3 February 2004 External T.I. 2003-0032285 - MEDICAL EXPENSE TAX CREDIT

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

Whether the costs of speech therapy performed in XXXXXXXXXX and related travel expenses qualify as medical expenses under subsection 118.2(2) of the Act.

Position:

The expenses would qualify if paid to a medical practitioner or to a public or licensed private hospital. Alternatively if certified as necessary by a medical practitioner, amounts paid to the XXXXXXXXXX facility would qualify. Also certain travel expenses may qualify if the conditions in paragraphs 118.2(2)(g) or (h) are met

Reasons:

Definition of medical expense in ss. 118.2(2)

XXXXXXXXXX Lena Holloway, CA
2003-003228
February 3, 2004

Dear XXXXXXXXXX:

Re: Medical Expense Tax Credit

We are writing in response to your letter dated July 23, 2003, requesting a technical interpretation on whether certain costs incurred by your client to obtain speech therapy for his eight year old child would qualify as a medical expense under subsection 118.2(2) of the Income Tax Act (the "Act"). The actual therapy was performed at the XXXXXXXXXX (the "Institute") in XXXXXXXXXX because, according to your client's family physician, similar programs were not available in Canada.

You had asked whether the costs of airfare, hotel and other travel expenses incurred in respect of the parents and the child would qualify as medical expenses. In addition you inquired whether the amounts paid to the Institute for the actual therapy would be a medical expense under the Act.

Written confirmation of the tax implications of a cost that a particular taxpayer has incurred should be addressed to the relevant tax services office of the Canada Revenue Agency (the "CRA"). Nonetheless, we are prepared to provide the following general comments, which may be of assistance.

Our Comments

Section 118.2 of the Act provides rules for determining the amount that may be claimed, as a tax credit in respect of medical expenses. In order for payments made to the Institute to qualify as medical expenses, they must either fall under paragraphs 118.2(2)(a) or (e) of the Act.

Payments to Medical Practitioners and Hospitals

Under paragraph 118.2(2)(a) of the Act amounts paid by an individual to a medical practitioner or to a public or licensed private hospital (i.e., licensed by the province or jurisdiction in which the hospital operates) to obtain medical services, would qualify as medical expenses eligible for the medical expense tax credit. Qualifying medical expenses can include amounts paid to medical practitioners or hospitals outside of Canada. Therefore if the Institute qualifies as a public or licensed private hospital in XXXXXXXXXX, payments made to the Institute for medical services would qualify as medical expenses. Alternatively, if payments were made to a qualified speech-language pathologist or audiologist, who is certified under the laws of XXXXXXXXXX to offer such services, these payments would also qualify as medical expenses.

Payments for Care and Training

If the Institute is not a licensed private or public hospital, or if the payments were not made to a licensed medical practitioner, then the payments would only qualify as medical expenses if they fall within paragraph 118.2(2)(e) of the Act. Under paragraph 118.2(2)(e), qualifying medical expenses include amounts paid for the care, or the care and training at a school, institution or other place, of an individual, who has been certified in writing by an appropriately qualified person to be a person who, by reason of a physical or mental handicap, requires the equipment, facilities or personnel specifically provided by that place.

As noted in paragraph 29 of Interpretation Bulletin IT-519R2 Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction, it is our view that an "appropriately qualified person" includes a medical practitioner such as a doctor or a psychologist, as well as any other person who has been given the required certification powers under provincial or federal law. While there is no prescribed form or specific wording required in the certification by the qualified person, it should demonstrate that, as a result of a particular mental or physical handicap, the individual named in the certificate requires the equipment, facilities or personnel specially provided by a particular place to deal with that particular handicap. Generally, the certificate should include a description of the equipment, facilities or trained professionals required to adequately provide care, or care and training, for the individual. In addition, the CRA must be satisfied that the equipment, facilities or personnel provided by a particular place meets this description. This certification should normally be obtained with respect to an individual prior to being enrolled as a student at an Institution. However, we are prepared to accept a certification made after placement if all the above-noted requirements are satisfied.

The correspondence from XXXXXXXXXX, the child's physician, attached to your letter indicates that the Institute program was recommended as "a reasonable alternative to the more conventional therapies that had already been tried and failed". In our opinion, this referral does not adequately describe the specific equipment, facilities, or trained personnel required for the care and training of the child, and offered by the Institute. If you feel that the payments meet the above requirements, your client may choose to resubmit a more detailed certification for our consideration.

Transportation and Travel expenses

Transportation and travel expenses may qualify as medical expenses under paragraphs 118.2(2)(g) and (h) of the Act if an individual travels not less than 80 kilometres from the locality where the individual dwells to a place where medical services are received. Transportation and travel expenses for an accompanying individual may also qualify under paragraphs 118.2(2)(g) and (h) of the Act if the patient has been certified by a medical practitioner as being incapable of travelling alone, which is usually the case when the patient is a minor. Transportation and travel expenses may be claimed as medical expenses only if the following requirements are met:

(i) substantially equivalent medical services were not available in the individual's locality,

(ii) a reasonably direct travelling route was taken by the individual, and

(iii) the individual travelled to the particular place to obtain medical services for himself or herself and it is reasonable, having regard to the circumstances, for the individual to have travelled to that place for medical services.

In addition, even if substantially equivalent medical services were not available in an individual's locality, the requirement in (iii) may not be met unless it is reasonable, having regard to the availability of substantially equivalent medical services nearer to the individual's locality, for the individual to have travelled to the place where the medical services were obtained. Other reasonable travel expenses such as meals and accommodation for an individual, and where applicable for an accompanying individual, may also qualify as medical expenses where the above requirements have been met.

Please note that under proposed legislation, transportation and travel expenses must be supported by written certification from a medical professional that substantially equivalent medical services were not available in the patient's locality, and that the patient requires an accompanying individual. This legislation, when enacted, will be effective for certifications made after December 20, 2002. Whether or not the above-noted requirements are met is a question of fact and the letter submitted from XXXXXXXXXX lacks the detail necessary for us to make this determination.

We trust our comments will be of some assistance. Please contact us if you have any questions concerning our response.

Yours truly,

Wayne Antle, CGA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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