If you are a physician who has structured your practice as a business (whether as a professional corporation, partnership or proprietorship), you no doubt are aware of the many income tax complexities of running a small business. However, you may not be aware of potential GST/HST obligations that could also apply to your practice.
Many small business owners, including physicians, are aware of the general threshold of $30,000 of GST/HST taxable revenues over your four previous calendar quarters before your business is required to become a GST/HST registrant. Once this threshold is exceeded, failure to register for and collect GST/HST on taxable revenue can result in unexpected GST/HST liabilities, interest and penalties if subsequently discovered by Canada Revenue Agency.
As a medical practitioner, you can take some comfort that the GST/HST legislation exempts medical services of a consultative, diagnostic, or treatment nature when rendered to an individual patient or if the service is covered under a provincial healthcare plan. However, in recent years the types of services delivered by medical practitioners has continued to expand and the Canada Revenue Agency has legislatively and administratively narrowed the types of services that would fall under this general exemption.
The types of services that may attract GST/HST, although not exhaustive, would include:
- Medical/legal reports for Court proceedings or insurance claims
- Expert opinion reports and expert witness fees
- Cosmetic procedures
- On call payments
- Department head fees, if not rendered as an employee
- Preparation of disability certificate forms, CPP disability, drivers license and similar reports
- Consulting services, including medical research and clinical trials
- Block or annual fees
In the late fall of 2014, Canada Revenue Agency released GST/HST Notice 286 containing a draft GST/HST Policy Statement which outlines in some detail their position on the HST application of various services provided by physicians and provides additional guidance and rationale to the above-noted list.
If you are required to become a GST/HST registrant, there may also be an opportunity to recover a portion of HST paid on the operating expenses of your practice, depending on the portion of your practice that is engaged in GST/HST taxable activities.
Should you have any questions about this matter or how it may apply to your practice, I would encourage you to contact your DFK sales tax specialist.
Winter 2017 DFK Newsletter Article
Other articles in this issue: Bonus Payable In Shares | More Fallout from the Graduated Rate Estate (“GRE”) Tax Rules | Will the 2017 Federal Budget Increase the Capital Gains Tax?
Author: Terry Soloman, CPA, CA, TEP – MRSB Group