Principal Issues: Does a plan that provides coverage for expenses such as fitness centre memberships, personal trainers, weight management programs, smoking cessation programs, nutrition counselling, etc. qualify as a PHSP?
Position: Question of fact.
Reasons: It is a question of fact whether a plan satisfies the conditions to be a PHSP. The term medical expense is not defined for purposes of PHSP.
XXXXXXXXXX 2016-064314 P. Waugh February 19, 2019
Dear XXXXXXXXXX:
Re: Private health services plans
We are writing in response to your letter dated April 19, 2016, and our conversations XXXXXXXXXX (Waugh/XXXXXXXXXX), concerning the revised position of the Canada Revenue Agency (CRA) on what qualifies as a private health services plan (PHSP). In particular, you asked whether coverage for expenses such as gym memberships, personal trainers, exercise physiologists, personal or home fitness equipment, weight management programs, and smoking cessation programs, etc. could be provided through a PHSP. Thank you for your understanding regarding the delay of this response.
Our Comments
This technical interpretation provides general comments about the provisions of the Income Tax Act (Act) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R8, Advance Income Tax Rulings and Technical Interpretations.
Under the CRA’s revised PHSP position, a plan qualifies as a PHSP where:
i. all of the expenses covered under the plan are medical or hospital expenses (medical expenses), or expenses incurred in connection with and within a reasonable time period following a medical expense (connected expense);
ii. all or substantially all (generally 90% or more) of the premiums paid under the plan relate to medical expenses that are eligible for the medical expense tax credit (METC); and
iii. the plan meets all other conditions as outlined in paragraph 3 of Interpretation Bulletin IT-339R2, Meaning of private health services plan [1988 and subsequent taxation years].
This revised position allows a plan to provide coverage for expenses that are not eligible for the METC as long as the expenses are medical expenses or connected expenses and the related premiums are generally not more than 10% of the total premiums paid under the plan (hereinafter referred to as the 10% coverage).
The term medical expenses is defined in the Act only for purposes of the METC and the definition PHSP does not refer to the METC. Where the legislation does not define a term, we generally rely on case law and the ordinary meaning (e.g., dictionary definition). It is a question of fact whether expenses that are not eligible for the METC are medical expenses or connected expenses for purposes of determining the 10% coverage.
Therefore, whether a plan that provides coverage for expenses such as gym memberships, personal trainers, exercise physiologists, personal or home fitness equipment, weight management programs, and smoking cessation programs qualifies as a PHSP is a question of fact.
We trust these comments will be of assistance to you.
Yours truly,
Ms. Nerill Thomas-Wilkinson, CPA, CA
Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch