Draft GST/HST Policy Statement - Qualifying Health Care Supplies and the Application of Section 1.2 of Part II of Schedule V to the Excise Tax Act to the Supply of Medical Examinations, Reports and Certificates

From: Canada Revenue Agency

GST/HST Notices - Notice 286
October 2014

For discussion purposes only

Draft GST/HST Policy Statement, Qualifying Health Care Supplies and the Application of Section 1.2 of Part II of Schedule V to the Excise Tax Act to the Supply of Medical Examinations, Reports and Certificates

This publication is being disseminated by the Canada Revenue Agency (CRA) in draft form for comments or suggestions, which should be sent by February 28, 2015, to the following:

Director
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
Canada Revenue Agency
14th floor, Place de Ville, Tower A
320 Queen Street
Ottawa, ON K1A 0L5

Fax: 613-990-7584

For supplies made after March 21, 2013, this policy statement supersedes Policy Statement P‑248, The application of the GST/HST to the supply of an independent medical examination (“IME”) and to other independent assessments, dated September 21, 2006.

Date of issue: XXXX

Legislative references:  Excise Tax Act: subsection 123(1) – definition of “public institution”; section 1 of Part II of Schedule V – definition of “qualifying health care supply”; sections 1.1, 1.2 and 9 of Part II of Schedule V; paragraph (q) of section 2 of Part VI of Schedule V

National coding system file numbers:  11865-1; 11865-23; 11885-3

Effective date: March 22, 2013 for GST and for HST;

April 1, 2013 for HST in Prince Edward Island.

Please note that the following policy statement, although correct at the time of issue, may not have been updated to reflect any subsequent legislative changes.

General

Bill C-60, Economic Action Plan 2013 Act, No. 1, received Royal Assent on June 26, 2013. This Act amends provisions relating to the health care sector in the Excise Tax Act (ETA). These amendments clarify that GST/HST applies to supplies of reports, examinations and other property or services that are not made for the purpose of the protection, maintenance or restoration of the health of a person or for palliative care. The amendments apply to supplies made after March 21, 2013.

Part II of Schedule V to the ETA sets out the health care services that are exempt under the GST/HST. New section 1.2 of Part II of Schedule V to the ETA provides that for the purposes of Part II of Schedule V to the ETA, other than sections 9 and 11 to 14Footnote1, a supply that is not a “qualifying health care supply” is deemed not to be included in Part II of that Schedule. Generally, supplies deemed not to be included in Part II of Schedule V would be taxable at the applicable rate of GST/HST.

Issue

This policy statement sets out the Canada Revenue Agency's (CRA) position in respect of the meaning of the term “qualifying health care supply” in the application of section 1.2 of Part II of Schedule V to the ETA and paragraph 2(q) of Part VI of Schedule V.

Decision

The term “qualifying health care supply” has been added to section 1 of Part II of Schedule V to the ETA and is defined to mean

“a supply of property or a service that is made for the purpose of

  1. maintaining health,
  2. preventing disease,
  3. treating, relieving or remediating an injury, illness, disorder or disability,
  4. assisting (other than financially) an individual in coping with an injury, illness, disorder or disability, or
  5. providing palliative health care.”

Section 1.2 is applicable to sections 2 to 8, and 10 of Part II of Schedule V to the ETA. This would include supplies of ambulance services, services rendered by a medical practitioner, services rendered by other practitioners such as optometrists and chiropractors, nursing services, dietetic services, social work services, pharmacist services, dental hygienist services, and laboratory services. When a supply meets the conditions of one of the above-noted sections it will become necessary to determine the purpose of the supply. If the purpose of the supply is not one of the purposes found in the definition of “qualifying health care supply” then section 1.2 would exclude the supply from these exempting provisions in Part II of Schedule V.

In addition, section 1.1 of Part II of Schedule V to the ETA and paragraph 2(p) of Part VI of Schedule V also specifically exclude from exemption a supply that is a cosmetic service supply or a supply in respect of a cosmetic service supply.

As a result of these amendments, services performed by health care professionals may be taxable or exempt depending on their purpose. This will particularly affect supplies of medical examinations, reports and certificates which may have an indirect link to health. In these cases it will be necessary to determine the purpose of the supply to determine its tax status.

