2020-0851841E5 Medical expenses outside Canada

Principal Issues: Whether medical services obtained outside Canada, and related travel costs would be eligible for the medical expense tax credit in a given situation.

Position: Question of fact, but likely yes in the circumstances, provided that the travel expenses meet the conditions in paragraphs 118.2(2)(g) and (h) of the Act.

Reasons: As a general rule, eligible medical expenses are not restricted to those paid in Canada or for medical services provided in Canada. Travel expenses must meet the conditions in paragraphs 118.2(2)(g) and (h) of the Act.

Author: El-Kadi, Randa
Section: 118.2(2)(a); 118.2(2)(o); 118.2(2)(g); 118.2(2)(h)

XXXXXXXXXX                                                                 2020-085184
                                                                                        Randa El-Kadi

June 19, 2020

Re: Medical expenses outside Canada

Dear XXXXXXXXXX,

We are replying to your correspondence of May 27, 2020 to Honourable Dan Vandal, which he forwarded to the Honourable Diane Lebouthillier, Minister of National Revenue. We understand that your XXXXXXXXXX son has cerebral palsy with weakness affecting one-side of his body. XXXXXXXXXX. You indicate that you have recently learned of a surgical procedure being pioneered in the United States (U.S.), for which you have booked your son at the recommendation of his neurosurgeon. You also indicate that due to a recent cancellation, the surgery was advanced to XXXXXXXXXX.

You add that the procedure is not available in your province, and seems to be performed to a limited extent at two locations in Canada, but only for patients who are affected on both sides of their body. You state that at the last moment (XXXXXXXXXX), you were directed to have your son assessed at one of these locations, failure of which may result in your son being ineligible for partial reimbursement through your jurisdiction’s Out-Of-Province claims department. You are concerned that you may not be able to proceed with the assessment on time prior to the scheduled surgery in the U.S., and you are asking whether the costs of the surgery in the U.S., including travel expenses and accommodations, may be eligible for the medical expense tax credit (METC).  

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 70-6R9, Advance Income Tax Rulings and Technical Interpretations.

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.

The Canada Revenue Agency’s (CRA) general views regarding the METC can be found in the Income Tax Folio S1-F1-C1, Medical Expense Tax Credit (Folio), at canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-1-individuals/folio-1-health-medical/income-tax-folio-s1-f1-c1-medical-expense-tax-credit. Generally, eligible medical expenses are not restricted to those paid in Canada or for medical services provided in Canada unless specifically stated in the Act.

Medical services

Under paragraph 118.2(2)(a) of the Act, eligible medical expenses include payments for medical services made to a medical practitioner, a dentist, nurse, or a public or private licensed hospital when the payments are made in respect of medical or dental services provided to the individual, the individual’s spouse or common-law partner, or certain dependants (for example, the individual’s children under 18 years of age). 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. The term “medical practitioner” includes individuals such as a medical doctor, pharmacist, physiotherapist (in all provinces) or nurse who is authorized to practice in the stated profession according to the laws of the jurisdiction in which the service is rendered. A “licensed private hospital” means licensed under the laws of the jurisdiction in which the hospital operates. These definitions apply to services rendered and facilities located both within and outside Canada. In your case, the hospital must be licensed by the state in which the hospital operates.

The CRA has made available to taxpayers a list titled “Authorized medical practitioners by province or territory for the purposes of claiming medical expenses.” Although the list is not exhaustive, it assists taxpayers in determining which medical practitioners are “authorized” to practice in Canadian jurisdictions, without necessarily having to contact the CRA or their own province or territory.

Diagnostic tests and related services

Additionally, according to paragraph 118.2(2)(o) of the Act, eligible medical expenses include amounts paid for laboratory, radiological or other diagnostic procedures or services, with necessary interpretations, for maintaining health, preventing disease or assisting in the diagnosis or treatment of an injury, illness, or disability as prescribed by a medical practitioner.

Travel expenses

Certain transportation and travel expenses may be claimed when a patient must travel to obtain medical services. To qualify for the METC, the claims for travel expenses must meet the requirements of either paragraphs 118.2(2)(g) or 118.2(2)(h) of the Act.

