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, 14th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 144811
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
83% Public Service Bodies’ rebate applicability
Thank you for your letter of March 31, 2012, concerning the eligibility of […] (the Corporation) to claim an 83% public service body (PSB) rebate of the GST and the federal part of the HST with respect to the operation of a Community Health Centre. We apologize for the delay in our response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; 14% in Prince Edward Island; and 15% in New Brunswick, Newfoundland and Labrador and Nova Scotia. The Government of Prince Edward Island has proposed to increase the rate of the HST in that province from 14% to 15% effective October 1, 2016. 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
It is our understanding that:
1. The Corporation is […][a] healthcare centre operating […][in Ontario].
2. The Corporation was incorporated in the Province of Ontario. […]
3. The Corporation is a registered charity for income tax purposes and is a charity for GST/HST purposes.
4. The Corporation is not registered for GST/HST purposes.
5. The Corporation has not been designated as a hospital authority for GST/HST purposes.
6. According to the Ontario Ministry of Health and Long-Term Care (MOHLTC) website, the Corporation is recognized as a Community Health Centre by the MOHLTC. That website indicates that Community Health Centres provide primary health and health promotion programs. Each Community Health Centre is an incorporated, non-profit agency, governed by a volunteer Board of Directors. Community Health Centres provide primary care services with an emphasis on health promotion and disease prevention. Community Health Centres also work with local residents to build the capacity of the community to improve its general health.
7. Services provided by the Corporation include the following:
* General healthcare, including health and nursing care, treatment and monitoring of temporary and chronic illness;
* 24 hour urgent on-call physician care;
* Preventative healthcare including general health teaching, routine physicals, vaccinations and screening for disease;
* Diabetes management and treatment services such as insulin initiation and adjudication, follow-up physician instructions and dietician counseling;
* […]
8. The services are provided by a multi-disciplinary team, including physicians, nurses, nurse practitioners, […], and social workers.
9. The Corporation does not provide chronic or palliative care requiring patients to stay overnight at the […][facility].
10. A physician is always available during the [facility’s] hours of service, which are mostly daytime, […]. There are [#] individual physicians on staff who collectively work the equivalent to [#] full-time physicians. The physicians are on call 24 hours per day, seven days/week.
11. The services rendered by the physicians to patients are part of a primary health care program. The physicians provide the same services as those a family physician/general practitioner would perform (e.g., primary health care, obstetric care, order prescriptions as required). Such physician services include diagnoses, treatment, general physical assessment and referrals to specialists.
12. […][Additional information about services rendered by physicians]
13. Besides purchases made for health care services, the Corporation also makes purchases related to the activities of healthcare promotion and patient outreach.
14. Other activities of the Corporation include teaching, […], nutrition education programs and cooking classes (e.g., to help diabetics learn what to cook; to teach those of low income), exercise programs […], and community wellness and health promotion workshops.
15. The Corporation receives funding from the provincial government to provide services. The audited financial statements for the year ended [mm/dd/yyyy], indicate that the Corporation received $[…] from the MOHLTC/[…] Local Health Integration Network as “Community Health Centre” funding.
16. […], the MOHLTC advised that the Corporation is approved as a health service provider, being a Community Health Centre that provides health services […].
RULING REQUESTED
You would like to know whether the Corporation is eligible to claim an 83% PSB rebate of the GST and the federal part of the HST, and as an entity resident in Ontario, an 87% PSB rebate of the provincial part of the HST for non-creditable tax charged in respect of property or services acquired in the course of its operations.
RULING GIVEN
Based on the facts set out above, we rule that the Corporation is a facility operator making facility supplies at […][a qualifying facility]. As such, it is eligible to claim an 83% PSB rebate of the GST and the federal part of the HST, and, as of July 1, 2010, an 87% PSB rebate for the provincial part of the HST (hereafter all referred to as the “83% PSB rebate”), for non-creditable tax charged in respect of purchases of property or services to the extent that the property or services are for consumption, use or supply in the course of activities engaged in by the Corporation in the course of operating the qualifying [facility] for use in making facility supplies, or of making facility supplies.
[…]
These rulings are 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
To be eligible for the 83% PSB rebate, an entity must be a “hospital authority”, a “facility operator” or an “external supplier”.
