21 February 2007 GST/HST Interpretation 82036 - Acquisition of Farmland Held in Joint Tenancy

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning the XXXXX. Specifically, you would like to know whether the XXXXX is entitled to the 83% public service body (PSB) rebate of the Goods and Services Tax (GST) and the federal component of the Harmonized Sales Tax (HST) for the tax it incurs in the operation of its facility(s) and in the provision of certain health care services rendered to individuals at its facility(s). We apologize for the delay in this response.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Statement of Facts

On the basis of the information you provided and that available on the websites of the XXXXX and the XXXXX it is our understanding that:

1. The XXXXX is a registered charity within the meaning assigned by subsection 248(1) of the Income Tax Act and is therefore a charity for purposes of the ETA.

2. The XXXXX is not registered for GST/HST purposes.

3. According to the Letters Patent of the XXXXX, and the Application for Incorporation Without Share Capital that formed part of its Letters Patent, the objectives of the XXXXX are:

1. XXXXX.

2. XXXXX

4. The mission of the XXXXX, as described on its website, is to provide XXXXX. Its goals are:

•   XXXXX

5. The XXXXX operates XXXXX facilities in XXXXX. XXXXX.

6. You have advised that the XXXXX does not provide palliative care or chronic care at its facility(s).

7. The XXXXX offers many programs and services. These include, for example, XXXXX. Other programs and services offered by the XXXXX, as described on its website include:

XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX.

8. XXXXX.

9. XXXXX.

XXXXX.

10. The XXXXX and the XXXXX entered into an agreement effective XXXXX (Agreement). XXXXX.

11. Under XXXXX the Agreement, the XXXXX is required to XXXXX.

12. XXXXX.

13. XXXXX.

14. The XXXXX Annual Report identifies its receipt revenue XXXXX from the XXXXX. Revenue from other areas within the XXXXX and from differing sources such as the XXXXX is also reported. The receipt of funding from the XXXXX is reported in the financial statements of the XXXXX for the year ended XXXXX.

Ruling Requested

You would like to know whether the XXXXX is eligible for the 83% PSB rebate on its acquisitions for the provision of its services at its facility(s) located at XXXXX.

Ruling Given

Based on the facts set out above, we rule that the XXXXX is a facility operator making facility supplies at a qualifying facility(s) located at XXXXX and is eligible to claim the 83% PSB rebate of "non-creditable tax charged", as defined in subsection 259(1) on its acquisitions to the extent that it intended to consume, use or supply property or services in activities engaged in by the XXXXX in the course of operating the qualifying facility(s) for use in making facility supplies, or of making facility 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 is 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

While the XXXXX may be a facility operator of a qualifying facility(s), not all of the property or services it supplies under its programs and services constitute a facility supply. As such, we have provided the following in order to assist the XXXXX in determining the extent to which it is entitled to claim the 83% PSB rebate in respect of the operation of its facility(s) and its provision of facility supplies.

To be eligible for the 83% PSB rebate, an entity must be a "hospital authority", a "facility operator" or an "external supplier" providing certain defined supplies, as set out below. Eligible entities are entitled to claim the 83% PSB rebate for tax that became payable on or after January 1, 2005, on supplies acquired in the course of operating a facility that constitutes a qualifying facility, or of making certain defined supplies.

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 purposes of the ETA.

Since the Minister of National Revenue has not designated the XXXXX as a "hospital authority", it is not a hospital authority for purposes of the ETA. It is therefore 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 XXXXX is a charity for purposes of the ETA, it meets the first requirement of the definition "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 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 rendering 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 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 the fiscal year or part.

Facility supply

Subsection 259(1) defines the term "facility supply" as an exempt supply of property or a service in respect of which:

(a) the property or service supplied is made available or 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 or diagnosing or treating an injury, illness or disability, or for the purpose of providing palliative 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 practice of medicine,

(B) a midwife acting in the course of the practice 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 practice of a nurse practitioner,

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

(iii) in the case of chronic care that requires the individual 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 XXXXX does not provide chronic care at its facility(s) that requires an individual to stay overnight and the XXXXX operates its own facility(s), subparagraph 259(1)(a)(iii) and paragraph 259(1)(b) of the definition of "facility supply" do not apply. Further, as the XXXXX does not supply palliative care it must provide an exempt supply of property or a service that meets the conditions set out in paragraph 259(1)(a), and subparagraphs 259(1)(a)(i) and 259(1)(a)(ii) of the definition of "facility supply".

Supplies exempt of the GST/HST are listed in Schedule V to the ETA. Section 1 of Part V.1 of Schedule V to the ETA exempts any property or a service supplied by a charity unless specifically excluded under paragraphs (a) to (n) of that section. As the XXXXX is a charity, the supplies it makes to individuals under the programs and services it offers, as described under Fact 7 above would generally fall within the section 1 exemptions applicable to charities. Accordingly, any exempt property or service supplied by the XXXXX that is made available or rendered under its programs and services would constitute facilities supplies if the other conditions set out in the definition were met.

