The Canada Revenue Agency (“CRA”) has recently been auditing doctors and medical practitioners for goods and services tax (“GST”) and harmonized sales tax (“HST”). We have seen a number or re-assessments for amounts paid to doctors and medical practitioners for services that do not or may not qualify as exempt medical services. Doctors and medical practitioners are required to charge GST/HST on payments made to the doctor unless the a specific exemption applies  – most of the specific exemptions are found in Schedule V of the Excise Tax Act.  The supply must meet the statutory definition to be exempt.

Some of the examples that we have seen where doctors and medical practitioners have been reassessed include:

  • The doctor is paid an amount by a Canadian university or other Canadian entity to give a lecture;
  • The doctor is paid an amount (often a significant amount) by a Canadian university to run a department or lab;
  • The doctor is paid an amount to manage a medical office;
  • The doctor is paid a daily stipend to be on call at a retirement home or nursing home;
  • The doctor is paid an amount to consult on litigation or act and an expert witness;
  • The doctor is paid an amount to consult on the development of a patent for a medical device; and/or
  • The doctor is paid an amount to act as an endorser of a drug or medical device.

Since GST/HST is not payable on employment services, none of the above examples applies when the doctor is in an employment relationship and gets a T4 for the amounts that are paid.  However, many doctors operate using professional corporations and in these cases, they are not in an employment relationship.  The relationship is structured as an independent contractor or “for services” arrangement.  In these circumstances, there are often taxable supplies of non-medical services.

The CRA is taking the position that the doctor must register for GST/HST purposes (in their personal capacity or their professional corporation) and charge collect and remit GST/HST on such payments to them.  In some cases, the CRA became aware of the payments being made during an income tax audit because the doctor properly reported the income.  In some cases, the income was not reported and the doctors have both an income tax and GST/HST issue.

The CRA takes the position that the doctor must register if the payments from non-employment sources exceeds $30,000 per year (which is the small supplier threshold).  Some auditors have incorrectly treated employment income as supplies for GST/HST purposes in order to require registration and impose failure to collect penalties on small amounts (less than $30,000).

The CRA has gone back beyond the 4-year statutory limitation period in some cases.  The CRA has taken the position that the failure to register is a misrepresentation attributable to neglect, carelessness or willful default.  The misrepresentation (according to the CRA) is either (1) by not registering the doctor has misrepresented the their activities as employment income (not taxable) or exempt medical services or (2) the filing of their income tax return is a misrepresentation of the status of the income for GST/HST purposes (if income tax is paid) or a deliberate omission (for both income tax and GST/HST purposes) if not reported.

In some of the cases we have seen, the amount that has been reassessed, including interest and penalties is well over $100,000 and sometimes is in the millions of dollars range.  When the CRA issues the re-assessment, they often take collection action quickly.  If the CRA issues a GST/HST reassessment, the amount is payable even if a notice of objection is filed. GST/HST rules are dissimilar from income tax rules in that the debt is due and payment cannot be delayed by filing a notice of objection.  CRA collections often want the full GST/HST re-assessment paid within 12-24 months.

If you have further questions, please do not hesitate to contact Cyndee Todgham Cherniak at 416-307-4168 or at