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

2. 2 Today’s Agenda  2008-2011: What’s new?  Our compliance interest in assistive devices  Comments on legislative policy intent  Overview on medical devices  Conditions limiting the zero rating  Services in respect of medical devices  Keeping your company compliant  Publications and help

3. 3 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

4. 4 Compliance Programs  Our mandate and methods  Leads from vendors  Impact of an audit: severe  The “default” rule: taxable unless zero rated  List of taxable goods: 2008 presentation  Your interests: a level playing field

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

6. 6 Overview of Medical Devices  Part II of Schedule VI lists certain medical and assistive devices that are zero-rated when supplied in Canada.  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.  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

7. 7 Limiting Conditions  Zero-rated without conditions  Zero-rated with conditions:  Special design features  For use by an individual with a disability or particular impairment  Can be used in the residence of an individual  Only when supplied on the written order of a medical practitioner for use by a consumer named in the order  Conditions for zero-rating may include one or more of the above

8. 8 Zero-Rated Without Conditions  Example:  Orthodontic Appliances  Wheel Chair Ramps  Hearing Aids  Zero Rated through the chain of distribution

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

10. 10 Zero Rated with Conditions (2)  In respect of cosmetic procedures  No medical or reconstructive purpose  Deemed not a medical device  Medical Practitioner  Physicians/surgeons and dentists only  Disability  Activities of daily living  For “Use” by an individual/consumer  Individual/consumer must operate device

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

12. 12 Maintaining Compliance  The Importance of a ruling  Internal controls  Creating a level playing field  A longer term relationship

13. 13 Help  CRA web site:  Search “medical device’  Memorandum 4.2 Medical Devices  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