The 2010 Federal Budget (announced on March 4, 2010) clarifies that any ‘cosmetic dentistry’ is taxable under the GST/HST regime. This is certainly not something new; but would the clarification mean that the government is paying more attention to this area? Are you in compliance with the GST/HST legislation?
Budget 2010 proposes to clarify that GST/HST applies to all purely cosmetic procedures, to devices or other goods used or provided with cosmetic procedures, and to services related to cosmetic procedures. Taxable procedures would generally include surgical and non-surgical procedures aimed at enhancing one’s appearance such as teeth whitening.
A cosmetic procedure will continue to be exempt if it is required for medical or reconstructive purposes, such as surgery to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease. As well, cosmetic procedures paid for by a provincial health insurance plan will continue to be exempt.
Who must register for GST / HST?
Dentists must register for GST/HST if the total annual taxable and zero-rated services are $30,000 or greater.
Examples of taxable services include cosmetic dentistry (services for appearance purposes; not treating pathology; not treating improper form or function), consultation services and other business activities i.e. rental of excess space or sale of electric toothbrushes.
Examples of zero-rated services include orthopaedic & orthodontic devices, full & partial dentures, fixed bridge, full & partial crowns, veneers and osseointegrated implants.
Otherwise, you are not obligated to register but you do have the option of getting registered. Once registered, you must collect GST @ 5% (HST @13% effective July 1, 2010) on all taxable items and will be eligible to recover some or all of the GST/HST paid.
What if you failed to register when you were supposed to? Review your situation with your accountant to determine your tax exposure.
Who is entitled to recover GST / HST paid and on what?
The conditions are:
1. you must be a GST/HST registrant;
2. revenues from the taxable and zero-rated supplies exceed 10% of total revenues; and.
3. supplies of the artificial teeth and orthodontic appliances must be identified separately on an invoice to the patient (i.e. not a lump sum for both artificial teeth and exempt dental services)
No refund can be claimed if you perform for example, dental diagnostic, preventative or restorative services.
GST/HST paid on general expenses, for example, rent, utilities or professional fees that are not directly related to any specific services can only be claimed based on a certain percentage.
Those who have the option to register should weigh the following pros and cons before jumping to a conclusion.
Possible eligibility for GST/HST refund Must charge/collect patients GST/HST on cosmetic dentistry and other taxable goods and services. Potential loss of patients as patients may go to a DDS who does not charge GST/HST.
Invoices to your patients must segregate those goods/services that are subjected to GST/HST from those which are not.
Additional bookkeeping i.e. segregate GST/HST paid on certain expenses and filing periodic GST/HST returns.
Identify on suppliers’ invoices what the materials are for i.e. orthodontic, regular or cosmetic dentistry in order to support your refund claim.
Not eligible to claim GST/HST on the equipment unless it is used for >50% in Orthodontic or cosmetic dentistry. e.g. Cerec 3D or E4D.