Hospital authority
A “hospital authority” is defined in subsection 123(1) as “an organization that operates a public hospital and that is designated by the Minister [of National Revenue] as a hospital authority” for GST/HST purposes.
The administrative criteria for designation as a hospital authority are set out in GST/HST Memoranda Series Chapter 25.2, Designation of Hospital Authorities. This memorandum is available on the Canada Revenue Agency’s website at http://www.cra-arc.gc.ca/E/pub/gm/25-2/README.html.
Since the Minister of National Revenue has not designated the Corporation as a “hospital authority”, it is not a hospital authority for GST/HST purposes.
Therefore, to determine whether the Corporation is eligible for the 83% PSB rebate, it is necessary to determine whether it is a “facility operator” or an “external supplier”.
Facility operator
A “facility operator” is defined in subsection 259(1) as meaning “a charity, a public institution or a qualifying non-profit organization (other than a hospital authority), that operates a qualifying facility”.
As the Corporation is a charity for purposes of the ETA, it meets the first requirement of the definition of “facility operator”. In order to meet the second requirement, it must operate a qualifying facility.
Qualifying facility
Subsection 259(2.1) sets out the criteria that must be met in order for a facility or part to be a qualifying facility, other than a public hospital, in a fiscal year, or any part of a fiscal year. A facility or part of a facility will be considered a qualifying facility if:
(a) supplies of services that are ordinarily rendered during that fiscal year or part to the public at the facility or part would be facility supplies if the references in the definition of “facility supply” in subsection 259(1) to “public hospital or qualifying facility” were references to the facility or part;
(b) an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part; and
(c) an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.
The requirements contained in (a) to (c) above must be met in order for a particular facility to be a “qualifying facility” for purposes of section 259. A discussion of these requirements follows.
Facility supply
Subsection 259(1) defines the term “facility supply” as an exempt supply (other than a prescribed supply) of property or a service in respect of which:
(a) the property is made available, or the service is rendered, to an individual at a public hospital or qualifying facility as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, which process
(i) is undertaken in whole or in part at the public hospital or qualifying facility,
(ii) is reasonably expected to take place under the active direction or supervision, or with the active involvement, of
(A) a physician acting in the course of the practise of medicine,
(B) a midwife acting in the course of the practise of midwifery,
(C) if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner acting in the course of the practise of a nurse practitioner, or
(D) a prescribed person acting in prescribed circumstances, and
(iii) in the case of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, 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.
A "physician" is defined in subsection 259(1) as “a person who is entitled under the laws of a province to practise the profession of medicine”.
As the Corporation does not provide chronic care at its [facility] that requires an individual to stay overnight, and because the Corporation operates its own [facility], subparagraph (a)(iii) and paragraph (b) of the definition of “facility supply” do not apply.
The definition of “facility supply” is to be applied on a supply-by-supply basis. To be a “facility supply”, the property made available or the service rendered to an individual at the qualifying facility must be an exempt supply (other than a prescribed supply).
Section 2 of Part II of Schedule V exempts a supply of an institutional health care service made by the operator of a health care facility if the institutional health care service is rendered to a patient or resident of the facility. The terms “institutional health care service” and “health care facility” are defined in section 1 of Part II of Schedule V.
Of note, if a supply is of an institutional health care service that falls within an exemption under section 2 of Part II of Schedule V, it is necessary to determine if the supply is excluded from the exemption because the supply is a cosmetic service supply or because the supply is not a qualifying health care supply, pursuant to sections 1.1 and 1.2 of Part II of Schedule V (Footnote 1) .
Section 1 of Part V.1 of Schedule V exempts supplies of property or services made by a charity unless specifically excluded under paragraphs (a) to (p) of section 1 of Part V.1 of Schedule V.
As the Corporation is a charity, the services supplied by it to patients would generally be exempt under section 2 of Part II or section 1 of Part V.1 of Schedule V.
Second, paragraph (a) of the definition of “facility supply” requires that the exempt property be made available or the exempt service be rendered to an individual at the qualifying facility. Therefore, only the exempt property made available or exempt services rendered by the Corporation to patients at the Corporation’s [facility] would meet this requirement. In other words, a service that is not rendered at the [facility] will not constitute a facility supply.
