HST/GST for Ontario Medical Practices in 2025

Understanding Tax Rules, Recent Updates, and How KKCPA Can Help Your Practice Thrive

Medical practitioners and practices in Ontario face unique challenges when it comes to understanding and managing their tax obligations, particularly the Harmonized Sales Tax (HST) and the Goods and Services Tax (GST). As of 2025, these taxes continue to play a significant role in the financial operations of healthcare providers. Whether you’re a solo practitioner, part of a group practice, or running a clinic, understanding how HST and GST apply to your services and expenses is crucial for compliance and optimizing your financial health.

In this blog post, we’ll break down the key considerations for medical practitioners in Ontario, including how HST/GST applies to medical services, input tax credits, and recent updates that may affect your practice.

Understanding HST/GST in Ontario

Ontario’s HST is a combined federal-provincial tax that includes the 5% federal GST and an 8% provincial component, totalling 13%. While most goods and services in Ontario are subject to HST, certain medical services and supplies are exempt or zero-rated, which can complicate matters for practitioners.

How HST/GST Applies to Medical Services

Exempt Services:
Most healthcare services provided by licensed medical practitioners, such as physicians, dentists, and optometrists, are HST-exempt. This means you do not charge HST on these services, but you also cannot claim input tax credits (ITCs) for HST paid on related expenses.

Examples of exempt services include:
- Consultations and diagnostic services
- Surgeries and treatments
- Prescriptions and medical advice
Taxable Services:
Some services provided by medical practices may be subject to HST. For example:
- Cosmetic procedures not medically necessary
- Medical reports or forms prepared for third parties (e.g., insurance companies)
- Rentals of medical equipment or space
If your practice offers both exempt and taxable services, you’ll need to carefully track and allocate expenses to ensure accurate HST reporting.

Input Tax Credits (ITCs) for Medical Practices

One of the most important aspects of HST/GST for medical practitioners is the ability to claim ITCs. ITCs allow you to recover the HST paid on business-related expenses, such as:

Office supplies and equipment
Rent or lease payments for your clinic space
Professional services (e.g., legal or accounting fees)
Utilities and maintenance costs

However, if your practice primarily provides exempt services, your ability to claim ITCs may be limited. In such cases, you can only claim ITCs for expenses directly related to taxable services.

Recent Updates (2025)

As of 2025, multiple updates to HST/GST regulations and interpretations have been introduced, particularly affecting medical practices. Staying informed about these changes is essential to ensure compliance and optimize your tax position. Here’s a deeper dive into the key updates:

1. Digital Health Services and Telemedicine

The rapid growth of telemedicine and digital health platforms has prompted the Canada Revenue Agency (CRA) to provide clearer guidance on how HST applies to these services.

Taxable vs. Exempt Digital Services:
While most traditional medical services remain HST-exempt, certain digital health services may now be subject to HST. For example:
- Exempt Services: Virtual consultations with patients, where the service is considered equivalent to an in-person visit (e.g., diagnosing a condition or providing medical advice).
- Taxable Services: Subscription-based wellness apps, online fitness coaching, or non-medical advice provided through digital platforms.
Example: If your practice offers a paid subscription for patients to access general health tips or wellness programs through an app, this service may be subject to 13% HST.
Third-Party Platforms:
If you use third-party platforms to deliver telemedicine services, ensure you understand whether the platform fees include HST. Some platforms may charge HST on their fees, which could impact your overall costs.

2. Enhanced Record-Keeping Requirements

The CRA has introduced stricter record-keeping requirements for businesses claiming Input Tax Credits (ITCs). These changes are designed to improve transparency and reduce errors in HST/GST filings.

Detailed Expense Tracking:
Medical practices must now maintain detailed records of all HST-paid expenses, including:
- Invoices and receipts for office supplies, equipment, and utilities.
- Documentation showing how expenses are allocated between exempt and taxable activities.
Example: If you purchase a new medical device for your clinic, you must keep records showing whether the device is used for exempt services (e.g., patient diagnostics) or taxable services (e.g., cosmetic procedures).
Digital Record-Keeping:
The CRA is encouraging businesses to adopt digital record-keeping systems to streamline compliance. Practices using cloud-based accounting software or electronic invoicing systems may find it easier to meet these requirements.

