21 January 2008 GST/HST Ruling 83055 - Temporary Importation of XXXXX and related equipment

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.

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5	XXXXX XXXXX XXXXX
XXXXX XXXXX XXXXX XXXXX	Case Number: 83055
	January 21, 2008

Dear XXXXX:

Subject:

GST/HST RULING XXXXX

This is in response to a letter XXXXX. XXXXX's letter concerned the XXXXX and whether it 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) as a facility operator under section 259 of the Excise Tax Act. XXXXX provided additional information. We apologize for the delay in providing this response.

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

The following is based on our understanding of information provided and that available on the websites of the XXXXX and the XXXXX.

Statement of Facts

1. The XXXXX is a registered charity within the meaning assigned by subsection 248(1) of the Income Tax Act. As such, it meets the definition of "charity" in subsection 123(1).

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

3. XXXXX.

4. The XXXXX has XXXXX locations in XXXXX.

5. The facilities of the XXXXX are staffed with: XXXXX nurses, occupational therapists, psychologists, physicians, physiotherapists XXXXX.

6. XXXXX

7. XXXXX

8. XXXXX

9. XXXXX

10. The XXXXX facilities at its XXXXX, each offer medical clinics. In terms of staff physicians at these clinics, the XXXXX medical doctors XXXXX. The physicians provide services under the following specializations: XXXXX. All physicians are involved in the assessment of XXXXX medical needs related to their diagnosis, and offer prevention strategies and ongoing specialized management and follow up.

In addition to medical doctors, the XXXXX has a staff of XXXXX psychologists who provide assessment and diagnostic services to clients. XXXXX.

11. The XXXXX offers the following programs and services through its various facilities:

XXXXX.

12. The XXXXX does not provide palliative care nor does it provide chronic care that requires the individual to stay overnight at its facilities.

13. The XXXXX has been classified as a XXXXX Hospital by the XXXXX.

14. XXXXX

15. The FINANCIAL STATEMENTS For XXXXX.

Ruling Requested

You would like to know whether the XXXXX is a facility operator entitled to the 83% PSB rebate under section 259 of the non-creditable tax charged on property or a service acquired by the XXXXX in the course of making supplies at its facilities. If the XXXXX does qualify for the 83% PSB rebate, you would also like to know whether the XXXXX is entitled to claim the rebate retroactively to January 1, 2005.

Ruling Given

Information provided by the XXXXX respecting physician involvement in the provision of its programs and services pertains only to the Medical Clinics offered at its XXXXX facilities located at XXXXX. For this reason, this ruling is limited to the activities carried out by the XXXXX at its XXXXX facilities at this location. Regarding the entitlement of the XXXXX to the 83% PSB rebate with respect to the operation of its other facilities, please see our comments below.

Based on the facts set out above, we rule that the XXXXX is a facility operator entitled to the 83% PSB rebate of the non-creditable tax charged on property or a service acquired by the XXXXX in the course of making exempt supplies that constitute facility supplies at its XXXXX facilities located at the XXXXX.

As a facility operator, the XXXXX may claim the rebate retroactively to January 1, 2005, for the GST and federal component of the HST it paid on purchases used to operate its facilities for use in making facility supplies, or of making facility supplies as the 83% PSB rebate applies to claim periods ending in 2005 and later. For a claim period that includes January 1, 2005, the 83% PSB rebate may also be claimed for tax deemed to have been paid or that became payable on or after that day.

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

To be eligible for the 83% PSB rebate, an entity must be a "hospital authority", a "facility operator" or an "external supplier", 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 providing certain defined supplies. The relevant definitions, which are taken from subsection 259(1) unless otherwise noted and our comments follow.

Hospital authority

A "hospital authority" is defined in subsection 123(1) of the ETA 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" means "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 this definition. In order to meet the second requirement, it must operate a qualifying facility.

Qualifying facility

Subsection 259(2.1) sets out three criteria that must be met in order for a facility or part of a facility, other than a public hospital, to be a qualifying facility 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 (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.

Facility supply

The term "facility supply" means 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 or 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" means a person who is entitled under the laws of a province to practise the profession of medicine.

For purposes of determining whether the XXXXX makes supplies that constitute facility supplies we have not addressed the requirements that must be met in the definition of "facility supply" respecting palliative care or chronic care that requires an individual to stay overnight since the XXXXX does not provide this type of health care at its facilities.

To meet the first requirement in the definition of "facility supply", the property made available or the service rendered to an individual 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 service is rendered to a patient or resident of the facility, but not including the supply of a service related to the provision of surgical or dental service that is performed for cosmetic purposes and not for medical or reconstructive purposes. Section 1 of Part II of Schedule V defines "institutional health care service" and "health care facility".