Third, the combination of paragraph (a), subparagraphs (a)(i) and (ii) and clause (a)(ii)(A) of the definition of “facility supply” further requires that the exempt property made available or exempt service rendered at the qualifying facility be part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative care. This process must be undertaken in whole or in part at the qualifying facility and reasonably be expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of the practise of medicine (or in certain circumstances, a midwife, a nurse practitioner or a prescribed person in prescribed circumstances).
The reference to “medically necessary process” in the definition of “facility supply” is qualified by the requirement that a physician be reasonably expected to be actively involved in the process. As such, only exempt supplies that are part of a medically necessary process of health care for individuals with active physician involvement will constitute facility supplies. Supplies that do not meet this requirement do not fall within the definition of “facility supply”. For example, supplies that a person may make in the course of such activities as research, nutrition education programs and cooking classes, exercise programs and community wellness and health promotion workshops would not fall within the definition of “facility supply”, and tax on purchases related to such activities would not be eligible for the 83% PSB rebate.
The Corporation offers primary health care services (e.g., diagnostic, treatment, general physical assessment, referrals) to patients registered with it. You have advised that the services rendered by the Corporation at its [facility] are comparable to those provided at a walk-in medical clinic where physicians and other health care professionals such as nurses, are on staff providing various health care services to individuals during set hours of operation.
Accordingly, exempt supplies of health care services provided by the Corporation at its [facility], that are part of a medically necessary process of health care for an individual for purposes described in paragraph (a) of the definition of “facility supply” and are rendered under the active direction or supervision, or with the active involvement, of a physician, will meet the requirements of subparagraphs (a)(i) and (a)(ii) and will, therefore, constitute facility supplies.
Qualifying funding
Paragraph (b) of the definition of “qualifying facility” in subsection 259(2.1) requires that an amount, other than a nominal amount, be paid or payable to the operator of the facility as “qualifying funding” in respect of the facility or part for the fiscal year or part.
Subsection 259(1) defines “qualifying funding” of the operator of a facility for all or part of a fiscal year of the operator as meaning a readily ascertainable amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the operator in respect of the delivery of health care services to the public for the purpose of financially assisting in operating the facility during the fiscal year or part, as consideration for an exempt supply of making the facility available for use in making facility supplies at the facility during the fiscal year or part or as consideration for facility supplies of property that are made available, or services that are rendered, at the facility during the fiscal year or part and is paid or payable by
(a) a government, or
(b) a person that is a charity, a public institution or a qualifying non-profit organization
(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and
(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.
The funding provided to the Corporation by the MOHLTC/[…] Local Health Integration Network under the Agreement meets the requirements of the definition of “qualifying funding” as it is a readily ascertainable amount of money paid or payable in respect of the delivery of health care services to the public in the circumstances described above.
Accreditation, licence or other authorization
Paragraph (c) of the definition of “qualifying facility” in subsection 259(2.1) requires that an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.
The [facility] operated by the Corporation […][meets] this criterion as the Corporation has authorization recognized by the MOHLTC respecting the [facility], as evidenced by the document described under Fact 16 above. The letter from the MOHLTC, dated [mm/dd/yyyy], supports the fact that the Corporation is a Community Health Centre authorized by the MOHLTC to provide health services. Further, the MOHLTC previously advised the CRA that Community Health Centres are health facilities and that it provides them funding so they may provide primary health care and health promotion services to local residents.
Summary of Facility Operator Criteria
To summarize, the Corporation’s [facility] [meets] all of the requirements of paragraphs (a) to (c) of the definition of “qualifying facility” in subsection 259(2.1) and, as a result, the Corporation is a facility operator for purposes of section 259. Accordingly, the Corporation qualifies for the 83% PSB rebate of non-creditable tax, to the extent that property or services are for consumption, use or supply in the course of activities engaged in by the Corporation in the course of operating the [facility] for use in making facility supplies, or of making facility supplies […].
Home medical supply
Section 259 also extends the 83% rebate to a “facility operator” that makes a home medical supply. Subsection 259(1) defines the term “home medical supply” as meaning 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 in respect of the supply.
