CRA is reassessing health care professionals for amounts paid for services that do not qualify as exempt medical services. The amounts assessed including interest and penalties can well be over $100,000. Reassessments relating to cost sharing arrangements are particularly painful, because a simple restructuring of the arrangement would have avoided the GST liability altogether.
Here is an example. A locum works in the clinic and is allocated 100% of the fees charged to the patient. Out of the fees received, the locum pays the principal for using the clinic, the staff and equipment. In this case the principal must remit GST on the fees received from the locum.
On the other hand, where the locum and the principal have entered into a bona fide arrangement to share fees irrespective of whether the locum or the principal is the initial recipient of the fees, CRA will not consider this to be a payment for the supply of administrative services made by the principal to the locum. The underlying characteristic of this arrangement is an apportionment of the fee for the health care service rendered to the individual between the parties. Thus, for purposes of the GST, the amounts apportioned between the two parties are not subject to tax.
Before you start reorganizing the clinic structure to avoid the GST, feel free to consult with us as to setting up an arrangement that will ensure your exemption from the GST.
Similarly cosmetic procedures that have no medical or reconstructive purpose are taxable for GST unless you are not registered for GST. You must register if you generate $30,000 or more of taxable supplies over the period of any four consecutive calendar quarters.
Here are some additional scenarios were GST may apply.
The doctor is paid an amount to consult in a litigation or act as an expert witness. One exception is that if the doctor 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 that GST will not apply.
Additional services that will trigger GST are:
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- the doctor is paid to manage a medical office;
- the doctor is paid an amount to be on call at a retirement home or nursing home;
- the doctor is paid to give lectures;
- the doctor is paid in a consulting capacity, for instance the development of a patent for a medical device.
If CRA issues you a GST reassessment, the amount owing is payable, even if you file a Notice of Objection. This is different from income tax in that the debt owing and payment can be delayed by filing a Notice of Objection.