Supplies of medical examinations, reports or certificates that meet the conditions of one of the exempting provisions in sections 2 to 8 and 10 of Part II of Schedule V to the ETA will be exempt if made for a purpose that meets the definition of qualifying health care supply. Supplies of medical examinations, reports and certificates that are made solely for other purposes, such as enabling a third party to make a decision for insurance or legal purposes, would be deemed not to be included in Part II of Schedule V and would be taxable at the applicable rate of GST/HST.

The purpose of a supply is the reason why the supply is being made. The fact that an individual may ultimately receive health care benefits as a result of the supply does not necessarily make this the purpose of the supply. It is important to note that a link between a supply and the receipt of health care benefits is not always indicative that the purpose of the supply was to provide health care services (and as a result, the purpose of the supply is not necessarily one that meets the purposes set out in the definition of the term “qualifying health care supply”).

Please note that paragraph (d) of the definition of qualifying health care supply includes supplies made for the purpose of assisting an individual (other than financially) in coping with an injury, illness, disorder or disability. This would include services provided directly to the individual to cope with the limitations or effects of an injury. It would not include evaluations and reports done for the purpose of helping an insurer determine the type or amount of benefits that the individual is entitled to receive. It would also not include services supplied for financial purposes such as a medical evaluation or assessment performed for the purpose of determining the value of injuries for a settlement of a claim for damages.

In addition, section 2 of Part VI of Schedule V to the ETA provides a general exemption for supplies made by a public institutionFootnote2. That section was also amended by adding paragraph (q). Paragraph (q) excludes from exemption supplies of any property or service that is not a qualifying health care supply and which would be included in sections 2 to 8 and 10 of Part II of Schedule V if that Part were read without reference to sections 1.1 and 1.2 of that Part. This means the exemption for public institutions (such as a charity that is a hospital authority) for such supplies would only apply if the supply is a qualifying health care supply and is not a cosmetic service supply or a supply in respect of a cosmetic service supply.

Note that any supply of property or service where the consideration for the supply is payable or reimbursed by a provincial health care plan is exempt pursuant to section 9 of Part II of Schedule V to the extent that the health care plan pays or reimburses the consideration for the supply. The addition of the purpose test in section 1.2 of Part II of Schedule V discussed above does not impact the application of this exemption.

In cases where a supply is made for more than one purpose, all of these purposes would be considered when determining if the supply is a qualifying health care supply. If one of the purposes for the supply meets the definition of “qualifying health care supply” then the supply would be a qualifying health care supply. However, it should be noted that supplies are generally made for a single purpose.

In cases where a health care service, such as an examination or assessment, is supplied together with a report or certificate it is necessary to determine if the supplier has made single or multiple supplies.

If the health care service and report or certificate constitute a single supply; the purpose of that single supply would include all of the purposes of the elements of the supply. Where a supply has multiple purposes, that supply would be a qualifying health care supply if any of the purposes is a purpose included in the definition of qualifying health care supply.

Where the health care service and the report or certificate constitute multiple supplies the purpose of each supply would be considered separately when determining if either of the supplies is a qualifying health care supply.

For more information on single and multiple supplies, please see GST/HST Policy Statement P-077R2 Single and Multiple Supplies.

Examples

Listed below are a number of examples of supplies that may be impacted by the addition of the definition of qualifying health care supply and the related purpose test.

For the purpose of the discussion of the term “qualifying health care supply,” the transactions outlined in the examples are considered to be a single supply rather than multiple supplies. In addition, the supplies listed in the examples below are assumed to meet the conditions of an exempting provision in sections 2 to 8 and 10 of Part II of Schedule V. This does not necessarily mean that the CRA considers these supplies will be single supplies in all circumstances nor does it mean that the CRA considers these supplies to be exempt supplies in all cases. In practice, each transaction must be examined to determine if one or more supplies are being made and to determine if any particular supply satisfies the conditions set out in an exempting provision.

Example 1

Supply

An individual attends a private clinic with a written order from a medical practitioner to have a diagnostic MRI performed. The clinic performs the MRI and provides a report to the physician. The supply is not an insured service under a provincial health plan.

