It is often thought that all services performed by physicians, dentists, physiotherapists, psychologists and other members of recognized medical disciplines (“practitioners”) are exempt from the Goods and Services Tax (GST) and Harmonized Sales Tax (HST).
However, this is not always the case. Cosmetic procedures that have no medical or reconstructive purpose are taxable for GST/HST unless the practitioner is not registered for GST/HST. Registration is required if the practitioner generates $30,000 or more of taxable supplies over the period of any four consecutive calendar quarters. A practitioner who makes taxable supplies not exceeding the threshold can choose to register for GST/ HST, in which case the services become taxable.
GST/HST may apply to other services provided by a practitioner such as fees charged for preparing reports for lawyers and insurance companies. However, if the practitioner actually examines the individual, even at the request of a third party, then the Courts have held that a doctor-patient relationship has been created and no tax applies. For example, fees charged for meeting with an individual to confirm a diagnosis or determine a level of disability are normally exempt.
Fees charged to simply review a file and provide information are generally subject to GST or HST. The same is true for fees for research, teaching or any other service that is not a “consultative, diagnostic or treatment service” rendered to an individual by the practitioner.
The Canada Revenue Agency (CRA) is of the view that “block fees” or annual fixed fees charged by practitioners are subject to GST or HST on the basis that these fees do not relate directly to services actually rendered to an individual. This view has yet to be tested in the Courts.
While having to register to collect GST/HST creates additional paperwork, it allows a practitioner to recover all GST/HST paid on goods and services used directly in making taxable supplies such as cosmetic procedures or taxable insurance and legal reports.
A practitioner who works in a clinic is often allocated 100% of the fees charged to the patient and then charged a portion of the fees for using the clinic, its staff and equipment. In these cases, GST or HST applies to the fees paid to the clinic, and no recovery of this tax is available because it relates to the practitioner’s exempt supply of health care services.
If the clinic and the practitioner restructure their agreement so they both provide medical services to the patient jointly and split the fees that are generated, or so that the clinic provides services to the patients and pays the practitioner for health care services, then it may be that no GST or HST will apply to the clinic's portion of the fee because it is in respect of exempt services rendered to the patient under a specific exemption in the Excise Tax Act. However, expert GST/HST advice should be obtained when designing such structures, to ensure that the supplies will indeed be exempt under the legislation.
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