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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 129131
August 10, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Supply of nurses to a hospital
Thank you for your letter of October 6, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of nurses to a hospital.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
BACKGROUND INFORMATION
In your letter dated October 6, 2010, you present a scenario in which a company (Company) that is an independent contractor specializing in health care services enters into a contract with a hospital to make a supply described as "nursing services". The fee charged by the Company for the supply is determined based on the number of hours worked by each nurse. The Company also invoices the hospital, under the same contract, for travel allowances and other expenses that it pays to the nurses. According to your letter, the hospital is invoiced on a monthly basis for "all nurses supplied for the month".
Interpretation Requested
You have asked us to confirm that the supply of nurses to a hospital, in the circumstances described above, is an exempt supply for GST/HST purposes.
In addition, you would like to know whether the hospital can recover any GST/HST included in the fee paid by the hospital to the Company in respect of travel allowances and other expenses paid to the nurses by the Company.
Pursuant to paragraph 14 of GST/HST Memoranda 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) can only issue a ruling when the person requesting the ruling has provided all the relevant facts of the transactions. Where all the relevant facts are not provided, an interpretation may be issued. Therefore, we are providing the following interpretation for your assistance.
Interpretation Given
Generally, most supplies of property and services made in Canada are taxable for GST/HST purposes, unless they are exempt supplies. Exempt supplies are listed in Schedule V. Part II of Schedule V provides that certain health care services are exempt from GST/HST. In order for a supply of property or a service to be exempt from GST/HST under Part II of Schedule V, a specific exempting provision included in Part II must apply to that supply. In this case, section 6 of Part II of Schedule V is the exempting provision to consider.
In addition, it should be noted that the GST/HST is a transactional tax and, as such, the exempting provisions in Part II of Schedule V apply on a supply-by-supply basis. Each supply must be evaluated independently in order to determine whether a particular exemption applies.
Section 6 of Part II of Schedule V
Prior to an amendment that came into effect for supplies made after February 26, 2008, section 6 of Part II of Schedule V exempted a supply of a nursing service rendered by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse, where:
a) the service was rendered to an individual in a health care facility or in the individual's place of residence;
b) the service was a private-duty nursing service; or
c) the supply was made to a public sector body (such as a government, non-profit organization, charity, municipality, school authority, hospital authority, public college or university).
Applicable to supplies made after February 26, 2008, section 6 exempts a supply of a nursing service rendered to an individual by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse, if the service is rendered within a nurse-patient relationship. As a result of this amendment, a supply of a nursing service rendered to an individual within a nurse-patient relationship can be exempt regardless of the location at which the service is rendered.
Nursing services are generally understood to be the provision of care for, and the treatment of the health conditions of, an individual where the care and treatment services are performed by registered or licensed nurses. These services include supportive, preventive, therapeutic, palliative and rehabilitative services that are rendered to assist the individual in attaining or maintaining optimal function. We also consider the scope of nursing to include the diagnosis and treatment of health problems, assessment of an individual's nursing care needs, and the preparation of a nursing care plan for the individual.
A registered or licensed nurse establishes and maintains a nurse-patient relationship by using nursing knowledge and skills to render nursing services involving supportive, therapeutic, palliative and rehabilitative services to assist the patient in attaining or maintaining optimal function, such as treating the health problems of a patient, administering medications and performing other interventions. We interpret the phrase "rendered within a nurse-patient relationship" to mean nursing services that involve personal interaction between a nurse and an individual who is a patient where there is an established or ongoing relationship between the nurse and the patient and the nurse is a direct care provider of the patient.
Accordingly, where a registered nurse, a registered nursing assistant, a licensed or registered practical nurse, or a registered psychiatric nurse renders nursing services involving personal interaction with a patient in a professional capacity as care provider, a supply of such nursing services is exempt under section 6 of Part II of Schedule V.
However, the issue for ETA purposes is not solely whether the activities performed by the registered or licensed nurse constitute a nursing service rendered to an individual within a nurse-patient relationship, but also whether it can be said that the supply in question (in this case, the supply by the Company) is that of nursing services rendered to an individual.
Supply of nursing service vs. supply of personnel
In the scenario you have presented, the supply of nurses made by the Company to a hospital must be analyzed separately from any supply made by the hospital. While certain activities performed by a registered or licensed nurse provided by the Company to a hospital may, in the context of the hospital-patient transaction, amount to a nursing service supplied by the hospital to an individual within a nurse-patient relationship, this does not necessarily translate to a supply of a nursing service by the Company. In other words, the end-use of a registered or licensed nurse by the Company's clients does not define the supply made by the Company to its clients. The determination as to whether the Company's supply of nurses to a hospital is a supply of a nursing service that falls within section 6 requires an analysis of the facts surrounding the supply, including the terms and conditions of the agreement between the parties.
Where, in accordance with an agreement between the Company and a hospital, the Company's responsibility is limited to providing registered or licensed nurses to the hospital on an as-needed basis so that the hospital may satisfy its own staffing requirements, and the nurses are subject to the control of the hospital and render services under the direction of the hospital in accordance with the hospital's responsibility to provide care to an individual, it is likely that the Company is making a supply of personnel or human resources, and not a supply of nursing services. This is due, in part, to the fact that the Company does not have any contractual obligation to provide nursing services to the individual to whom the services are rendered. Instead, the Company has an obligation to supply staff who have certain qualifications and whose actions are an input to what may be a supply of nursing services made by the hospital to the individual. In this situation, the supply of the personnel or human resources by the Company does not fall within section 6 of Part II of Schedule V and, therefore, is generally taxable for GST/HST purposes.
