GSTHST Medical and Assistive Devices W C Dobson

GST/HST Medical and Assistive Devices W. C. Dobson CA Health and Public Sector Specialist

Today’s Agenda Ø 2008 -2011: What’s new? ØOur compliance interest in assistive devices ØComments on legislative policy intent ØOverview on medical devices ØConditions limiting the zero rating ØServices in respect of medical devices ØKeeping your company compliant ØPublications and help 2

2008 -2011: What’s new? § Quiet on the Legislative Front § HST in Ontario § Transitional Rules § New Place of Supply Rules § New GST/HST Directorate at CRA • Focus on risk assessment • Pre-assessment clearing • Post payment audit § Onboarding Ontario Auditors 3

Compliance Programs ØOur mandate and methods ØLeads from vendors ØImpact of an audit: severe ØThe “default” rule: taxable unless zero rated ØList of taxable goods: 2008 presentation ØYour interests: a level playing field 4

The Policy Intent ØEmphasis is on nature of the device and its relationship to a chronic illness, disease or disability of an individual. ØOnly devices specially designed for use by an individual with a chronic illness, disease or disability qualify for zero-rating. ØMany of these devices are conditionally zero-rated: only when sold to a consumer on the order of a physician. ØIf a device has other potential uses it is generally denied GST/HST relief. 5

Overview of Medical Devices Ø Part II of Schedule VI lists certain medical and assistive devices that are zero-rated when supplied in Canada. Ø Schedule VII of the Excise Tax Act allows many of the medical and assistive devices listed in Part II of Schedule VI to be imported on a non-taxable basis. Ø Institutions, retailers, etc. pay the GST/HST on importations of medical devices where zero-rated status is conditional on a written order from a physician for use by a consumer named in the order 6

Limiting Conditions ØZero-rated without conditions ØZero-rated with conditions: ØSpecial design features ØFor use by an individual with a disability or particular impairment ØCan be used in the residence of an individual ØOnly when supplied on the written order of a medical practitioner for use by a consumer named in the order ØConditions for zero-rating may include one or more of the above 7

Zero-Rated Without Conditions ØExample: Ø Orthodontic Appliances Ø Wheel Chair Ramps Ø Hearing Aids ØZero Rated through the chain of distribution 8

Zero Rated with Conditions Specially Designed ØPrecise term to ensure only devices made to address the specific medical conditions relating to a disability are zero-rated. Ø“Specially” imposes a restriction on the word “designed” which excludes general purpose goods from zero-rating. ØRelates to the intention of the original designer or manufacturer as to the ultimate use of the device as reflected in the qualities and features 9

Zero Rated with Conditions (2) ØIn respect of cosmetic procedures Ø No medical or reconstructive purpose Ø Deemed not a medical device ØMedical Practitioner Ø Physicians/surgeons and dentists only ØDisability Ø Activities of daily living ØFor “Use” by an individual/consumer Ø Individual/consumer must operate device 10

Services ØServices of installing, maintaining, restoring, repairing or modifying a zero-rated device ØWould include, for example, a contract for maintenance services for a home use dialysis machine ØDoes not include warranties or insurance 11

Maintaining Compliance ØThe Importance of a ruling ØInternal controls ØCreating a level playing field ØA longer term relationship 12

Help ØCRA web site: Ø Search “medical device’ Ø Memorandum 4. 2 Medical Devices Ø Contact CRA 1 -800 -959 -8287 – English 1 -800 -959 -8296 – French 1 -800 -465 -5770 – TTY 1 -800 -567 -4692 - Québec www. cra-arc. gc. ca 13