Decision

The supply is a qualifying health care supply.

Rationale

Generally an MRI is performed to diagnose an injury or illness.  The purpose of this supply is to treat, relieve or remediate an injury, illness, disorder or disability and the supply is a qualifying health care supply pursuant to paragraph (c) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V to the ETA.

Example 2

Supply

A practitioner contacts another practitioner to get a second opinion on a diagnosis or treatment protocol for a patient. The other practitioner provides a written report to the referring practitioner.

Decision

The supply is a qualifying health care supply.

Rationale

In cases where the supply is an insured service under a provincial health care plan, the supply would be exempt pursuant to section 9 of Part II of Schedule V. The purpose test in section 1.2 of the same Part does not impact the application of the exemption for property or services that are payable or reimbursed by a provincial health care plan.

In cases where the supply is not an insured service under a provincial health care plan, the purpose test in section 1.2 would have to be applied. The purpose of this supply is to treat, relieve or remediate an injury, illness, disorder or disability and the supply is therefore a qualifying health care supply pursuant to paragraph (c) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 3

Supply

Pre-employment or periodic medical evaluation and report/certificate to determine if an individual meets the health requirements for employment.

Decision

The supply is not a qualifying health care supply.

Rationale

The purpose of this supply is to assist an employer to make a decision on job recruitment or retention by demonstrating that an individual has the health profile required for certain professions.

The supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 4

Supply

Medical assessment and certificate required by an employer for sick leave taken by an employee.

Decision

The supply is a qualifying health care supply.

Rationale

Employees are sometimes required by an employer to obtain a medical assessment and certificate when they are absent from work due to illness. The purpose of this supply is to “assist an individual in coping with an injury, illness, disorder or disability” and the supply is a qualifying health care supply pursuant to paragraph (d) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Although there may be a financial aspect related to the supply (i.e., the certificate may be required for the employee to be paid sick leave benefits), the purpose of the supply is to allow an individual to be absent from work to recover from an illness, disorder, disability or injury.

Example 5

Supply

Medical assessment done at the request of an employer to determine if it is necessary to modify an employee's job tasks or workspace due to the employee's limitations.

Decision

The supply is a qualifying health care supply.

Rationale

The purpose of this supply is to maintain the health of the employee and help him/her cope with an injury, illness, disorder or disability. The assessment determines what modifications are necessary to a person's job tasks or workspace in order to alleviate the effects of an injury, illness, disability or disorder. A supply done for these purposes would be a qualifying health care supply pursuant to paragraph (a) and/or (d) of the definition of “qualifying health care” supply in section 1 of Part II of Schedule V.

Example 6

Supply

Medical assessment and completion of a report required for an individual to join or buy back service in a pension plan.

Decision

The supply is not a qualifying health care supply.

Rationale

The purpose of the supply is to assist the employer or the plan administrator in making a decision on whether or not to allow an individual to join the pension plan or buy back past service.

The supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 7

Supply

Medical evaluation and report for immigration purposes.

Decision

The supply is not a qualifying health care supply.

Rationale

Citizenship and Immigration Canada requires a medical evaluation and report as part of the immigration process. The purpose of the evaluation and report is to determine if an individual meets the criteria to be accepted for immigration. The fact that the medical examination may uncover health issues of the individual does not change the purpose of the supply. The purpose of the supply is to help determine the suitability of an individual for immigration.

The supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 8

Supply

Mediation service rendered by a psychologist as part of a divorce proceeding.

Decision

The supply is not a qualifying health care supply.

Rationale

The purpose of this supply is to assist the parties involved in a divorce proceeding to come to a resolution of their differences.

The supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 9

Supply

Medical assessment and report on educational services, accommodations, or physical aids required by a child with a disability or a developmental delay.

Decision

The supply is a qualifying health care supply.

Rationale

The purpose of this supply is to assist a child in coping with an injury, illness, disorder or disability. These evaluations determine the types of services, accommodations, or physical aids required by the child to alleviate the effects of an injury, illness, disability or disorder.

The supply is a qualifying health care supply pursuant to paragraph (d) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V as it is made for the purpose of assisting (other than financially) an individual in coping with an injury, illness, disorder or disability.