Section 1 of Part V.1 of Schedule V exempts supplies of property or a service made by a charity unless specifically excluded under paragraphs (a) to (n) of that section. A charity that makes exempt supplies is entitled to claim a 50% PSB rebate of "non-creditable tax charged", as defined in subsection 259(1). "Non-creditable tax charged" is generally tax paid or payable on property or services acquired by a person that is not recoverable by way of an input tax credit (ITC).

Accordingly, section 2 of Part II and section 1 of Part V.1 of Schedule V would generally apply to exempt the supplies made by the XXXXX. As such, any exempt supplies made by the XXXXX under its programs and services, as described in fact 11 above would constitute facility supplies if the other conditions set out in the definition of "facility supply" were met.

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 facility. As such, only those exempt supplies made by the XXXXX at its facilities would fulfil this requirement.

Subparagraphs (a)(i) and (a)(ii) of the definition of "facility supply" further require that the exempt property made available or the exempt service rendered at the public hospital or 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 public hospital or qualifying facility under the active direction or supervision, or with the active involvement, of a physician acting in the course of the practice of medicine (or by a nurse practitioner in certain circumstances or a prescribed person in prescribed circumstances).

The XXXXX offers various programs and services through its facilities. However, the information provided by the XXXXX respecting physician involvement in the provision of its programs and services is limited to the activities undertaken by it at the Medical Clinics offered at its XXXXX facilities located at the XXXXX. As a result, the determination of whether the XXXXX is a facility operator making exempt supplies that meet the requirements of subparagraph (a)(i) and (a)(ii) is based on its operations at that location, and not at its other facilities.

XXXXX. The physicians provide services under the following specializations: XXXXX. All physicians are involved in the assessment of XXXXX's medical needs related to their diagnosis, as well as offer prevention strategies and ongoing specialized management and follow up. In addition to medical doctors, the XXXXX has approximately XXXXX psychologists on staff who provide assessment and diagnostic services to XXXXX.

XXXXX. It is clear that any exempt supply made by the XXXXX to its clients at the Medical Clinics held at its XXXXX facilities located at the XXXXX as part of a medically necessary process of health care for the individual is a facility supply because the process is reasonably expected to take place under the active direction, or supervision, or with the active involvement, of a physician, as required under paragraph (a) and subparagraphs (a)(i) and (a)(ii) of the definition of "facility supply".

For purposes of establishing whether a facility is a qualifying facility, subsection 259(2.1) sets out three criteria that must be met. The first criterion that must be met under paragraph 259(2.1)(a) is that the exempt supplies made at the facility must be facility supplies. The XXXXX meets this first criterion in respect of its exempt supplies made to its clients at the Medical Clinics held at its XXXXX facilities located at the XXXXX.

The other supplies made by the XXXXX through its other programs and services offered at its XXXXX facilities located at the XXXXX may also constitute facility supplies if paragraph (a) and subparagraphs (a)(i) and (a)(ii) of the definition of "facility supply" are met. However, we were not provided with sufficient information to make a definitive determination.

The second criterion that must be met in order for a facility to be a qualifying facility is that "qualifying funding", as defined, be paid or payable to the operator of the facility in respect of the facility for all or part of a fiscal year of the operator.

Qualifying funding

Subsection 259(1) defines "qualifying funding" of the operator of a facility for all or part of a fiscal year of the operator to mean 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 or services that are made available or 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 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.

Since the XXXXX provides funding to the XXXXX to financial assist it in the provision of XXXXX, its XXXXX facilities located at the XXXXX meets this second criterion as a qualifying facility.

The third criterion that must be met in order for a facility to be a qualifying facility is that an accreditation, licence or other authorization recognized by the federal or a provincial government in respect of its facilities for the provision of health care services must exist.

The XXXXX has been classified by the XXXXX as a XXXXX Hospital. Therefore, the third criterion has been met and the XXXXX facilities located at the XXXXX meet the definition of "qualifying facility".

Should any of the other facilities operated by the XXXXX make facility supplies and meet the requirements set out in subsection 259(2.1) each of these facilities would also constitute a "qualifying facility" thereby entitling the XXXXXto claim the 83% PSB rebate as a "facility operator" in respect of each of its facilities.

In summary, the XXXXX meets the definition of facility operator because it is a charity that operates a qualifying facility(s). It is therefore entitled to claim the 83% PSB rebate for non-creditable tax charged in respect of facility supplies it makes at its XXXXX facilities located at the XXXXX. Please note, the 83% PSB rebate is also available to a facility operator that makes an "ancillary supply" or "home medical supply", as defined in subsection 259(1). As there is no indication in the facts presented above that the XXXXX makes ancillary supplies or home medical supplies we have not addressed this issue.

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

2008/01/25 — RITS 87870 — Services Provided by [an IME]