2015-0572891E5 International in-vitro fertilization

Principal Issues: Are payments in respect of in-vitro fertilization and egg donor procedures for a surrogate and an egg donor eligible medical services for the purpose of the medical expense tax credit?

Position: No.

Reasons: The medical expenses provided for under paragraphs 118.2(2)(a), 118.2(2)(n) and 118.2(2)(o) of the Income Tax Act must be in respect of the patient. The patient must be the individual, the individual's spouse or common-law partner or a dependant.

Author: Shea-Farrow, Nancy
Section: 118.2

XXXXXXXXXX
                                                                                                                                              2015-057289
                                                                                                                                              N. Shea-Farrow

April 14, 2015

Dear XXXXXXXXXX:

Re: International in-vitro fertilization and egg donor procedures

We are replying to your letter dated December 21, 2014, to the XXXXXXXXXX Tax Centre that was forwarded to us, regarding whether costs for in-vitro fertilization and egg donor procedures relating to a surrogacy arrangement are eligible medical expenses for the purpose of the medical expense tax credit (METC).

You stated in your letter that you are physically unable to bear children or produce healthy eggs. You and your husband are currently considering in-vitro fertilization in XXXXXXXXXX due to the expense of the procedures and surrogacy laws in Canada.  You would like to know if the proposed payments to a licensed private hospital to screen a prospective egg donor and a surrogate, retrieve eggs from the egg donor, and administer fertility drugs to the surrogate are eligible medical expenses.

We assume that the neither the egg donor nor the surrogate is a dependant of yourself or your husband.

Our Comments:

This technical interpretation provides general comments about the provisions of the Income Tax Act (the “Act”) and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

Medical expenses of an individual that are eligible for the METC are limited to those described in subsection 118.2(2) of the Act.  If a particular expenditure is not described as an eligible medical expense in subsection 118.2(2) of the Act, or if the conditions under which the expenditure would qualify are not met, the expenditure does not qualify for purposes of the METC, even though the expenditure may have been incurred for medical reasons. The Canada Revenue Agency’s general views regarding the METC are contained in Income Tax Folio S1-F1-C1, Medical Expense Tax Credit (the “Folio”) which is on the CRA website at www.cra-arc.gc.ca. 

Pursuant to paragraph 118.2(2)(a) of the Act, an amount paid by an individual to a medical practitioner, a dentist or a nurse (a “medical practitioner”) or a public or private licensed hospital in respect of medical or dental services provided to a person (referred to as the “patient”) is an eligible medical expense for the METC. Additionally, if the requirements of paragraphs 118.2(2)(n) and 118.2(2)(o) of the Act are met, the amounts paid for drugs and for laboratory or other diagnostic procedures or services for in-vitro fertilization for the patient will qualify as eligible medical expenses.  Paragraph 1.130 of the Folio describes expenses that are involved with artificial insemination that may fall under paragraph 118.2(2)(o) of the Act.

As a general rule, eligible medical expenses are not restricted to those paid in Canada or for medical services provided in Canada.  A medical practitioner must be authorized to practice his or her particular profession according to the laws of the jurisdiction in which the service is rendered, whereas a licensed private hospital must be licensed by the jurisdiction in which the hospital operates. 

However, to be eligible for the METC, the amounts paid by an individual have to be for medical expenses for the patient.  The patient, as explained in paragraphs 1.2 to 1.7 of the Folio, is a person who is the individual, the individual’s spouse or common-law partner, or the individual’s dependant.  A dependant of the individual for a particular tax year is a person who is:

*     a child, grandchild, parent, grandparent, brother, sister, uncle, aunt, niece or nephew of the individual or of the individual’s spouse or common-law partner; dependent on the individual for support at some time in the year; and
*     with some exceptions, a resident of Canada at some time in the year.

Since neither the surrogate nor the egg donor is a dependant of yourself or your husband, it is our view that the proposed payments for services that you describe would not be eligible medical expenses for you or your husband for the purpose of the METC.

We trust our comments will be of assistance.

Yours truly,

Pamela Burnley, CPA, CA
Manager
Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate

All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without the prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5.

© Her Majesty the Queen in Right of Canada, 2015

Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistribuer de l'information, sous quelque forme ou par quelque moyen que ce soit, de façon électronique, mécanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.

© Sa Majesté la Reine du Chef du Canada, 2015