Medical funding
The term “medical funding” of a supplier in respect of a supply is defined in subsection 259(1) as meaning an amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the supplier in respect of health care services for the purpose of financially assisting the supplier in making the supply or as consideration for the supply by
(a) a government, or
(b) a person that is a charity, a public institution or a qualifying non-profit organization
(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and
(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person 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.
[…]
Rebate regarding activities that qualify as “facility supplies” […]
As discussed above, the definitions of “facility supply” […] require that an exempt supply made to an individual at a qualifying facility […] be part of a medically necessary process of health care for the individual and meet certain criteria. As such, not all supplies made by the Corporation will automatically constitute facility supplies […]. The determination of whether a particular supply is facility supply […] is to be made on a case-by-case basis.
As the Corporation provides a variety of services, the 83% PSB rebate rate may not apply to all of its purchases. Pursuant to subsection 259(14), where all or substantially all of the non-creditable tax charged for a claim period is tax incurred in its capacity as a facility operator, the Corporation will be entitled to claim an 83% PSB rebate on all of the non-creditable tax charged for that claim period. In other words, if 90% or more of the non-creditable tax charged for a claim period is tax incurred in activities engaged in by the Corporation in the course of operating a qualifying facility for use in making facility supplies, or of making facility supplies […], then the Corporation will be entitled to claim an 83% PSB rebate on all of the non-creditable tax charged for that claim period. If less than 90% of non-creditable tax charged in a claim period is for these purposes, then the Corporation is entitled to claim an 83% PSB rebate to the extent the non-creditable tax charged is for activities engaged in by the Corporation in the course of operating a qualifying facility for use in making facility supplies, or of making of facility supplies […].
The Corporation (as a charity) may be entitled to claim a 50% rebate of the GST and the federal part of the HST and, as a resident in Ontario, may also be entitled to an 82% rebate of the provincial part of the HST (hereafter all referred to as the “50% charity rebate”), for non-creditable tax charged on purchases of property and services that are not eligible for the 83% PSB rebate.
Recap of Rebate Eligibility
In conclusion, the Corporation meets the definition of “facility operator” and therefore qualifies for the 83% PSB rebate in respect of non-creditable tax charged to the extent that it intends to consume, use or supply property or services in the course of activities engaged in by the Corporation in the course of operating its [facility] for use in making facility supplies, or of making facility supplies […]. For purchases of goods and services that may be made which do not qualify for the 83% rebate, the 50% charity rebate may be available, subject to rules for that rebate. For more information on the charity rebate, refer to GST/HST Guide RC4082, GST/HST Information for Charities, which can be found at http://www.cra-arc.gc.ca/E/pub/gp/rc4082/README.html.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4390. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
John Ware
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
1 Sections 1.1 and 1.2 of Part II of Schedule V
A supply that is a cosmetic service supply or a supply in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes is generally deemed under section 1.1 of Part II of Schedule V not to be included in Part II of Schedule V and is therefore not exempt under section 2 of Part II of Schedule V. A cosmetic service supply is defined in section 1 of Part II of Schedule V to mean "a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes."
In addition, section 1.2 provides that for the purposes of Part II of Schedule V, other than sections 9 and 11 to 14, a supply that is not a "qualifying health care supply" is deemed not to be included in Part II of that Schedule. Generally, supplies deemed not to be included in Part II of Schedule V would be taxable at the applicable rate of GST/HST, unless they are exempted pursuant to another provision.
The expression "qualifying health care supply" is defined in section 1 of Part II of Schedule V to mean, "a supply of property or a service that is made for the purpose of
(a) maintaining health,
(b) preventing disease,
(c) treating, relieving or remediating an injury, illness, disorder or disability,
(d) assisting (other than financially) an individual in coping with an injury,
illness, disorder or disability, or
(e) providing palliative health care."
For more information on the expression “qualifying health care supply”, please refer to GST/HST Notice 286, Draft GST/HST Policy Statement – Qualifying Health Care Supplies and the Application of Section 1.2 of Part II of Schedule V to the Excise Tax Act to the Supply of Medical Examinations, Reports and Certificates.
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