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Certain owners and operators of residences for seniors and persons that require a degree of daily health care or living assistance will be pleased to know that they may be eligible to lower their GST / HST costs.
Providers of residential housing and long-term care facilities have to pay tax on their costs of construction and acquisition of goods and services to operate and maintain the facilities. Depending on the type of organization owning or operating the facility, a portion of the tax may be rebated.
For example, registered charities and qualifying non-profit organizations receive a rebate of the tax paid on costs related to most of their activities. A for-profit private operator generally does not receive a rebate, although they may qualify for a long-term rental tax rebate on the costs of new construction.
In this article, I would like to highlight two opportunities for GST / HST cost savings. These opportunities are supported by two Tax Court of Canada decisions.
Enhanced Rebate for Long-term Care
This rebate may be available to a public service body, although it is not available to privately owned facilities. The rebate is equivalent to the rebate payable to public hospitals. For purposes of the GST or the federal portion of the HST, a charity or qualifying non-profit organization receives a 50 percent rebate of the GST it pays on expenses, whereas a public hospital receives an 83 percent rebate. However, if the charity or non-profit entity qualifies as a “facility operator,” and meets the required additional criteria, it may be entitled to the same rebate as a public hospital.
The increased rebates can be substantial. There are several eligibility criteria to meet, including the provision of long-term complex care to its residents due to physical or mental limitations, and continuous and active supervision by medical practitioners.
Home Care Rebate
This rebate is available to private and public facility operators. A “home care service” is a household or personal care service, such as bathing, feeding, assistance with dressing or medication, cleaning, laundering, meal preparation and child care, if it is rendered to an individual who due to age, infirmity or disability requires the assistance.
Often, home care services are outsourced to third party service providers. Historically, most of these providers have charged tax on their services since, in many cases, the Canada Revenue Agency’s interpretation has been that the services are indeed taxable. In one of the above-mentioned Tax Court decisions, the court took a different view and decided the services were exempt.
Of course, as with the long-term care rebate, there are criteria that must be met before the services can be considered exempt, including that the service must meet the specific definition of a home care service (not all services do).
If you have paid tax on home care services, you may qualify for a rebate of the tax you paid to the service provider.
Savings related to these opportunities can be significant. However, it is important to remember the eligibility criteria are specific and documentary proof and support are key to being successful. There are time restrictions for retroactivity when filing a rebate application, so best to not defer.
For more information on how to determine the benefit to your organization, contact John Frim at 519.772.1961 or [email protected]
Related Topics:Health Care; GST; HST; Not-For-Profits
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