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
Case Number: 189456
Business Number: […]
[Addressee]
Dear [Client]:
Subject: GST/HST RULING
Eligibility of […][the Corporation] to claim a public service body rebate as a facility operator
I am writing further to the request from […] of your office for a ruling on […] (the “Corporation”) eligibility to claim the 83% public service body (PSB) rebate of the goods and services tax (GST) and the federal part of the harmonized sales tax (HST), and an […]% PSB rebate of the provincial part of the HST under section 259 of the Excise Tax Act (ETA) in respect of its activities.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the ETA unless otherwise specified.
STATEMENT OF FACTS
We understand the following:
1. The Corporation was incorporated as […][the Corporation] […]
2. […]
3. The Corporation operates the […] (the “Facility”) in […][City 1, Province 1]. […]
4. Effective [mm/dd/yyyy], 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 the ETA(Footnote 1).
5. […]
6. to 17. […][Contains specific information about the Corporation’s operations].
18. The Facility is staffed by an inter-disciplinary team consisting of physicians, nurses, occupational therapists, physiotherapists, speech-language pathologists, activity therapists, dieticians, social workers and pharmacists.
19. There are [#] physicians with privileges at the Facility; […][types of physicians]. Physicians are at the Facility 7 days a week but not 24 hours a day; there are physicians on call at times when no physicians are at the Facility.
20. Patients are admitted to the Facility on the order of a physician. Patients are mainly admitted from an acute care facility. On admission patients are assigned to one of the physicians who have privileges at the Facility, and a care plan is prepared by the physician.
21. Physicians do rounds and meet with other clinical staff to discuss the progress of their patients and to make changes to care plans, as required.
22. There are at least [#] registered nurses at the Facility 24 hours a day. The Corporation employs [#] nurses at the Facility.
23. Patients receive an average of […] hours of nursing services each day.
24. In addition to the nursing care patients at the Facility also receive physiotherapy, occupational therapy, social work, speech language therapy, activation therapy and clinical dietetics. Patients receive an average of […] hours of care per day from these health care professionals.
25. The Corporation receives the majority of its operational funding from […]
26. […][Information about patient care]
27. Patients who require emergency or acute care are transferred to the emergency department at an acute care hospital.
RULING REQUESTED
You would like to know if the Corporation is a facility operator that is entitled to claim an 83% rebate of the GST and the federal part of the HST and the corresponding rebate of […]% of the provincial part of the HST for activities carried on in [Province 1] in the course of making facility supplies in a qualifying facility.
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, the Corporation is eligible to claim an 83% PSB rebate of the GST and the federal part of the HST for non-creditable tax charged (Footnote 2) 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 qualifying facility for use in making facility supplies or in the course of making facility supplies, ancillary supplies and home medical supplies.
In addition, the Corporation, as a facility operator resident only in [Province 1], is also eligible to claim an […]% PSB rebate for the provincial part of the HST 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 [Province 1] in the course of operating a qualifying facility for use in making facility supplies or in the course of making facility supplies, ancillary supplies and home medical supplies.
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
To be eligible for an 83% PSB rebate of the GST and the federal part of the HST and an […]% PSB rebate for the provincial part of the HST (in the case of an entity resident in [Province 1]), an entity must be 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”.
Effective [mm/dd/yyyy], the Corporation is a registered charity under the Income Tax Act, which means it is a charity for GST/HST purposes (Footnote 3) . Therefore, the Corporation meets the first requirement of the definition of facility operator. In order to meet the second requirement, the Corporation must operate a “qualifying facility”.
Qualifying facility
Subsection 259(2.1) provides that 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.
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 supplies
In general terms, paragraph (a) of the definition of “qualifying facility” in subsection 259(2.1) provides that supplies of services that are ordinarily rendered to the public at the facility or part must be facility supplies.
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.
In order to be a facility supply, the supply must first be an exempt supply (other than a prescribed supply). Exempt supplies are found in Schedule V to the Act.
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. This excludes cosmetic service supplies, meaning property or services provided for cosmetic purposes and not for medical or reconstructive purposes. Section 1 of Part V.I of Schedule V exempts supplies of property or a service made by a charity, except those specifically excluded under paragraphs (a) to (p) of that section.