On the other hand, where an agreement between the Company and a hospital provides for a supply by the Company of a nursing service rendered to an individual by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse, in circumstances where the Company takes on the responsibility for the rendering of care, this supply by the Company may fall within section 6 of Part II of Schedule V, provided the service is rendered within a nurse-patient relationship. For example, where the Company has entered into an agreement with a hospital to provide nursing services to individuals who fall within a certain nursing care program of the hospital and, pursuant to the agreement, the Company is ultimately responsible for the provision of nursing care to individuals under the program (and is not simply responsible to provide qualified personnel to the hospital), or is responsible for the overall implementation of the nursing care program including the provision of nursing care to individuals, and is accountable for the quality of nursing care provided to individuals under the program, this may indicate that the Company is making a supply of a nursing service that is exempt under section 6 of Part II of Schedule V, provided the nursing services are rendered to an individual by a registered or licensed nurse within a nurse-patient relationship.
In your letter, you refer to paragraphs 13 and 14 of GST Memorandum G300-4-2 Health Care Services (G300-4-2):
13. A supply of a nursing service provided by a registered nurse, a registered nursing assistant or a licensed practical nurse is exempt where:
(a) the service is provided to an individual in a health care facility or in the individual's place of residence;
(b) the service is a private-duty nursing service; or
(c) the supply is made to a public sector body (for example, a school authority, a hospital authority or a municipality).
14. Nurses may provide their services directly to patients or they may be hired by employment agencies who specialize in the provision of health care providers. In either case, the charge for their services is exempt.
We note that GST Memoranda do not replace the law found in the ETA and its Regulations, nor are they intended to address all circumstances. Although G300-4-2 was correct when it was issued on November 17, 1993, it has not been updated since that time and, therefore, much of the technical information in the memorandum is no longer valid. For example, paragraph 13 does not reflect section 6 of Part II of Schedule V as it currently reads, but rather, it reflects section 6 as it read at the time G300-4-2 was released, which was prior to several legislative amendments including those applicable to supplies made after February 26, 2008.
The comments in paragraph 14 of G300-4-2 were also drafted based on section 6 of Part II of Schedule V as it read in November of 1993. In our view, as long as the supply in question is that of a nursing service, a supply that meets all of the requirements of section 6 is exempt whether the nurse who renders the service is hired by the hospital directly or by a third party. In circumstances where a supply of a nursing service is exempt under section 6, the consideration for that supply, i.e., the "charge" referred to in paragraph 14 of G300-4-2, will not be subject to the GST/HST. However, as previously explained, it will be a question of fact whether a supply made by an employment agency is a supply of a nursing service or a supply of personnel.
Travel Allowances
Generally speaking, where the requirements of section 174 are met, a person who pays a reasonable allowance to an employee (or, in certain circumstances, a partner or volunteer) for taxable supplies of property or services acquired in Canada by the employee in relation to activities engaged in by the person is deemed to have received a supply of the property or service and is deemed to have paid tax in respect of the supply such that the person may claim an input tax credit or rebate with respect to the allowance as if the person had acquired the property or services directly.
You have presented a scenario in which the Company, an independent contractor, pays an amount to its nurses (hired by the Company) as a travel allowance and to cover various expenses incurred by the nurses. The Company then, in accordance with an agreement to supply nurses to a hospital, charges the hospital a fee in respect of the amount paid to the nurses.
In the circumstances you have described, section 174 does not apply to the fee paid by the hospital to the Company as it is not an allowance as contemplated by section 174, nor is it paid by the hospital to an employee of the hospital.
The fee paid by the hospital is considered to be part of the consideration for the supply by the Company to the hospital. Accordingly, if it is determined that the supply of nurses to a hospital is a taxable supply of personnel (rather than a nursing service), the fee paid by the hospital to the Company for allowances and other expenses will be subject to the GST/HST at a rate of 5%, 12%, 13% or 15% depending on the place of supply. On the other hand, if it is determined that the supply by the Company to the hospital is exempt, the fee paid by the hospital would not be subject to the GST/HST.
As noted above, in the scenario you have presented, section 174 does not apply to the fee paid by a hospital to the Company. However, where the supply by the Company to a hospital is a taxable supply that is subject to the GST/HST, the hospital may be entitled to recover a portion of the tax paid or payable as part of its public service body ("PSB") rebate under section 259 of the ETA.
In general terms, section 259 enables a hospital authority to claim an 83% PSB rebate of the GST and the federal part of the HST for non-creditable tax charged in respect of property or services that are for consumption, use or supply in activities engaged in by the person in the course of operating a public hospital, operating a qualifying facility for use in making facility supplies, or making facility supplies, ancillary supplies or home medical supplies.
In addition, a hospital authority resident in British Columbia, Ontario or Nova Scotia may qualify for a PSB rebate of 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 the course of activities engaged in by the hospital authority, in that province, consisting of operating a public hospital, operating a qualifying facility for use in making facility supplies, or making facility supplies, ancillary supplies or home medical supplies. For more information on this topic, please refer to RC4034 GST/HST Public Service Bodies' Rebate, available online at www.cra-arc.gc.ca.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4289. 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,
Brian Olsen, CGA
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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