GST for Health Capital Projects
Whereas the province requires 20 per cent local funding for the construction of health capital projects; and Whereas for many projects the local funding comes from urban and rural municipalities whose residents will directly benefit from the construction of the capital project; and Whereas municipalities are able to claim a 100 per cent rebate on any Goods and Services Tax (GST) paid; and Whereas health regions, who are considered the project managers and legal recipients of contractor invoices, claim GST from the Federal Government at a lower percentage; and Whereas health region policies are not being uniformly applied to allow municipalities contributing to the local funding of health capital projects to claim the GST on their share of the project expense; Therefore be it resolved that the Saskatchewan Urban Municipalities Association lobby the provincial government to require health regions to enter into project management agreements for the construction of health capital projects that make municipalities the legal recipients and payors for 20 per cent of contractor invoices, allowing them to claim the GST on the 20 per cent of funding paid by municipalities. Background The Town of Rosetown and several area municipalities are providing local funding for the construction of a new 54-bed long-term care facility in Rosetown. The local funding share of the project is $5,390,000. Invoices are sent from contractors to the regional health authority for payment. The regional health authority receives a rebate for a portion of the GST, and then invoices the town for 20 per cent of the remaining costs, which includes a portion of the GST that hasnâ€™t been received as rebate by the regional health authority. Reimbursement from the town is considered a grant to the regional health authority. The town has been unable to claim any GST on the project, which for the local funding share amounts to more than $270,000. Discussions with the Canada Revenue Agency and the Heartland Health Regionâ€™s GST Consultant have revealed that local authorities are not considered â€œlegal recipientsâ€ for contractor invoices under the current arrangement with regional health authorities, and thus cannot claim reimbursement for GST-related costs. Other municipalities have been able to convince their health region to provide invoices outlining GST costs, to ensure municipalities can claim their full GST rebates. This policy seems to be applied on an ad hoc, rather than a uniform, basis. Altering agreements for health capital projects to make municipalities co-project managers and legal recipients for contractor invoices would allow municipalities to receive full GST refunds, resulting in significant savings on large capital health projects.
The Canada Revenue Agency (CRA) allows Regional Health Authorities to claim GST rebates for the construction of healthcare facilities as they are responsible for the invoice payments, the debt associated, and have ownership interests in these capital projects. The tax treatment of transfer payments may be complex and is determined on a case-by-case basis by the CRA. Municipalities should contact the CRA directly as it is in the best position to answer questions relating to the tax treatment of transfer payments for the local share of capital projects and whether exceptions can be made for the local share of healthcare capital projects. Our government is committed to supporting all Saskatchewan residents in achieving their best possible health and well-being by offering health care programs and services, by building relationships with our partners, and by always putting the patient first. Partnering with municipalities on capital projects helps make this possible.