Example 10

Supply

Medical form required by a transportation authority to retain or renew a driver's licence.

Decision

The supply is not a qualifying health care supply.

Rationale

The purpose of this supply is to determine if an individual meets the health requirements to retain or renew a driver's licence and not for the purposes described in the definition of “qualifying health care supply.”

The supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 11

Supply

Medical examination and report required by insurance companies in respect of applications for, or the continuation of, an insurance policy.

Decision

The supply is not a qualifying health care supply.

Rationale

The purpose of this supply is to provide information to the insurance company to assist it in determining if an individual is eligible for coverage under an insurance contract.

Although the individual may receive medical or rehabilitative benefits under an insurance policy, the purpose of this supply is not to treat or assist the individual but rather to determine eligibility to enter into or continue an insurance contract.

The supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 12

Supply

Medical examination and completion of a disability certificate required by an insurance company.

Decision

The supply is not a qualifying health care supply.

Rationale

The purpose of this supply is to assist an insurance company in determining if an individual is eligible to receive benefits. Determining if an individual is eligible for benefits is part of an insurance company's claims handling process.

Although an individual may receive medical or rehabilitation benefits that are qualifying health care supplies, this does not mean that the property and services used by the insurance company to determine eligibility for benefits are also qualifying health care supplies.

The supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 13

Supply

Medical assessment and report to determine whether an individual meets the “catastrophic impairment” criteria conducted on the request of an insurer.

Decision

The supply is not a qualifying health care supply.

Rationale

The purpose of this supply is to assist an insurer in determining eligibility to certain benefits. Although an individual who is determined to have suffered a “catastrophic impairment” may be entitled to receive additional medical and rehabilitation benefits, the purpose of the supply is to assist the insurance company in determining which benefits the individual is entitled to receive.

The purpose of this supply is to assist the insurance company in its claims handling process rather than assisting the individual; this supply is not a qualifying health care supply as the purpose of the supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 14

Supply

Medical assessment and expert report of a psychiatrist to a judge, lawyer or probation officer in respect of an individual's ability to be subject to legal proceedings.

Decision

The supply is not a qualifying health care supply.

Rationale

The purpose of the supply is to enable a person to make a decision (e.g., to enable a judge to determine whether an individual is fit to stand trial) and not for the purposes described in the definition of qualifying health care supply.

The supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 15

Supply

Medical evaluation and report in respect of an adolescent within the framework of the Youth Criminal Justice Act (S.C. 2002, c.1) to determine if the individual is to be tried as an adult.

Decision

The supply is not a qualifying health care supply.

Rationale

The purpose of this supply is to enable a court to make a decision regarding a court process (i.e., whether an individual is to be tried as an adult) and not for the purposes described in the definition of qualifying health care supply.

The supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 16

Supply

Mental health capacity assessment and report to determine an individual's capacity to consent to treatment or for the appointment of a power of attorney/legal guardian.

Decision

The supply is not a qualifying health care supply.

Rationale

Where the assessment is performed in respect of an individual's capacity to consent to treatment the supply is not a qualifying health care supply. The purpose of the supply is to assist a court or other body to make a decision on the ability of an individual to consent to treatment or be admitted to a health care facility for treatment.

In cases where the court or other body is making a decision solely on the appointment of a power of attorney or legal guardian for the individual, the supply is not a qualifying health care supply. The purpose of this supply would be to assist the court or other body to make a decision on the ability of an individual to manage his/her affairs.

In cases where the court or other body is making a decision both on the ability to consent to treatment and on the appointment of a power of attorney or legal guardian, both purposes of the assessment would be considered. As noted above, neither type of assessment is a qualifying health care supply. As a result, the supply is not a “qualifying health care supply” as neither of the purposes of this supply is included in paragraphs (a) to (e) of the definition of qualifying health care supply in section 1 of Part II of Schedule V.

Example 17

Supply

Medical-legal assessment and report conducted to enable a court, tribunal or similar body to make a decision.

Decision

This supply is not a qualifying health care supply.

