CDA Essentials 2014 • Volume 1 • Issue 7 - page 12

12 | Volume1 Issue7
CDA at W ork
Volume1 Issue7 |
Note: Dentistsandorthodontistsshouldseektheadviceoftheirtaxprofessionalto
determinehowtheserulesapplytotheirparticularcircumstances.
*Theterms“dentalpractice”orthe“dentist”areusedtogenerallyrefertothepersonresponsible forGST/
HSTregistration,which isona legalpersonbasis– i.e.,asoleproprietorship,partnershiporcorporation.
What isthedifferencebetweengoods
andservicesthataretax-exemptversus
zero-rated?
Anexemptgoodor service isnot
subject toGST/HSTorQSTbut a zero-
ratedgoodor service is taxableat 0%.
Diagnosticand treatment services
(other thancosmetic services) are
generally tax-exempt,whereas artificial
teethandorthodonticappliances are
taxableat 0%.
Inboth tax-exempt and zero-rated
goods and services, theprovider does
not collect or report any tax. However,
thedistinction is important because
apracticecannot claim ITCsor ITRs to
recover taxespaidby thedentist to
provide tax-exempt goodsor services.
On theother hand, adental practice
providing taxable (including zero-rated)
goodsor servicesmayclaim ITCsor ITRs
to recover theGST/HSTorQSTpaidon
relatedcosts. (SeeBox2)
What isthestatusoftheCRApolicy
relatingtodentists’andorthodontists’
eligibilitytoclaimITCs?
TheCRApolicy relating todentists’
andorthodontists’ eligibility toclaim
ITCswas set out ina letter to theCDA
inMay2004. Thepolicyoriginatedwith
theOrthodontics SuppliesAgreement,
anadministrativeagreement from
1998between theCRA, CDAand the
CanadianAssociationofOrthodontists.
The2004CRA interpretation still
applies. It explains that ITCsmaybe
claimed for theGST/HSTondirect
costs (e.g., taxable laboratory fees) and
eligible indirect or overheadcosts (e.g.,
leaseof theofficeandcost of utilities)
to theextent thecostswere incurred
for consumptionor use in themaking
of taxable sales, andprovided the
indirect costs are incurred for at least
10% in taxableactivities. As a result,
indirect costsmust beallocated to
exempt and taxableactivities for ITC
and ITRpurposes.
CRA’s administrativepolicyon ITC
eligibility requires that thedentist
or orthodontist patient fees identify
separatelycharges for taxable sales
(e.g., anartificial toothor orthodontic
appliance), asdistinct fromdental
services that are tax-exempt (e.g.,
diagnostic service).
Arethereanticipatedchangestothe
policiesonGST/HSTandQST for
dentists?
CRA is currently reviewing the
arrangement andCDA is awareof this
situation. CDAprovideda submission
to theCRAandwill be involved in
discussionswith theCRA in regards to
the statusof their review. In the interim,
theOrthodontics SuppliesAgreement
and thebroader CRAadministrative
policy relating todentists’ eligibility
toclaimaportionof theGST/HSTand
QST theypayoncosts continues to
apply. If anychanges are introduced,
theCRAhas indicated that theywill be
introducedonago-forwardbasis, not
retroactively. a
Examplesof taxableand
exemptdental services
TaxExempt
• goodsorservicescoveredundera
provincialhealthcareplan
• consultative,diagnosticand
treatmentservices (excludingservices
forcosmeticpurposes)
• dentalhygienistservices (excluding
servicesmade forcosmeticpurposes)
Taxable
Standardtaxrates
• cosmeticservicesnot formedicalor
reconstructivepurposes
• theprovisionofmedico-legal reports
to insurancecompaniesor lawyers
• rentalofofficespaceorprovisionof
parking
Zero-rated
• orthodonticappliances,artificial
teeth
• parts,accessoriesorattachments
speciallydesigned forartificial teeth
ororthodonticappliances
➋
Total taxable supplies =$0 CannotRegister
Total taxable supplies >$30,000 RegistrationMandatory
Total taxable supplies <$30,000
i) significant ITCsavailable? RegisterVoluntarily
ii)minimal orno ITCsavailable? DoNotRegister
To Register or Not To Register? ➊