast augmentation or a breast lift. Notwithstanding the multiple uses of breast implants, the CRA generally considers breast implants to be a medical or surgical prosthesis.

Part II of Schedule V and Part II of Schedule VI contain references to a medical or surgical prosthesis:

* Paragraph (b) of the definition of “institutional health care service” in section 1 of Part II of Schedule V, which identifies goods and services that may be exempt supplies pursuant to section 2 of that Part;

* Section 25 of Part II of Schedule VI, which identifies a medical or surgical prosthesis that may be a zero-rated supply for purposes of the GST/HST.

Accordingly, depending on the circumstances in which it is made, a supply of a medical or surgical prosthesis may be subject to the GST/HST, zero-rated or exempt. Part II of Schedule V and Part II of Schedule VI set out the circumstances in which a supply of a medical or surgical prosthesis is exempt or zero-rated; otherwise, the supply falls under the general rule and the GST/HST is calculated at the rate of 5%, 12%, 13%, or 15% (depending on the place of supply) on the value of the consideration for the supply.

Part II of Schedule V

Pursuant to section 2 of Part II of Schedule V, a supply made by the operator of a health care facility of an institutional health care service rendered to a patient or resident of the facility is exempt. An institutional health care service is an exempt supply when it is provided for medical or reconstructive purposes, and not for cosmetic purposes.

Cosmetic procedures are surgical and non-surgical procedures that are generally aimed at enhancing one’s appearance, such as liposuction, hair replacement procedures, botulinum toxin injections, teeth whitening, as well as face lifts, breast lifts and breast augmentation surgery that are not provided for the purpose of treating a medical condition or for reconstructive purposes. For instance, breast implants used to replace diminished breast tissue as a result of breast-feeding, to correct asymmetry, or to simply add volume to breasts would generally be considered to be provided for cosmetic purposes and not for medical or reconstructive purposes.

However, breast implants used to replace breast tissue that has been removed surgically, such as during a mastectomy procedure, or damaged or destroyed by illness or accident would generally be considered for medical or reconstructive purposes.

Definition of “health care facility”

Section 1 of Part II of Schedule V defines the phrase “health care facility” for purposes of that Part. Under paragraph (a) of this definition, a facility, or a part thereof, operated for the purpose of providing medical or hospital care, including acute, rehabilitative or chronic care is a health care facility. The CRA interprets this part of the definition to mean a facility attended by patients for the purpose of receiving care rendered by trained medical professionals who provide patients with what is required to diagnose, treat and/or prevent disease, injuries or other illnesses. Private surgical facilities with operating rooms, anaesthetic facilities and necessary equipment and supplies for surgeons to perform surgery on patients are health care facilities for purposes of Part II of Schedule V. A health care facility also includes cosmetic surgical facilities. A health care facility may have in-patient beds or it may be operated to provide ambulatory care or day surgery.

The Corporation operates the Facility […]. Based on these facts, it is our view that the Facility is operated by the Corporation for the purpose of providing medical care and thus falls within the meaning of “health care facility” for purposes of Part II of Schedule V.

Definition of “institutional health care service”

Section 1 of Part II of Schedule V defines the phrase “institutional health care service” for purposes of that Part as including any of the following when provided in a health care facility:

(a) laboratory, radiological or other diagnostic services;
(b) drugs, biologicals or related preparations when administered, or a medical or surgical prosthesis when installed, in the facility in conjunction with the supply of a service included in any of paragraphs (a) and (c) to (g);
(c) the use of operating rooms, case rooms or anaesthetic facilities, including necessary equipment or supplies;
(d) medical or surgical equipment or supplies
(i) used by the operator of the facility in providing a service included in any of paragraphs (a) to (c) and (e) to (g), or
(ii) supplied to a patient or resident of the facility otherwise than by way of sale;
(e) the use of radiotherapy, physiotherapy or occupational therapy facilities;
(f) accommodation;
(g) meals (other than meals served in a restaurant, cafeteria or similar eating establishment); and
(h) services rendered by persons who receive remuneration therefor from the operator of the facility.