Based on the information provided, the supplies by the Corporation would generally fall within the exemption in section 2 of Part II of Schedule V for the supply by an operator of a health care facility of an institutional health care service rendered to patients of that facility or under section 1 of Part V.1 of Schedule V, the general exemption for property or services supplied by charities.
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 public hospital or qualifying facility. Therefore, only the exempt property made available or exempt services rendered by the Corporation to patients at its facility would meet this requirement.
Paragraph (a), subparagraphs (a)(i) and (a)(ii) and clause (a)(ii)(A) of the definition of “facility supply” further require that the exempt property made available or exempt service rendered at the public hospital or qualify facility be part of a medically necessary process of health care for an individual. This process must be undertaken in whole or in part in the public hospital or qualifying facility and reasonably be expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of practise of medicine (or in certain circumstances, a midwife, a nurse practitioner or a prescribed person in prescribed circumstances).
The Corporation offers health care services to patients admitted to the Facility to assist in recovering from surgery, strokes, traumatic injuries, and chronic debilitating conditions. Patients must be medically stable before they are admitted and not require hospitalization as an acute care patient.
Patients are admitted for intensive therapy to deal with the effects of their condition. […]. There are [#] physicians on staff at the Facility and physicians are present during weekdays and are on call at nights and on weekends. Physicians do rounds and meet with clinical leaders to monitor patients’ progress and make adjustments to the treatment plans, as required. Physicians also determine when a patient is ready to be discharged from the Facility. Multidisciplinary care is provided by physicians, nurses, occupational therapists, physiotherapists, speech-language pathologists, dieticians, and social workers.
Based on our review of the facts, it is our view that physicians are reasonably expected to be involved in the process of health care for patients of the Facility. Accordingly, to the extent that the health care services provided at the Facility are exempt supplies that are part of a medically necessary process of health care for the individual for purposes described in paragraph 259(1)(a) of the definition of “facility supply” and are rendered under the active direction or supervision, or with the active involvement, of a physician, they will meet the requirements of subparagraphs 259(1)(a)(i) and 259(1)(a)(ii).
In circumstances where chronic care requires the individual to stay overnight at the public hospital or qualifying facility, the definition of “facility supply” in subsection 259(1) provides that the process must require, or reasonably be expected to require, the additional elements referred to in clauses (a)(iii)(A) to (D) of the definition of “facility supply”. That is, a registered nurse must be at the public hospital or qualifying facility at all times when the individual is there; a physician or, if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, must be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is there; the individual must be subject to medical management and receive a range of therapeutic health care services that includes registered nursing care; and it must 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.
We note in this regard that registered nurses are present at the Facility at all times and physicians are present during the day and are either at the Facility or available on-call at night to attend to patient needs if necessary.
Patients are admitted to the Facility for intensive therapy. The amount of therapy that a patient will receive depends on the unit to which they are admitted. This involves interaction with physicians, nurses, pharmacists, occupational therapists, physiotherapists, therapeutic recreation specialists, dieticians, speech language pathologists, and social workers who work with the patients to help them cope with, and/or alleviate their physical conditions. The treatment and discharge plans that are prepared for each patient and monitored by the physicians demonstrate that the patients are subject to medical management. Patients receive an average of […] hours of therapeutic care from registered nurses and other health care professionals.
Based on this information, the Corporation is rendering facility supplies in the Facility.
Qualifying funding
Paragraph (b) of the definition of “qualifying facility” in subsection 259(2.1) requires that an amount, other than a nominal amount, be paid or payable to the operator of the facility as “qualifying funding” in respect of the facility or part.
Subsection 259(1) defines “qualifying funding” of the operator of a facility for all or part of a fiscal year of the operator as meaning
a readily ascertainable amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the operator in respect of the delivery of health care services to the public for the purpose of financially assisting in operating the facility during the fiscal year or part, as consideration for an exempt supply of making the facility available for use in making facility supplies at the facility during the fiscal year or part or as consideration for facility supplies of property that are made available, or services that are rendered, at the facility during the fiscal year or part and is paid or payable by
(a) a government, or
(b) a person that is a charity, a public institution or a qualifying non-profit organization
(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and
(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.