Specifically, an amount paid to a person engaged in the business of providing transportation services to transport a patient at least 40 kilometres from the locality where the patient lives to a place where medical services are normally provided may qualify as a medical expense. If the patient travels to obtain medical services in a place that is at least 80 kilometres from the locality where the patient lives, other reasonable travel expenses (for example, accommodation, meals and parking) may also qualify as a medical expense during the period of the patient’s medical treatment. An individual is entitled to claim transportation and other travel expenses only if the following additional requirements are met:

i. substantially equivalent medical services are not available in the patient’s locality;

ii. the patient takes a reasonably direct travel route, having regard to the circumstances; and

iii. the patient travels to that place to obtain medical services for himself or herself and it is reasonable, having regard to the circumstances, for the patient to travel to that place to obtain those services.

It is our view that the requirement in (iii) may be met even if medical services are available nearer to the patient’s locality if, in the circumstances, it is reasonable for the patient to have travelled to the place where the medical services were obtained.

If transportation or other reasonable travel expenses incurred in respect of a patient’s travel to obtain medical services can be claimed under paragraph 118.2(2)(g) or paragraph 118.2(2)(h), the same kind of expenses paid for transportation and travel for one individual who accompanies the patient may also be claimed as an eligible medical expense. For the expenses paid for the accompanying individual to be eligible, a medical practitioner must have certified in writing that the patient is incapable of travelling without the assistance of an attendant.

For meals and vehicle expenses, either the detailed method or the simplified method can be used. If you use the detailed method, you have to keep all receipts and records. Information on these methods is available on the CRA webpage titled “Meal and vehicle rates used to calculate travel expenses for 2019 and previous years” at canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-25500-northern-residents-deductions/meal-vehicle-rates-used-calculate-travel-expenses. More information on transportation and travel expenses can be found in the Folio (see paragraphs 1.64 to 1.72).

Reasonability of travel outside Canada

Our Directorate has considered many situations where we opined that reasonable travel expenses to obtain medical services outside Canada were likely to qualify for the METC, provided all the requirements under paragraphs 118.2(2)(g) or 118.2(2)(h) were met. For example, this was the case for:

* stem cell therapy not available in Canada

* cancer treatments available only in the U.S.

* medical assessments obtained in the U.S. in a particular situation where the individual’s local hospital was unable to give them a definitive diagnosis to rule out cancer

* treatments in the U.S. for a rare form of cancer. Although treatments became available a few years later in Canada, the patient was advised to continue to be followed up by their doctor(s) in the U.S.

* back surgery at a hospital outside Canada because there was a four-year waiting period for the surgery in Canada, and the individual’s condition was deteriorating

* in-vitro fertilization (IVF) procedure outside Canada. The taxpayer and his wife had determined that local IVF was not a viable option given the wife’s relatively advanced age and the long waiting periods for IVF in Canada.

Receipts

Generally, all expenses claimed as eligible medical expenses must be supported by proper receipts. A receipt should indicate the purpose of the payment, the date of the payment, the patient for whom the payment was made and, if applicable, the audiologist, dentist, medical doctor, nurse practitioner, medical practitioner, nurse, occupational therapist, optometrist, pharmacist, physiotherapist, psychologist, or speech-language pathologist who prescribed the purchase or gave the service.

Receipts are not required for meal and vehicle expenses claimed as transportation and travel expenses under paragraph 118.2(2)(g) and (h) where the simplified method of calculating meal and vehicle expenses is chosen.

Receipts must also be kept for all accommodation expenses with evidence that the amount paid for accommodation was necessary because of the distance travelled and the medical condition.

Whether an amount qualifies as a medical expense is a question of fact that can only be determined after analyzing all the facts and circumstances. Such a review would usually only be undertaken by the CRA in the course of an audit (if any), after a return has been filed by a taxpayer. However, in our view, it seems reasonable, having regard to the circumstances you described, for you (or your spouse) to travel to the U.S. to obtain the required medical (and surgical) services for your son.

For all medical expenses, an individual can only claim the part of reasonable expenses for which he or she has not been and will not be reimbursed, unless the amounts are included, and not otherwise deducted, from the individual’s income.

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
Legislative Policy and Regulatory Affairs Branch

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