Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Is a warm climate considered a medical service for the purpose of the medical expense tax credit?
Position: No. Medical services are diagnostic, therapeutic or rehabilitative services that are performed by a medical practitioner acting within the scope of his or her professional training.
Reasons: The clear meaning provided by 118.2(2)(a) of the Income Tax Act.
Author: Shea-Farrow, Nancy
Section: 118.2(2)(a), 118.2(2)(g), 118.2(2)(h)
Canadian Tax Foundation Annual Conference 2015
When a patient travels to a warm climate for the beneficial effects on his or her health, can the beneficial effects of the warm climate be considered a medical service for the purpose of paragraphs 118.2(2)(g) and 118.2(2)(h) of the Income Tax Act (the “Act”)?
Certain costs for transportation and travel expenses incurred to obtain medical services are eligible medical expenses for the purpose of the medical expense tax credit (“METC”) under paragraphs 118.2(2)(g) and (h) of the Act.
Under paragraph 118.2(2)(g) of the Act, an amount paid to a person engaged in the business of providing transportation services for transportation of a patient, and a necessary accompanying person, to a place where medical services are normally provided is an eligible medical expense under the following circumstances:
* the patient travels to a place that is at least 40 kilometres away from the locality where he or she dwells to obtain the “medical services;”
* substantially equivalent medical services are not available within the patient’s locality;
* the patient takes a reasonably direct travel route having regard to the circumstances; and
* it is reasonable, in the circumstances, for the patient to travel to that place to obtain those medical services.
Paragraph 118.2(2)(h) of the Act provides that eligible medical expenses include amounts paid for other reasonable travel expenses if, under the same circumstances, the patient must travel at least 80 kilometres away from the locality where he or she dwells to obtain the medical services.
The Canada Revenue Agency’s (“CRA”) view is that for the purpose of the METC, medical services are diagnostic, therapeutic or rehabilitative services that are performed by a medical practitioner acting within the scope of his or her professional training. Payments may be made to a medical practitioner or to a public or licensed private hospital for medical services provided to a patient. In other words, a service must be provided to the patient by a medical service provider. In the CRA’s view, the beneficial effects of a warm climate are not medical services as no service has been provided to the patient. Therefore, travel expenses incurred to travel to a warmer climate to receive those beneficial effects, even if for health reasons, are not eligible medical expenses.
In Tallon v. The Queen, 2015 FCA 156, the Federal Court of Appeal affirmed the CRA’s position, stating that the term “medical services” in paragraph 118.2(2)(a) of the Act was clear and that “a medical service must be obtained from a medical service provider.” (footnote 1) The court concluded that the beneficial effects of a warm climate is not a medical service for the purpose of either paragraphs 118.2(2)(g) or (h) of the Act, as medical services “must be provided to the patient by a person or hospital.” (footnote 2) Thus the taxpayer’s transportation and travel expenses to Thailand and Indonesia were not allowed under paragraphs 118.2(2)(g) or (h).
November 24, 2015
Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:
1 Paragraph 36 of Tallon v. The Queen, 2015 FCA 156
2 Paragraph 41 of Tallon v. The Queen, 2015 FCA 156
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