3. Changes to the Small Supplier Threshold

The small supplier threshold for HST/GST registration remains at $30,000 in taxable supplies over four consecutive calendar quarters. However, the CRA has clarified how this threshold applies to medical practices offering both exempt and taxable services.

Exempt Services Excluded:
Only taxable supplies (e.g., cosmetic procedures, medical reports for third parties) count toward the $30,000 threshold. Exempt services (e.g., standard medical consultations) do not count.

Example: If your practice earns $25, 000 f ro m t a x ab l eser v i ces an d$ 100,000 from exempt services in a year, you would not exceed the small supplier threshold and would not be required to register for an HST/GST account.
Voluntary Registration:
Even if you don’t exceed the threshold, you may choose to register voluntarily to claim ITCs on business expenses. This can be particularly beneficial for practices with significant taxable activities.

4. Expanded Eligibility for Input Tax Credits (ITCs)

The CRA has expanded the eligibility criteria for ITCs in certain scenarios, providing more opportunities for medical practices to recover HST paid on business expenses.

Mixed-Use Expenses:
If an expense is used for both exempt and taxable activities (e.g., office rent or utilities), you can now claim ITCs for the portion of the expense related to taxable services.

Example: If 20% of your clinic’s space is used for cosmetic procedures (taxable) and 80% for standard medical consultations (exempt), you can claim ITCs for 20% of the HST paid on rent and utilities.
Capital Expenses:
The CRA has clarified that ITCs can be claimed on capital expenses, such as the purchase of medical equipment or renovations to your clinic, provided the expenses are related to taxable activities.

5. New Reporting Requirements for Digital Platforms

Starting in 2025, digital platforms that facilitate the sale of goods and services (including telemedicine platforms) are required to report transaction details to the CRA. This change may indirectly affect medical practitioners who use these platforms.

Impact on Practitioners:
If you use a third-party platform to deliver telemedicine services, the platform may provide the CRA with information about your earnings. Ensure your records align with the data reported by the platform to avoid discrepancies during audits.

6. HST on Medical Devices and Supplies

The CRA has updated its guidelines on the HST treatment of medical devices and supplies, particularly for items used in both exempt and taxable services.

Zero-Rated Supplies:
Certain medical devices and supplies (e.g., prescription drugs, prosthetics) are zero-rated, meaning no HST is charged on their sale, but you can still claim ITCs for HST paid on related expenses.

Example: If you purchase zero-rated medical supplies for your clinic, you won’t pay HST on the purchase, but you can claim ITCs for HST paid on shipping or handling fees.
Taxable Supplies:
Items used for cosmetic or non-medical purposes (e.g., skincare products sold in a dermatology clinic) are subject to 13% HST.

Why These Updates Matter for Your Practice

These changes highlight the importance of staying up-to-date with HST/GST regulations and ensuring your practice is compliant. Failure to properly account for HST on taxable services or claim ITCs could result in costly penalties or missed opportunities to reduce your tax burden.

Tips for Managing HST/GST in Your Practice

Separate Exempt and Taxable Services:
Keep clear records of exempt and taxable services to ensure accurate HST reporting and maximize ITC claims.
Work with a Tax Professional:
HST/GST rules can be complex, especially for medical practices with mixed exempt and taxable activities. A professional accountant can help you navigate these rules and optimize your tax position.
Stay Updated on CRA Guidelines:
Tax laws and interpretations can change. Regularly review CRA updates or consult with your accountant to ensure compliance.

How KKCPA Can Help

Navigating HST and GST obligations doesn’t have to be overwhelming. At KKCPA, a trusted accounting firm based in Hamilton, Ontario, we specialize in helping medical practitioners and practices manage their tax and financial responsibilities. Our team understands the unique challenges faced by healthcare providers and can assist with:

HST/GST registration and compliance
Maximizing input tax credits
Strategic tax planning for your practice
Record-keeping and audit support

Let us handle the complexities of HST and GST so you can focus on providing exceptional care to your patients. Contact us today by calling 855 667 1727 or completing the form here to get started.

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