Within the Facility, the use of operating rooms and/or anaesthetic facilities, necessary equipment and supplies for surgeons to perform surgery on patients, and medical or surgical prosthesis (breast implants) are provided to patients of the Facility. The medical or surgical prosthesis is installed in the Facility in conjunction with the use of an operating room, anaesthetic facilities and necessary equipment and supplies. Because they are provided in a health care facility, the use of the Facility for which the Corporation charges a “facility fee” to the patient and the breast implants that are surgically implanted in patients of the facility fall within the meaning of “institutional health care service”.

The characterization of an institutional health care service is discussed in GST/HST Policy Statement P-207, The GST Status of the Supply of a Laser Eye Surgery Service. As explained in P-207, the provision to a patient of the use of any part of the health care facility, such as an operating room, anaesthetic facility or accommodation is an institutional health care service.

The same treatment for purposes of Part II of Schedule V applies to any other supply made by the operator of a health care facility such as drugs when administered, or a medical or surgical prosthesis when installed, in the health care facility. In this situation, the drugs are administered or the surgical prosthesis is installed in the facility in conjunction with the use of an operating room and the provision of health care services.

Whether the institutional health care services rendered to patients of the Facility are exempt or taxable (the consideration is subject to the GST/HST) depends on whether the supply is made for medical or reconstructive purposes or for cosmetic purposes, or whether the supply relates to another supply that is made for medical or reconstructive purposes or for cosmetic purposes.

Supplies made before March 4, 2010

Prior to March 4, 2010, section 2 of Part II of Schedule V provided an exemption for a supply made by the operator of a health care facility of an institutional health care service rendered to a patient of the facility except where the supply related to the provision of a surgical or dental service that was performed for cosmetic purposes and not for medical or reconstructive purposes. Accordingly, the tax status of the institutional health care services (i.e., the use of the Facility and the breast implants) supplied by the Corporation were:

* exempt pursuant to section 2 of Part II of Schedule V where these services related to a surgical service that was performed for medical or reconstructive purposes; and

* taxable (the consideration for the supply was subject to the GST/HST) where these services related to a surgical service that was performed for cosmetic purposes as they were specifically excluded from section 2 of Part II of Schedule V.

Whether the supply made by the Corporation was exempt or whether the consideration for the supply was subject to the GST/HST, and whether the Corporation charged separate fees for the use of the Facility and the breast implants, the breast implants supplied by the Corporation were not a separate supply of property because of the circumstances in which the breast implants were supplied. That is, the breast implants were “installed” in the Corporation’s Facility in conjunction with the use of the Facility and therefore constituted an institutional health care service for purposes of the GST/HST.

Supplies made on or after March 4, 2010

Amendments made to Part II of Schedule V announced by the Minister of Finance on March 4, 2010 clarified that both surgical and non-surgical services performed for cosmetic purposes and not for medical or reconstructive purposes, as well as any separate supply of property and services made in respect of these ‘purely’ cosmetic services are not exempt supplies.i The definition “cosmetic service supply” was added to section 1 of Part II of Schedule V and it means a supply of a property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes.

Section 1.1 of Part II of Schedule V clarifies that cosmetic service supplies and any separate supply of property or services that are in respect of cosmetic service supplies are not exempt under this Part. Accordingly, a supply of an institutional health care service, such as a medical or surgical prosthesis installed in a health care facility, is not an exempt supply included in Part II of Schedule V if it is a cosmetic service supply or it is made in connection with a cosmetic service supply.

The result of these amendments is that any supply (no matter how provided) that is made by the operator of a health care facility or made by a health care professional (e.g., a physician) of a cosmetic service supply or any separate supply of property or services that is made in respect of a cosmetic service supply is taxable: the consideration for the supply is subject to the GST at the rate of 5% or the HST at the rate of 12%, 13% or 15%, depending on the place of supply. These amendments apply to a supply made after March 4, 2010. They also apply to a supply made on or before that day if:

* all of the consideration for the supply becomes due after that day or is paid after that day without having become due; or

* any of the consideration for the supply became due, or was paid, on or before that day if the supplier charged, collected or remitted any GST/HST in respect of the supply.

