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: 150125
Dear [Client]:
Subject: GST/HST INTERPRETATION
Hospital On-Call Fee
Thank you for your [correspondence] of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to an on-call fee paid by a hospital to a medical specialist.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. 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.
INTERPRETATION REQUESTED
Your request is about an “on-call” coverage arrangement made between a hospital and a medical specialist. You advised that the hospital wants to retain the services of a medical specialist to treat patients, but does not wish to “keep” the medical specialist on site when there are no patients present. The solution is for the hospital to pay the medical specialist a stipend to keep him close to the hospital in order to be available on an on-call basis when a patient arrives at the hospital.
You would like to know whether the GST/HST applies to the “on-call” payment made by the hospital to the medical specialist. As we were not provided with a copy of an agreement between the hospital and the medical specialist and the medical specialist’s status as a GST/HST registrant is unknown, we are providing the following interpretation.
INTERPRETATION GIVEN
The GST/HST is a transaction-based tax and for each transaction, the supplier must determine whether the tax is applicable. 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%, 13%, 14%, 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.
Section 5 of Part II of Schedule V exempts a supply of a consultative, diagnostic, treatment or other health care service rendered by a medical practitioner to an individual, where the service is a qualifying health care supply. That is, section 1.2 of Part II of Schedule V generally deems a supply that is not a “qualifying health care supply”, as defined in section 1, to not be included in that Part. (Footnote 1) Therefore, to be exempt under section 5, the service rendered to an individual by a medical practitioner must be for the purpose of:
* maintaining health,
* preventing disease,
* treating, relieving or remediating an injury, illness, disorder or disability,
* assisting (other than financially) an individual in coping with an injury, illness, disorder or disability, or
* providing palliative health care.
Section 1.1 of Part II of Schedule V also excludes a cosmetic service supply (which is defined in section 1 to mean a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes) from the exemptions in Part II as well as supplies that are in respect of a cosmetic service supply that are not made for medical or reconstructive purposes.
Hospital on-call fee
We understand that “hospital on-call” is a situation where a medical practitioner, such as a physician, has agreed to remain on stand-by in order to respond to urgent or emergent telephone calls from hospital staff, residents and other physicians requesting advice about a patient and/or to go to the hospital to examine and treat a patient. In other words, “hospital on-call” is being available to provide timely access to medical care to hospital patients.
The hospital on-call fee, also referred to as a retainer or a stipend, is typically a flat rate that is set on a per annum, per month or on per diem basis that is paid by the hospital to the physician for being available to provide a service. Although the physician will provide services in the future, at the time when the hospital and the physician enter in the arrangement or when the hospital pays the on-call fee, the hospital acquired the right to call upon the physician to attend the hospital. The payment of the on-call fee is not tied to actual hours worked nor is it dependent on the number of services that may be provided by the physician. There is no adjustment to the on-call fee to reflect hours worked or services provided by the physician. Also, the on-call fee is a payment that is in addition to the regular fee-for-service earnings of the physician, and the physician may still submit fee-for-service billings (e.g., to the hospital, patient or other party) for the health care services that he or she renders to patients during the on-call period.
As the GST/HST is a transactional tax the exempting provisions in Schedule V apply on a supply-by-supply basis. This means that each supply must be evaluated independently in order to determine whether a particular exemption applies. Together, sections 1.1, 1.2 and 5 of Part II of Schedule V describe the circumstances in which a supply rendered by a physician will be exempt under that Part. Accordingly, a supply is exempt under section 5 of Part II of Schedule V if it meets all of the following conditions:
* it is rendered to a particular individual;
* the person who renders the service is licensed under the laws of the province to practise the profession of medicine (or dentistry);
* it is a consultative, diagnostic or other health care service that is a qualifying health care supply (i.e., the service is provided for the purpose of maintaining health, preventing disease, treating an injury, etc. of an individual); and
* it is not a cosmetic service supply nor a supply in respect of a cosmetic service supply that is not made for medical or reconstructive purposes.
These circumstances clearly provide that the exemption is dependent upon the nature of what is supplied and not merely on the medical qualification of the supplier. The consideration paid or payable must be directly linked to a supply of a health care service that is in fact rendered by a physician to a particular individual. Therefore, it is not sufficient for purposes of section 5 of Part II of Schedule V that a payment has been made to a physician or that the physician will be available to render a service at some point in the future.
At the time the “hospital on-call” arrangement is entered into between the hospital and the physician or when the fee is paid by the hospital to the physician, the hospital acquired a right to call upon the physician to attend the hospital during a given time period. This right has a distinct utility to the hospital and as such, it is our view that the right is a discrete supply that is separate from any health care services that may be rendered by the physician to patients of the hospital.
For purposes of the GST/HST, “property” is defined in subsection 123(1) to mean any property, whether real or personal, movable or immovable, tangible or intangible, corporeal or incorporeal, and includes a right or interest of any kind, a share and a chose in action. It is also noted that the definition of “service” in subsection 123(1) excludes property. As consideration for a supply of “property”, the hospital on-call fee is not consideration paid or payable for a supply of a service for GST/HST purposes. Therefore, the hospital on-call fee cannot be consideration paid or payable by the hospital for a supply of a health care service rendered to an individual as described in section 5 of Part II of Schedule V. This view is affirmed by the fact the physician still submits fee-for-service billings for the health care services that he or she renders to patients during the on-call period.
There is no exempting provision that would apply to a supply made by a physician of being available to a hospital – a right provided to the hospital to call upon the physician during a given time period. Accordingly, the hospital on-call fee paid by a hospital to a physician is consideration for a taxable supply.
Registration and small suppliers
Subsection 123(1) defines a “registrant” to mean a person who is registered or who is required to be registered for the GST/HST. Subsection 240(1) requires every person who makes a taxable supply in Canada in the course of a commercial activity to register for the purposes of the GST/HST. An exception to the rule is where the person is a small supplier.
The term “small supplier” is defined in subsection 148(1). It includes a person who had gross worldwide revenues from taxable supplies equal to or less than $30,000 over the last four consecutive calendar quarters. If a physician’s only taxable income is generated from hospital on-call fees and these fees do not exceed the small supplier threshold, the physician would qualify as a small supplier and as such not be required to register and charge GST/HST on this fee. However, a small supplier may choose to voluntarily register for GST/HST purposes. GST/HST Memorandum 2.3 Voluntary Registration provides information on this subject.
A registrant who makes a taxable supply is required to collect the GST/HST payable by the recipient in respect of the supply and to remit the tax collected. If the physician is a registrant, the physician must collect and remit the GST/HST calculated at the applicable rate on the value of the consideration for the supply; i.e., the hospital on-call fee. For example, if the supply is made in Ontario, the HST would be calculated at the rate of 13% on the hospital on-call fee. More information on this matter can be found in Guide RC4022, General Information for GST/HST Registrants.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-941-3268. 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,
Chantal Desrosiers
Manager, Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
1 Section 9 of Part II of Schedule V exempts a supply (other than a zero-rated supply) of a 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 person of the province. The exclusions in sections 1.1 and 1.2 of Part II of Schedule V from the exempting provisions of that Part do not apply to a supply that is exempt under section 9.
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