The funding provided to the Corporation by […] meets the requirements of the definition of “qualifying funding” as the funding provided is a readily ascertainable amount of money paid or payable in respect of the delivery of health care services to the public in the circumstances described above.
Accreditation, licence or other authorization
Paragraph (c) of the definition of “qualifying facility” in subsection 259(2.1) requires that the Facility must have 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.
The Facility has received an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of its provision of health care services […].
To summarize, the 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 an 83% PSB rebate for the GST and the federal part of the HST and an […]% PSB rebate for the provincial part of the HST 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.
In addition to the making of facility supplies, the Corporation, as a facility operator, may be entitled to claim an 83% PSB rebate for the GST and the federal part of the HST and an […]% PSB rebate for the provincial part of the HST 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 by the Corporation in the course of making “ancillary supplies” or “home medical supplies” as defined in subsection 259(1).
Although it has not been demonstrated that the Corporation is involved in the provision of ancillary supplies or home medical supplies, we offer the following information for your reference.
Ancillary supply
Subsection 259(1) defines the term “ancillary supply” as:
(a) an exempt supply of a service of organizing or coordinating the making of facility supplies or home medical supplies in respect of which supply an amount, other than a nominal amount, is paid or payable to the supplier as medical funding, or
(b) the portion of an exempt supply (other than a facility supply, a home medical supply or a prescribed supply) of property or a service (other than a financial service) that represents the extent to which the property or service is, or is reasonably expected to be, consumed or used for making a facility supply and in respect of which portion an amount, other than a nominal amount, is paid or payable to the supplier as medical funding.
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.
Apportionment
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.
The 83% (or […]%) PSB rebate rate may not apply to all of the Corporation’s purchases and expenses. 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% (or […]%) 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 in the course of making facility supplies or home medical supplies, then the Corporation will be entitled to claim an 83% (or […]%) 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% (or […]%) 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 in the course of making of facility supplies or home medical supplies.
The Corporation, as a charity for purposes of the ETA, 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.
[…].
PSB rebates from previous periods
The Corporation may find that it has GST/HST that was paid or payable but has not been claimed in a rebate or that it has claimed rebates in respect of certain activities at an incorrect rate. The requirements for claiming such additional rebate amounts are not the same and are described in detail below.
Where a person has made an application for a PSB rebate for a particular claim period and later discovers additional GST/HST that was paid or payable in that claim period but was not claimed, subsection 259(6.1) may apply. Where certain conditions are met, new subsection 259(6.1) allows a PSB to claim a rebate in respect of property or a service for a particular claim period in a rebate application for a subsequent claim period ending after September 8, 2017. If a PSB has not claimed a rebate in respect of property or a service for a particular claim period, new subsection 259(6.1) allows the rebate to be carried forward where the following four conditions are met:
- The PSB did not claim the rebate in the application for any other claim period;
- The application for the subsequent claim period is filed within two years after
- if the person is a registrant, the day on or before which the person is required to file its GST/HST return for the particular claim period, and
- if the person is not a registrant, the day that is three months after the last day of the particular claim period;
- The PSB did not change the claimant type under which it was eligible to claim PSB rebates at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period; and
- The applicable rebate factor(s) did not change at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period.
Subsection 259(6.1) does not apply in situations where a person has claimed a PSB rebate in respect of a property or service and later finds out that it was eligible to claim the rebate at a higher rate. If the Corporation has already claimed a PSB rebate for a claim period and subsequently discovers that the rebate was not claimed at the proper rate, the Corporation must adjust the previously filed rebate application to claim a PSB rebate at the higher rate. The Corporation cannot include the additional rebate amount in the PSB rebate application for a different claim period. For more information on how to adjust a previously filed rebate claim, see "How do you make changes to a rebate application you already filed?" in Guide RC4034, GST/HST Public Service Bodies' Rebate. A reassessment or additional assessment of a rebate claim shall not normally be made more than four years after the day the application for the rebate was filed.
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 613-670-7932. 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
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
1 […].
2 In general terms, "non-creditable tax charged" means the GST/HST paid or payable on property or services for which the Corporation cannot claim an input tax credit, rebate, refund or remission other than a PSB rebate.
3 […].
Email this Content