These amendments were clarifying measures intended to address non-surgical cosmetic services, and supplies in respect of non-surgical cosmetic services. Therefore, these amendments have no impact on the tax consequences of institutional health care services supplied by the operator of a health care facility that related to surgical procedures, whether provided for medical or reconstructive purposes or for cosmetic purposes, prior to March 4, 2010.

In summary, the tax status of supplies of institutional health care services made by the Corporation on or after March 4, 2010 is as follows:

* the use of the Facility and the breast implants installed in a patient at the Facility are exempt institutional health care services pursuant to section 2 of Part II of Schedule V when they are provided for medical or reconstructive purposes or provided in respect of another supply (e.g., a physician’s surgical service) that is made for medical or reconstructive purposes; and

* the use of the Facility and the breast implants installed in a patient at the Facility are taxable supplies pursuant to sections 1.1 and 2 of Part II of Schedule V when they are provided for cosmetic purposes or provided in respect of another supply (e.g., a physician’s surgical service) that is made for cosmetic purposes and not for medical or reconstructive purposes. In this situation, taxable does not include zero-rated supplies.

Part II of Schedule VI

Pursuant to section 25 of Part II of Schedule VI, a supply of a medical or surgical prosthesis, an ileostomy, colostomy or urinary appliance or similar article that is designed to be worn by an individual is zero-rated. This section is subject to the condition set out in section 1.1 of Part II of Schedule VI, which excludes from that Part any property that is not designed for human use or for assisting an individual with a disability or impairment.

The announcement by the Minister of Finance on March 4, 2010 also included an amendment to Part II of Schedule VI. Pursuant to section 1.2 of Part II of Schedule VI, a cosmetic service supply (as defined in section 1 of Part II of Schedule V) and any supply in respect of a cosmetic service supply is excluded from the provisions of that Part.ii This amendment applies to a supply made after March 4, 2010. It also applies to a supply made on or before that day if:

* all of the consideration for the supply becomes due after that day or is paid after that day without having become due; or

* any of the consideration for the supply became due, or was paid, on or before that day if the supplier charged, collected or remitted any GST/HST in respect of the supply.

Section 25 of Part II of Schedule VI generally applies to a supplier that is a manufacturer, distributor or retailer as such suppliers do not consume, use or supply medical or surgical prosthesis in the course of providing health care services. The supplies made by manufacturers, distributors and retailers are not connected to a particular service that will be rendered to an individual. In these circumstances the recipient typically acquires the medical or surgical prosthesis for general inventory purposes and it is not known whether that prosthesis will be used in a reconstructive or a cosmetic surgical procedure.

It was also asked whether the breast implants supplied by the Corporation could be considered a zero-rated supply described in section 25 of Part II of Schedule VI where a separate consideration was charged. Based on the structure of the ETA and the definition of the expression “commercial activity” in subsection 123(1), it is necessary to determine whether the supply of the medical or surgical prosthesis is exempt under Schedule V prior to determining whether the supply is zero-rated under Schedule VI.

Generally, the manner in which consideration is charged does not by itself characterize a supply. Instead, the tax consequences of a supply are determined by the circumstances in which the supply is made. As noted in the discussion above concerning Part II of Schedule V, a medical or surgical prosthesis is, by definition, an “institutional health care service” when the prosthesis is installed in a health care facility in conjunction with the supply of a service.

Where the operator of a health care facility provides a medical or surgical prosthesis for medical or reconstructive services and the prosthesis is installed in conjunction with the supply of a service in the health care facility, the supply is an exempt institutional health care service pursuant to section 2 of Part II of Schedule V. Accordingly, section 25 of Part II of Schedule VI could not apply to a supply that is made in such circumstances. Because of the definition of “commercial activity” this exempt supply cannot be a zero-rated supply. In order to be a taxable supply, which would include a zero-rated supply, the supply must be made in the course of a commercial activity and the definition of commercial activity excludes exempt supplies.

