In Canada, governments at all levels and of all political stripes struggle to deal with the rising costs associated with delivering quality health care to Canadians. They strive to pay for the services patients need and demand when they visit their doctors, dentists, psychologists, orthodontists and other members considered under the Excise Tax Act (ETA) as “practitioners” and “medical practitioners.”

To help defray these costs, provincial health care authorities, with legislative help from the Canada Revenue Agency (CRA), have defunded certain services that were once covered under provincial health care plans, such as the Ontario Health Insurance Plan (OHIP). The 2013 Federal Budget introduced changes to the GST/HST and the treatment of certain services, rendering taxable some services that were previously exempt. The reasoning behind many of the changes assumed that, if medical practitioners could no longer bill for these services, doctors would either stop providing them to their patients or would be forced to pass the costs on to patients in the form of service fees. In reality, however, medical practitioners now more than ever are providing services both inside and outside of their offices with the unintended side effect that they grow closer and closer to the requirement to be a GST/HST registrant.

Typically, medical practitioners are not required to be registered for GST/HST on the basis that most of the services they provide are exempt from the tax. Schedule V, Part II, section 1 of the ETA exempts home and institutional health care services as well as qualifying health care supplies made by medical practitioners or practitioners of optometric, chiropractic, physiotherapy, chiropodist, podiatric, osteopathic, audiological, speech-language pathology, occupational therapy, psychological, midwifery, dietetic, acupuncture or naturopathic services who are required to be licensed or otherwise certified to practice the profession. However, every year the rules become more complex and the definition of “exempt service” is interpreted more strictly. Now, medical practitioners often struggle to determine whether their services are exempt.

Consequently, we have seen the CRA step up its enforcement actions, targeting medical practitioners for audit more often, with many (re)assessments proposed for amounts paid to medical practitioners for services that no longer qualify for the medical exemption. For example, the CRA has reassessed doctors when they have been paid to:

• give a lecture or hold a teaching position;
• run a department or a lab (either in a hospital or academic setting);
• perform research;
• provide consulting on litigation; and
• act as an expert witness.

In addition, the taxation of hospital on-call coverage payments is in dispute between the Ontario Medical Association and the CRA.

As a result, many medical practitioners are now exceeding the annual threshold for GST/HST registration ($30,000 in a rolling four-quarter period). Many practitioners are unaware of this requirement, or even that they may have surpassed the minimum threshold and are falling victim to CRA audits and the associated failure-to-file penalties and interest. In addition, once practitioners do register, they face the ongoing obligation to file GST/HST returns and the associated administrative burdens. 

The following table provides some examples of in-office services that were once covered under provincial health plans.

Generally, the CRA takes the position that practitioners must register for GST/HST purposes (either in their personal capacity or their professional corporation) and charge, collect and remit GST/HST on such payments collected by or paid to them. Notably, where a medical practitioner is not registered but is required to be, the CRA can and will go back beyond the standard four-year statutory limitation period. Some CRA auditors argue that the failure to register is a misrepresentation attributable to willful neglect, carelessness or default, which can result in significant interest and penalties assessed.

While registering to collect GST/HST can create additional paperwork, there are some benefits. Being a registrant allows a practitioner to recover any GST/HST paid on goods and services used directly in making the taxable supplies. Costs and the tax associated with activities such as cosmetic procedures and preparing forms and/or insurance and legal reports are recoverable.

Given this evolving landscape, if you are a practitioner or a medical practitioner providing multiple services, it is imperative that you understand your GST/HST obligations. As the legislation has changed, so too have the professional activities that can give rise to these new reporting obligations, which are often overlooked. Your Baker Tilly indirect tax specialist can help you determine your GST/HST registration requirements. As our medical practitioners are apt to say, “if you are concerned that this is being overlooked, get a second opinion and be proactive.”

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Sameer Noormohamed
Windsor, Ontario
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Mark Bloch
Windsor, Ontario
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