2019-0800911E5 Cannabis for medical purposes

Principal Issues: Can a taxpayer with a prescription to purchase cannabis for medical purposes, purchase it from any legal retailer and claim the cost as an eligible medical expense for the METC?

Position: No.

Reasons: i. Proposed updates have been tabled to amend paragraph 118.2(2)(u) to reference the new Cannabis Regulations. ii. An individual must be registered with a "holder of a licence for sale for medical purposes" to purchase cannabis for medical purposes that will qualify for the METC under the proposed provision.

Author: Wirag, Eric
Section: 118.2(2)(u)

XXXXXXXXXX                                                                                                                                           2019-080091
                                                                                                                                                                   Eric Wirag, CPA, CMA
May 7, 2019

Dear XXXXXXXXXX:

Re: Cannabis for medical purposes

This is in reply to your request for our comments on whether the cost of cannabis purchased for medical purposes would be an eligible medical expense for purposes of the medical expense tax credit (METC) under the Income Tax Act (the Act).  More specifically, you are asking whether a taxpayer with a prescription for cannabis for medical purposes can purchase the cannabis from any legal retailer and claim the cost as a medical expense.

This technical interpretation provides general comments about the provisions of 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 70-6R9, Advance Income Tax Rulings and Technical Interpretations.

Certain expenses associated with the purchase of medical marihuana have been eligible for the METC under paragraph 118.2(2)(u) of the Act, which currently references the Access to Cannabis for Medical Purposes Regulations and section 56 of the Controlled Drugs and Substances Act. These regulations were repealed and as of October 17, 2018, a new regime for access to cannabis for medical purposes is in force under the Cannabis Regulations, under the Cannabis Act.

Budget 2019 proposed to amend paragraph 118.2(2)(u) of the Act to reflect the current regulations for accessing cannabis for medical purposes.  The proposed paragraph 118.2(2)(u) will allow a patient who is the holder of a medical document provided by a health care practitioner to support their use of cannabis for medical purposes to claim the cost of cannabis, cannabis oil, cannabis plant seeds or cannabis products purchased for medical purposes as an eligible medical expense.  The cannabis, cannabis oil, cannabis plant seeds or cannabis products must be purchased from a holder of a licence for sale for medical purposes (the “holder”) to claim those costs.

The Cannabis Regulations require an individual to be registered as a client of the holder in order to purchase cannabis, cannabis oil, cannabis plant seeds or cannabis products for medical purposes from the holder.  To be registered with the holder, the individual must provide a registration application, together with the original of the individual’s medical document or a copy of their registration certificate received from Health Canada.  Therefore, for an individual to claim the cost of cannabis, cannabis oil, cannabis plant seeds or cannabis products for purposes of the METC, the purchase must be made from the holder with whom they are registered.

While a technical amendment to paragraph 118.2(2)(u) of the Act has been proposed, it is yet to be enacted by Parliament.  In the interim, the Canada Revenue Agency will not disallow eligible medical expenses claimed for the purchase of cannabis, cannabis oil, cannabis plant seeds or cannabis products purchased for medical purposes from a holder of a licence for sale that is allowable under these new regulations. We recognize that paragraphs 1.139 to 1.142 of Income Tax Folio S1-F1-C1: Medical Expense Tax Credit, refer to the repealed regulations.  These paragraphs will be changed to reflect the technical amendment to paragraph 118.2(2)(u) once the amendment has been enacted.

We trust our comments will be of assistance.

Yours truly,

Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate

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