Paragraph 259(1)(a) of the definition of "facility supply" provides that the supply of exempt property or service must be made available or rendered to an individual at the qualifying facility.

As this paragraph requires the exempt supply to be made available or rendered at a qualifying facility, only those exempt supplies made to individuals by the XXXXX at its facility(s) would fulfill this requirement. Accordingly, a service that is not rendered at the facility(s) of the XXXXX, as in the case of its XXXXX program for example, would not constitute a facility supply.

Paragraph 259(1)(a), subparagraphs 259(1)(a)(i) and 259(1)(a)(ii) of the definition of "facility supply" in the ETA further requires that the exempt property or service made available or rendered at the 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 under the active direction or supervision, or with the active involvement of a physician acting in the practice of medicine.

The XXXXX renders health care services to individuals under its XXXXX program. You have advised that the services rendered by the XXXXX under this program are comparable to those provided at a walk-in medical clinic where physicians and other health care professionals such as nurses, are on staff at the clinic providing various health care services to individuals (e.g., diagnostic and treatment; referrals) during set hours of operation.

As the health care services provided by the XXXXX at its facility(s) to individuals under its XXXXX program are exempt supplies that are part of a medically necessary process of health care for the individual for the purposes described in paragraph 259(1)(a) of the definition of "facility supply" and those exempt health care services are rendered under the active direction or supervision, or with the active involvement, of a physician, their supply meet the requirements of subparagraphs 259(1)(a)(i) and 259(1)(a)(ii) and therefore constitute facility supplies.

Section 259(2.1) sets out three criteria that must be met in order for a facility or part of a facility to be considered a qualifying facility of its operator for all or part of a fiscal year. Since the health care services rendered by the XXXXX under its XXXXX program are facility supplies, the facility(s) operated by the XXXXX where these exempt services are ordinarily rendered would meet the first criteria described under paragraph 259(2.1)(a) to be a qualifying facility(s).

It should be noted that if the XXXXX provides exempt health care services, as may be the case under its XXXXX program, the supply of these services may also constitute facilities supplies if the requirements set out in paragraph 259(1)(a), subparagraphs 259(1)(a)(i) and 259(1)(a)(ii) of the definition of "facility supply" in the ETA are met.

With respect to other exempt services supplied by the XXXXX that do not meet the requirements of the definition of "facility supply", as may be the case in the provision of its services under the XXXXX program, the XXXXX would be entitled to claim the 50% rebate available to charities under subsection 259(1) in respect of "non-creditable tax charged" rather than the 83% PSB rebate.

Qualifying funding

The second criteria that must be met under paragraph 259(2.1)(b) for a facility to be a qualifying facility is that "qualifying funding", as defined above, be paid or payable to the operator of the facility in respect of the facility for a fiscal year or part of a fiscal year of the operator. Qualifying funding includes an amount that is paid or payable by a government to the operator of a facility for the delivery of health care services to the public at the facility.

The XXXXX receives funding from the XXXXX for the provision of primary care services that it renders at its facility(s). As such, the facility(s) where the XXXXX makes facility supplies (e.g., primary care services rendered to individuals under the XXXXX program) for which qualifying funding is paid or payable to the XXXXX will meet the second criteria to be a qualifying facility.

Accreditation, licence or other authorization

The third criteria that must be met under paragraph 259(2.1)(c) for a facility to be a qualifying facility is that it must have an accreditation, licence or other authorization recognized by the federal government or a provincial government in respect of its facilities for the provision of health care services.

The facility(s) operated by the XXXXX meets the third criteria to be a qualifying facility as the XXXXX has authorization recognized by the XXXXX respecting the facility(s) that the XXXXX operates, as evidenced by the documents described under Facts 9 to 14 above.

In conclusion, the XXXXX 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 activities engaged in by the XXXXX in the course of operating its facility(s) for use in making facility supplies, or of making facility supplies.

Since the definition of "external supplier" in subsection 259(1) excludes a "facility operator", we have not provided information respecting the availability of the 83% PSB rebate to external suppliers. For your reference, an "external supplier" means a charity, a public institution or a qualifying non-profit organization (other than a hospital authority or a facility operator) that makes an "ancillary supply", a "facility supply" or a "home medical supply", as those terms are defined.

Please note that subsection 259(1) also extends the 83% PSB rebate to a "facility operator" that makes an ancillary supply or a home medical supply. Although there is no indication in the facts presented above that the XXXXX is involved in the provision of ancillary supplies or home medical supplies, the following information has been provided in order to assist in making this determination.

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 of the property or service that 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 or diagnosing or treating an injury, illness or disability, or for the purpose of palliative health care, and

(ii) after a physician acting in the course of the practice 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 or service supplied is made available or 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 practice of medicine, or a prescribed person acting in prescribed circumstances,

(c) in respect of which substantially all of the property or services included in the supply are 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.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-7952.

Yours truly,

Lynn F. Renner
Municipalities and Health Care Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

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