Rationale

Generally, the purpose of medical-legal assessments and related reports is to enable a court, tribunal or similar body to make a decision (e.g., an assessment that quantifies injuries for a tort claim). A supply of these assessments would not be a qualifying health care supply for purposes of the GST/HST. In such a case, the role of the medical practitioner is not to treat the individual but is to provide advice and opinion to assist an adjudicative body involved in a legal proceeding.

A supply of a medical-legal assessment and related reports may be rendered by a health care professional who is also treating the individual being assessed or by an independent contractor hired to perform the assessment. Whether the service is made by a treating or non-treating health care professional would have no effect on whether a supply is a qualifying health care supply; that determination is based solely on the purpose of the supply.

The fact that an individual is a patient under the care of a health care professional does not mean that all services provided by the health care professional to the individual will be exempt. For a supply to be exempt, the purpose of the supply would need to be one that is listed in the definition of “qualifying health care supply.”

In the circumstances noted above the supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

In cases where a health care service is supplied together with a medical-legal assessment by a treating health care professional it is necessary to determine if the supplier has made single or multiple supplies.

If the health care service and medical-legal assessment constitute a single supply; the purpose of that single supply would include the purpose for each element of the supply. Where a supply has multiple purposes, that supply would be a qualifying health care supply if any of the purposes is included in the definition of “qualifying health care supply.”

Where the health care supply and the medical-legal assessment constitute multiple supplies the purpose of each supply would be considered separately when determining if each of the supplies is a qualifying health care supply.

For more information on single and multiple supplies, please see GST/HST Policy Statement P-077R2 Single and Multiple Supplies.

Example 18

Supply

Medical evaluation and report/certificate required by the administrator of the CPP or QPP for disability benefits or for the supplement for handicapped children.

Decision

The supply is not a qualifying health care supply.

Rationale

The purpose of this supply is to assist the administrator of the CPP or QPP in determining if an individual is eligible to receive CPP or QPP benefits. Determining eligibility for benefits is part of the administration of the CPP or QPP.

As a result, the supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 19

Supply

Medical assessment and report to support income replacement benefits as part of an employee's claim for workplace insurance benefits.

Decision

The supply is not a qualifying health care supply.

Rationale

The purpose of this supply is to assist the adjudicator in making a decision regarding an employee's eligibility for benefits. Determining if an employee is eligible for benefits is part of the workplace insurance board's claims handling process,

As a result, the supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 20

Supply

Medical evaluation and report requested by an employer as part of a claim for workplace insurance benefits.

Decision

The supply is not a qualifying health care supply.

Rationale

A medical evaluation requested by an employer in respect of an employee receiving workplace insurance benefits is not a qualifying health care supply. The purpose of this supply is to help the insurance board make a decision regarding a person's entitlement to benefits.

The supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 21

Supply

Medical evaluation and report to quantify injuries for lump-sum settlement of workplace insurance benefit claim.

Decision

The supply is not a qualifying health care supply.

Rationale

A report supplied for the purpose of quantifying injuries for lump sum settlement of a claim is considered to assist an individual financially in coping with an injury, illness, disorder or disability and is not a qualifying health care supply. Paragraph (d) of the definition of “qualifying health care supply” excludes supplies which are made for the purpose of financially assisting an individual.

The supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 22

Supply

Medical assessment and report conducted as part of an insurer's examination to determine whether proposed treatments are reasonable and consistent with injuries reported.

Decision

The supply is not a qualifying health care supply.

Rationale

The purpose of this supply is to assist the insurance company in determining what benefits the individual is entitled to receive. Although the supply may involve a diagnosis of an individual and comment on treatments for his/her injuries, that is not the purpose of the supply. The purpose of the supply is to determine benefit entitlement.

The supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

Example 23

Supply

Insurer examination consisting of a review of medical records and report of findings to determine whether proposed treatments are reasonable and consistent with injuries reported.

Decision

The supply is not a qualifying health care supply.

Rationale

The purpose of this supply is to assist the insurance company in determining what benefits the individual is entitled to receive. Although the review of medical records may comment on treatments for an individual's injuries, that is not the purpose of the examination. The purpose of the supply is to determine benefit entitlement.

The supply is not a qualifying health care supply as the purpose of this supply is not included in paragraphs (a) to (e) of the definition of “qualifying health care supply” in section 1 of Part II of Schedule V.

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