As discussed in the last issue of The Professional Advisory, the federal government is collecting more money in the form of GST from dentists and doctors these days because of Canada Customs and Revenue Agency’s (CCRA) enforcement of policy statement P-238.
The policy affects dentists and doctors who are in a principal-associate relationship, where the principal (owner of the practice) contracts for the services of one or more associates. Unless these relationships are clearly understood and documented, dentists and doctors could find themselves facing unexpected GST bills. The previous GST alert addressed two issues:
– Is the associate self-employed (independent contractor) or an employee? And
– Does the principal provide management, administrative or other services to the associate?
Fee sharing arrangement
This GST alert looks at dentists in a fee sharing arrangement. Where the principal and associate(s) have entered into an arrangement to share fees, CCRA will not consider this to be a payment for the supply of services made by the principal to the associate.
Hence, no GST will apply in situations involving a fee sharing or splitting arrangement. If the associate bills the patient directly and remits, say 60%, of the amount collected to the principal, then CCRA will usually consider this to be a fee sharing or splitting arrangement.
Alternatively, if the principal bills and collects 100% of the fees in respect of services rendered by the associate and the associate and principal have an agreement (preferably a written agreement) providing for the collection of fees on behalf on the associate, then CCRA may consider this to be a fee sharing arrangement. In this situation, CCRA deems this arrangement to be an agency relationship.
Passing or failing anyone of the following tests (see chart) does not guarantee classification as an employee or independent contractor. CCRA would look at the following tests as a whole, as well as related circumstances, to determine if the dentist is an employee or an independent contractor. A worthy exercise would be to review your associate agreement in light of the following tests.
Issues which should be addressed when determining if individual is an employee or independent contractor
Employee vs. Independent Contractor