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

  • Follows instructions on how to work
  • Works within team environment
  • Hired for indefinite period
  • Works under set hours
  • Works for one employer at a time
  • Works mainly on-site; is employer-directed off-site
  • Works in accordance with employer-established policies to allow for supervision
  • Compensated regularly, at specified time periods
  • Has work-related expenses paid by employer including advices, professional development, malpractice insurance
  • Has tools and supplies provided by employer
  • Does not own or control work site
  • Generally does not work on profit/loss basis; a minimum compensation is guaranteed
  • Gives employer exclusive effort; not permitted to work for anyone else
  • Cannot offer efforts to general public
  • Can end employment at any time


Independent Contractor
  • Works without detailed directions on procedure
  • Works alone-not part of team effort, i.e., is not required to attend staff meetings
  • Hired for a set time period only
  • Sets own hours
  • Can work for several people
  • Can work either on-site or off-site, without employer direction
  • Works any way desired to provide required service or product
  • Paid on per-job basis in a lump sum
  • Pays own expenses out of expected compensation
  • Provides tools, equipment, instruments and supplies
  • May own or control work site
  • Generally works on profit/loss basis
  • Works for many employers at once
  • Markets services to anyone who wants them
  • Responsible for completing job as agreed upon