Is Osteopathy Tax Deductible in Canada? A Comprehensive Guide to GST/HST

Navigating the complexities of the Canadian tax system can be challenging, especially when it comes to determining the eligibility of health services for tax deductions or exemptions. Many Canadians seek osteopathic treatment for various health concerns, leading to a common question: Is osteopathy tax deductible in Canada?

The short answer is, it depends. The deductibility of osteopathic services, specifically concerning the Goods and Services Tax/Harmonized Sales Tax (GST/HST), hinges on the practitioner's qualifications and licensing. This article will delve into the specifics of the Excise Tax Act (ETA) and its application to osteopathic services, providing clarity on when GST/HST applies and when it doesn't.

Understanding the GST/HST and Health Care Services

The GST/HST is a consumption tax applied to most goods and services in Canada. However, certain health care services are exempt from this tax. The Excise Tax Act (ETA) outlines the specific conditions under which health care services, including osteopathic services, qualify for exemption. The key distinction lies between services provided by "osteopathic physicians" and "manual osteopathic service providers."

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Osteopathic Physicians vs. Manual Osteopathic Service Providers

The ETA makes a crucial distinction between two types of osteopathic practitioners:

Osteopathic Physicians: These are licensed medical doctors (doctors of osteopathic medicine, doctors of osteopathy, or osteopaths) entitled to practice medicine under the laws of a province. In provinces like Alberta, British Columbia, Ontario, and Quebec, their practice is regulated in conjunction with the practice of medicine. They are members of the College of Physicians and Surgeons of the province.

Manual Osteopathic Service Providers: These providers offer osteopathic services but are not licensed osteopathic physicians. Currently, there are no provincial or territorial licensing requirements for manual osteopathic service providers in Canada. This is the critical factor determining the GST/HST applicability.

GST/HST Exemption for Osteopathic Physicians

Services rendered by osteopathic physicians are generally exempt from GST/HST. This exemption falls under section 5 of Part II of Schedule V of the ETA. The following conditions must be met:

• The service is rendered to an individual by a medical practitioner.
• The medical practitioner is entitled under provincial law to practice medicine.
• The Service is a Qualifying Health Care Supply.
• The service is *not* a cosmetic service supply.

For example, if a patient is referred to an osteopathic specialist licensed to practice medicine in British Columbia, the specialist's services are exempt from GST/HST.

GST/HST Applicability to Manual Osteopathic Service Providers

The situation is different for manual osteopathic service providers. Because they are not currently members of a regulated health profession in any Canadian province or territory, and there are no licensing requirements, they do not meet the definition of a "practitioner" under section 1 of Part II of Schedule V of the ETA.

While osteopathic physicians' services may be exempt, manual osteopathic service providers are not considered osteopathic physicians. Their services, therefore, do *not* qualify for the exemption under section 7 of Part II of Schedule V.

Consequently, if a manual osteopathic service provider is a GST/HST registrant, they must collect and remit the GST/HST on their services at the applicable rate for the province where the service is provided.

For example, a manual osteopathic practitioner in Ontario charging $100 per hour plus a $60 initial assessment fee (totaling $160) would be required to collect and remit the 13% HST on the $160 if they are a registrant.

Membership in Osteopathic Associations

It's important to note that membership in provincial or national osteopathic associations does not change the GST/HST applicability for manual osteopathic service providers. These associations may set professional standards, but they do not have the regulatory authority equivalent to provincial licensing bodies. Membership is voluntary and does not fulfill the requirements of the "practitioner" definition under the ETA.

Mixed Supplies of Health Care Services and The Small Supplier Threshold

Some practitioners may offer a mix of services, some of which are taxable and some of which are exempt. For example, a practitioner might offer both manual osteopathic services (taxable) and physiotherapy services (exempt if rendered by a licensed physiotherapist). In such cases, it's crucial to separate the revenue from taxable and exempt services.

This distinction is particularly important for determining whether a practitioner is a "small supplier." Generally, a supplier is considered a small supplier if their total revenue (before expenses) from taxable supplies, along with any associates, does not exceed $30,000 in a single calendar quarter or over the previous four consecutive calendar quarters.

If the total revenue from taxable supplies exceeds this threshold, they should be registered.

Input Tax Credits (ITCs)

GST/HST registrants (including manual osteopathic service providers who are required to register) are generally eligible to claim Input Tax Credits (ITCs). ITCs allow businesses to recover the GST/HST paid or payable on purchases and expenses related to their commercial activities (i.e., making taxable supplies).

For example, a clinic offering both exempt chiropractic services and taxable manual osteopathic services could claim ITCs for the GST/HST paid on administrative services, but only the portion attributable to the taxable manual osteopathic services (e.g., if 40% of the clinic's services are manual osteopathic, they could claim 40% of the GST/HST paid on relevant expenses).

ITCs may also be available for GST/HST paid before becoming a registrant, to the extent that the tax relates to property or services used in commercial activities after registration. For example, a manual osteopathic service provider who registers on December 1st could claim ITCs for the GST/HST paid on rent for December, but not for rent paid in October or November.

CRA's Educational Approach

The Canada Revenue Agency (CRA) published an article in September 2020 clarifying the application of GST/HST to manual osteopathic services. Recognizing that some practitioners may have previously believed their services were exempt, the CRA initially adopted an educational approach, encouraging voluntary registration for those who were not small suppliers. However, the CRA reserves the right to assess retroactively in cases of severe or continuous non-compliance.

Conclusion: Key Takeaways on Osteopathy and Tax Deductibility in Canada

The tax deductibility, in terms of GST/HST, of osteopathic services in Canada depends entirely on the provider's status. Services from **osteopathic physicians** (licensed medical doctors) are **exempt** from GST/HST. Services from manual osteopathic service providers, who are not licensed physicians, are generally **taxable**, and providers who are not small suppliers must register for, collect, and remit GST/HST. Membership in professional associations does not change this requirement. GST/HST registrants can claim Input Tax Credits (ITCs) to recover the tax paid on eligible business expenses.

This information is intended for general guidance only and does not replace the law found in the Excise Tax Act and its regulations. For specific situations, it is always recommended to consult the ETA, relevant regulations, or contact GST/HST Rulings at 1-800-959-8287 (or Revenu Québec at 1-800-567-4692 for those in Quebec).

If you are a manual osteopathic provider, or a patient seeking to clarify your tax obligations, are you confident that you are compliant with the current GST/HST regulations?

If you want to know other articles similar to Is Osteopathy Tax Deductible in Canada? A Comprehensive Guide to GST/HSTy ou can visit the category Tax Deductions.