The operator of a health care facility generally acquires medical or surgical prosthesis for consumption, use or supply in the course of providing institutional health care services that are rendered to patients of its health care facility. It is at this stage when it can be determined whether the medical or surgical prosthesis is a cosmetic service supply or supplied in respect of a cosmetic service supply. Thus section 1.2 of Part II of Schedule VI will exclude the supply made by the operator from section 25 of that Part where the supply is in respect of a cosmetic service supply.

Conclusion

As explained above, depending on the circumstances in which it is made, a supply of a medical or surgical prosthesis may be subject to the GST/HST, zero-rated or exempt:

* When the supply is made by the operator of a health care facility, the medical or surgical prosthesis will be either an exempt supply or a taxable supply that is subject to the GST at the rate of 5% or the HST at the rate of 12%, 13% or 15% (depending on the place of supply).

* In contrast, when the supplier is a manufacturer or distributor there is usually a discrete supply of property that has no connection to a particular surgical procedure, e.g., the recipient acquires the medical or surgical prosthesis for general inventory purposes. Therefore, supplies of a medical or surgical prosthesis made by a manufacturer or distributor to the operator of a health care facility would generally be zero-rated where the prosthesis is designed for assisting an individual with a disability or impairment. However, if the medical or surgical prosthesis is, by its design, to be used solely for cosmetic purposes then the supply may be considered a cosmetic service supply or a supply in respect of a cosmetic service supply and would be taxable and not zero-rated.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-6761.

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Endnotes:

i These amendments were included in Bill C-9, the Jobs and Economic Growth Act, which received Royal Assent on July 12, 2010.

ii This amendment was included in Bill C-9, the Jobs and Economic Growth Act, which received Royal Assent on July 12, 2010.

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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 134234
Business Number: […]

October 24, 2012

Dear [Client]:

Subject:	GST/HST RULING
		The application of GST/HST to cost-of-repair estimates

Thank you for your faxes of April 7, 2011, and June 24, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to cost-of-repair estimates. We apologize for the length of time it has taken to respond to your query.

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 the information provided in your faxes, we understand that […](your company) is a general contractor serving the insurance restoration industry. As part of its business activities, your company inspects damaged buildings (fire, water, wind or other related damages) to provide an insurance company with a report stating the cause of the damage and an estimate of the cost to repair the damage. In the sample estimate that your company submitted to us, the estimate names the person from your company doing the inspection, the site being inspected, and sets out details of labour and material required to repair water damage to a home. The estimate includes charges for overhead, profit and applicable GST/HST. Where you do not receive the contract to proceed with the repairs, your company submits an invoice to the insurance company for an on-location inspection and appraisal fee. The fee in this sample case is $[…].

RULING REQUESTED

You would like to know if you are to charge GST/HST for this on-site inspection and appraisal service.

RULING GIVEN

Based on the facts set out above, we rule that your company’s supply of this on-site inspection and appraisal service is not a taxable supply. It is an exempt supply to which GST/HST does not apply.

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

For the services supplied by your company to an insurer (or an insurance adjuster) to be exempt, the service must satisfy one of the exempting provisions set out in the ETA. In this particular situation – the service of supplying an on-site inspection and appraisal concerning a property insurance claim – the service would be exempt under the definition of financial service in subsection 123(1) if it complied with paragraph (j.1) of that definition and was not excluded by paragraph (r).

In other words, your company’s service would be exempt if the following conditions were met:

* the service is provided to an insurer or a person who supplies a service which is referred to in paragraph (j) (i.e., a provincially licensed adjuster who provides a service of investigating and recommending the compensation in satisfying an insurance claim that is not in the nature of accident and sickness or life insurance);

* the service is not provided by an accountant, actuary, lawyer or notary in the course of a professional practice; and

* your company inspects the property and provides an appraisal of the damage caused to the property.

Since your company’s estimate is an estimate of the cost of repairing damaged property where your company inspected the damaged premises to prepare your estimate and since you are supplying it to an insurance company, your company’s estimate of the cost of repairing the water-damaged property is an exempt supply and you do not charge GST/HST for this service.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4394. 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,

Doris McMullan
Insurance and ITC Allocations Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate