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.

GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5

[Client Address]

Case Number: 247613
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Eligibility for 83% Public Service Bodies Rebate

This is further to our letters of [mm/dd/yyyy], and [mm/dd/yyyy], regarding the eligibility of […][long-term care home] (the Corporation), to claim a 83% public service bodies’(PSB) rebates of the GST/HST at the hospital authority rate. As indicated in our letter of [mm/dd/yyyy], we are providing you with a ruling concerning the Corporation's eligibility for public service body rebates as a facility operator operating a qualifying facility.

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 Government of Nova Scotia has proposed to decrease the rate of the HST from 15% to 14% effective April 1, 2025. The GST applies in the rest of Canada at the rate of 5%.

All references in this letter are to the Excise Tax Act (the Act) and its regulations unless otherwise provided.

STATEMENT OF FACTS

We understand from your letter dated [mm/dd/yyyy] and from the Corporation’s website that:

1. The Corporation is a registered charity within the meaning assigned to that expression by subsection 248(1) of the Income Tax Act and is a “charity” for purposes of Part IX of the Act.

2. The Corporation is licensed under the […][applicable provincial legislation] to operate a long-term care home in […][the province].

3. The Corporation is publicly funded by […][the regional health authority].

4. The Corporation operates a residential care facility that provides care to the elderly in […][city]. […]. A significant number of their residents have dementia.

5. The Corporation has registered nurses on site 24 hours a day, 7 days a week, physicians and allied care staff (rehabilitation, recreation, social work, dietician etc.) on site regularly and virtually, as needed.

6. The Corporation provides medication and drugs to residents as needed. The Corporation also provides food, laundry services and housekeeping services.

7. We understand that the Corporation has been claiming PSB rebates as a hospital authority since [mm/dd/yyyy].

8. Following a review of hospital authority designations, including that of the Corporation, we issued a letter on [mm/dd/yyyy] requesting that you submit all documentation and related analysis demonstrating that the Corporation meets the administrative guidelines for designation as a hospital authority. Upon reception of your letter dated [mm/dd/yyyy], we issued a second letter on [mm/dd/yyyy] explaining the Corporation’s ineligibility to claim PSB rebates at the hospital authority rate.

RULING REQUESTED

You would like to know whether the Corporation is entitled to claim an 83% PSB rebate of the GST as a facility operator.

RULING GIVEN

Based on the facts set out above, we rule that the Corporation is a facility operator and is eligible to claim an 83% PSB rebate of the GST for non-creditable tax charged in respect of property or services to the extent that the property or services are for consumption, use or supply in activities engaged in by the Corporation in the course of operating the facility for use in making facility supplies, or in the course of making facility supplies, ancillary supplies and home medical supplies.

EXPLANATION

To be eligible for an 83% PSB rebate of the GST, the Corporation would have to qualify as a "hospital authority" as defined in subsection 123(1) or a "facility operator" as defined in subsection 259(1).

Hospital Authority

A "hospital authority" is "an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority" for GST/HST purposes.

As per our letter dated [mm/dd/yyyy], and reiterated in our [mm/dd/yyyy] letter, the Corporation does not operate a public hospital and is not designated as a hospital authority. Therefore, the Corporation is not a hospital authority for GST/HST purposes.

As the Corporation is not a “hospital authority”, to determine if there is eligibility for the 83% PSB rebate, it is necessary to determine if the Corporation is a “facility operator”.

For ease of reading, find the full text of the following definitions in Appendix to this letter:

Facility operator;
Qualifying facility;
Facility supply;
Physician;
Qualifying funding.

Facility Operator

A "facility operator" means "a charity, a public institution or a qualifying non-profit organization (other than a hospital authority), that operates a qualifying facility".

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

Qualifying facility

Subsection 259(2.1) sets out three criteria that must be met for a facility, or part of a facility, other than a public hospital, to be a “qualifying facility”.

The following requirements must be met in order for a particular facility to be a “qualifying facility” for purposes of section 259.

First criterion: Facility Supply

To be a "facility supply", the property made available or the service rendered to an individual at the public hospital or qualifying facility must be an exempt supply . The definition of "facility supply" in subsection 259(1) is to be applied on a supply-by-supply basis. Exempt supplies are listed in Schedule V of the Act.

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

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

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

Upon review of the services and the care provided at the Corporation to its residents, as stated in the facts, we are of the view that the first criterion under paragraph 259(2.1)(a) description of a "facility supply" is met.

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

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

Second criterion: Qualifying Funding

The second criterion that must be met under paragraph 259(2.1)(b) for a facility to be a

"qualifying facility" is to receive qualifying funding.

The Corporation is an “accredited residential care facility that is publicly funded by [the regional health authority]”. The funding provided by [the regional health authority] to the Corporation in respect of its operation of the facility constitutes “qualifying funding”, thus meeting the second criterion under the paragraph 259(2.1)(b) description of a “qualifying facility”.

Third criterion: Accreditation, licence or other authorization

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

Based on the facts stated above, the Corporation is licensed under the [applicable provincial legislation] to operate a long term care home under [the regional health authority] in the province.

Hence, the Corporation, as the operator of the long-term care home, has an authorization that is recognized or provided for under a law of a province in respect of facilities for the provision of health care services. As a result, the third criterion for a facility to be a qualifying facility is also met by the Corporation.

Summary of “qualifying facility” analysis

The Corporation meets all of the requirements of paragraphs (a) to (c) of the definition of "qualifying facility" and, as a result, the Corporation is a facility operator for purposes of section 259. Accordingly, the Corporation qualifies for an 83% PSB rebate of the GST or payable on eligible purchases and expenses to the extent that it intended to consume, use or supply the property or service in the course of activities engaged in by the Corporation in the course of operating a qualifying facility for use in making facility supplies, or in the course of making facility supplies.

As discussed above, the definition of "facility supply" requires that an exempt supply made to an individual at a qualifying facility be part of a medically necessary process of health care that is reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician. As such, not necessarily all supplies made by the Corporation constitute facility supplies. The determination of whether a particular supply is a facility supply is to be made on a case-by-case basis. A facility operator may also be entitled to claim an 83% rebate of the GST and the federal part of the HST paid or payable on eligible purchases and expenses to the extent that it intended to consume, use or supply the property or service in the course of activities engaged in by the Corporation in the course of making ancillary supplies or home medical supplies.

ADDITIONAL INFORMATION

As there is no indication that the Corporation is involved in the provision of ancillary supplies or home medical supplies, we invite you to consult the Appendix of this letter that offers the pertinent information for your reference.

Calculation of the PSB rebate

As a facility operator, the Corporation will claim its PSB rebate at the rate of 83% on line 311 of the form GST66, Application for GST/HST Public Service Bodies' Rebate and GST Self-Government Refund.

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

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

As required by subsection 259(4.1), the Corporation will be required to apportion its rebate claims between its inputs that are for consumption, use or supply in its activities carried on in the course of operating a qualifying facility for use in making facility supplies or in the course of making facility supplies, ancillary supplies or home medical supplies, and its other activities (if any), unless subsection 259(14) applies.

Subsection 259(14) provides that:

"For the purposes of this section, if a person incurs all or substantially all of the tax that is included in determining the amount of the non-creditable tax charged in respect of property or a service for a claim period of the person acting in the person's capacity as a hospital authority, a facility operator or an external supplier, the person is deemed to have incurred all of the tax that is included in determining that amount in the course of fulfilling the person's responsibilities as a hospital authority, a facility operator or an external supplier, as the case may be."

The CRA defines "all or substantially all" to mean 90% or more. Generally, subsection 259(14) means that where the Corporation incurs 90% or more of the GST/HST paid or payable on a property or a service acquired in its capacity as a facility operator (e.g., for use in making facility supplies), all of that GST/HST is deemed to have been incurred in that capacity. As such, the Corporation could claim a PSB rebate for that property or service at the rate of 83% for the GST and the federal part of the HST. For example, if the Corporation incurs GST/HST on its utilities, and the Corporation determines it incurs 93% of the GST/HST in its activities as a facility operator for making facility supplies, the Corporation may claim 100% of the GST/HST it pays on the utilities using the 83% PSB rebate rate.

Please note that the wording of subsection 259(14) requires an allocation to be performed for each property or service identified in the claim period.

Rebate for purchases that do not qualify for 83% rebate

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

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

Change in tax status of supplies

A registered charity for income tax purposes that is also a hospital authority is a public institution, as defined in subsection 123(1) of the ETA. If the Corporation does not qualify as a hospital authority, it will no longer be treated as a public institution for GST/HST purposes. Instead, the Corporation will be treated as a charity and facility operator for GST/HST purposes and will be subject to the provisions of the Act that apply to charities and facility operators. As a result, some supplies made by the Corporation may have a different tax status.

Generally, all supplies of property and services made in Canada are subject to GST/HST unless specifically relieved under the ETA. However, similar to the general exemption for public institutions found in section 2 of Part VI of Schedule V of the ETA, the general exemption for charities found in section 1 of Part V.1 of Schedule V of the ETA provides that most supplies of property or services made by charities are exempt, unless the supply is excluded under paragraphs (a) to (p) of that section.

Change in accounting method

Additionally, the Corporation will no longer be able to use the regular method or the special quick method of accounting available to public institutions to calculate its net tax that is reported on its GST/HST return for a reporting period. Charities that are GST/HST registrants must use the net tax calculation for charities when filing their GST/HST returns, unless the charity is eligible to elect not to use it and it files the appropriate form. Using the net tax calculation for charities does not affect your public service bodies' rebate entitlements and you still claim your rebate in the usual way.

For more information on how the GST/HST applies to charities, including the net tax calculation charities, see Guide RC4082, GST/HST Information for Charities, and GST/HST Info Sheet GI-066, How a Charity Completes Its GST/HST Return. Basic information on how the GST/HST applies to many issues commonly faced by organizations that are charities under the ETA is available in GST/HST Info Sheet GI-067: Basic GST/HST Guidelines for Charities.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 873-455-1361. Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287 or by fax to 1-418-566-0319.

Sincerely,

Kassandra Leonard
Rulings Officer
Health Care Sectors Unit
Public Service Bodies and Governments Division
GST/HST Rulings Directorate

APPENDIX

These definitions are included in section 259 of the Excise Tax Act.

Facility Operator

A "facility operator" is defined to mean "a charity, a public institution or a qualifying non-profit organization (other than a hospital authority), that operates a qualifying facility".

Qualifying facility

(…) a facility, or part of a facility, other than a public hospital, is a qualifying facility for a fiscal year, or any part of a fiscal year, of the operator of the facility or part, if:

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

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

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

Facility supply

Facility supply means an exempt supply (other than a prescribed supply) of property or a service in respect of which

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

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

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

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

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

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

(iii) in the case of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, requires or is reasonably expected to require that

(A) a registered nurse be at the public hospital or qualifying facility at all times
when the individual is at the public hospital or qualifying facility,

(B) a physician or, if a physician is not readily accessible in the geographic area in
which the process takes place, a nurse practitioner, be at, or be on-call to attend at,
the public hospital or qualifying facility at all times when the individual is at the
public hospital or qualifying facility,

(C) throughout the process, the individual be subject to medical management and
receive a range of therapeutic health care services that includes registered nursing
care, and

(D) it not be the case that all or substantially all of each calendar day or part
during which the individual stays at the public hospital or qualifying facility is
time during which the individual does not receive therapeutic health care services
referred to in clause (C), and

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

Physician

Physician means a person who is entitled under the laws of a province to practise the profession of medicine.

Qualifying funding

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

(a) a government, or

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

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

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

Ancillary supplies

Subsection 259(1) defines an "ancillary supply" to mean

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

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

Home medical supply

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

(a) that is made

(i) as part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, and
(ii) after a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances, has identified or confirmed that it is appropriate for the process to take place at the individual's place of residence or lodging (other than a public hospital or a qualifying facility),

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

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

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

Medical funding

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