2019-0804001E5 Subscription fees for a mobile app

Principal Issues: Whether the subscription fees for a mobile app qualify as a medical expense for purposes of the medical expense tax credit?

Position: No.

Reasons: See response.

Author: Underhill, Cynthia
Section: ITA: 118.2(2)(k), (m), (o), (t), section 5700 of the Regulations

XXXXXXXXXX                                                                                                                                          2019-080400
                                                                                                                                                                  C. Underhill
June 4, 2019

Dear XXXXXXXXXX:

Re: Medical expenses

This is in reply to your email dated April 5, 2019, regarding whether subscription fees qualify as a medical expense for purposes of the medical expense tax credit (“METC”). More specifically, you asked whether subscription fees for a mobile app (“App”) would qualify as a medical expense pursuant to paragraph 118.2(2)(k) of the Income Tax Act (the “Act”) or paragraph (s) of section 5700 of the Income Tax Regulations (“Regulations”).

In a telephone conversation (Underhill/XXXXXXXXXX) you confirmed that the App:

*    does not measure a diabetic’s blood sugar level. The diabetic’s readings from the blood glucose meter can be sent to the App if the glucose meter is Bluetooth enabled, otherwise the patient is required to manually enter his or her readings on the App;

*    monitors and manages a patient’s blood sugar level and improves the efficiency of the blood glucose meter by analyzing each reading and offering instantaneous individualized feedback to the patient. In addition, the App provides virtual coaching to the patient concerning his or her medication, food, and any other factors that may impact the patient’s treatment plan; and

*    may be prescribed by the patient’s medical practitioner.

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.

The Canada Revenue Agency’s (CRA) general views regarding the METC are contained in Income Tax Folio S1-F1-C1, Medical Expense Tax Credit (the “Folio”). You can access the Folio online by going to Canada.ca and typing the document title into the search box in the top right-hand corner of the screen.

Medical expenses which 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), 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.

You assert that the subscription fees for the App may qualify as a medical expense under paragraph 118.2(2)(k) because the App may be described within the phrase “equipment necessary to administer insulin” since the App facilitates the proper and efficient administration of insulin if necessary.

Paragraph 1.90 of the Folio discusses paragraph 118.2(2)(k) and states:

“The cost of buying or renting an oxygen tent or other equipment necessary to administer oxygen for medical purposes (including, for example, oxygen face masks, tanks containing oxygen under pressure) is an eligible medical expense under paragraph 118.2(2)(k) if prescribed by a medical practitioner for use by the patient. In addition, this same paragraph provides that the cost of insulin, oxygen, liver extract injectible for pernicious anaemia or vitamin B12 for pernicious anaemia for use by a patient is an eligible medical expense if these treatments are prescribed by a medical practitioner.”

The reference to “other equipment to administer oxygen” is limited to equipment necessary to administer oxygen, not insulin. In addition, only treatments listed under paragraph 118.2(2)(k) of the Act as prescribed by a medical practitioner may qualify for purposes of the METC.

Under paragraph 118.2(2)(m) of the Act, a payment in respect of a device or equipment may qualify as a medical expense if certain conditions are met. Generally, to qualify, the device or equipment must be prescribed by a medical practitioner, must be included in the list of qualifying devices or equipment described in section 5700 of the Regulations and must meet such conditions as are prescribed by the Regulations as to its use or the reason for its acquisition.

Paragraph (s) of section 5700 of the Regulations states:

“(s) infusion pump, including disposable peripherals, used in the treatment of diabetes or a device designed to enable a diabetic to measure the diabetic’s blood sugar level.”

Paragraph 1.131 of the Folio discusses the costs associated with a number of procedures or treatments that may be considered to be for maintaining health, preventing disease or assisting in the diagnosis or treatment of an injury, illness or disability of a patient, the third bullet point states:

“The cost of a device designed to enable a diabetic patient to measure the patient’s blood sugar level, including the cost of test tapes or test tablets, is an eligible medical expense under paragraph 118.2(2)(m) and paragraph (s) of section 5700 of the Regulations (see Devices and equipment prescribed by regulation). However, the cost of various kinds of scales, which patients with diabetes frequently use for weighing themselves or their food, is not an eligible medical expense under any paragraph of subsection 118.2(2).”

The App is not a device that enables a diabetic patient to measure his or her blood sugar level; the App enables a patient to monitor and manage his or her blood sugar level.

Although the App may be prescribed by a medical practitioner, the App is not listed in section 5700 of the Regulations nor described under any paragraph of subsection 118.2(2) of the Act. Therefore, it is our view that subscription fees (monthly or yearly) for the App would not qualify as an eligible medical expense for purposes of the METC.

We trust our comments will be of assistance to you.

Yours truly,

Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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