Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th Floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Business Number: […]
Case Number: 179772
Dear [Client]:
Subject: GST/HST RULING
Supplies of the International English Language Testing System test and preparation courses in respect of that test
Thank you for your facsimile of September 19, 2016, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to instruction in a course that prepares individuals to write the International English Language Testing System (“the IELTS”) test. We apologize for the delay in responding.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (“the ETA”) unless otherwise specified.
STATEMENT OF FACTS
On [mm/dd/yyyy], we contacted you and requested that you have your client, […] (the Corporation) contact us to clarify the facts. We have not heard from the Corporation. In the interest of providing you with our decision, the following ruling is based on the facts as described below.
You have been authorized by the Corporation to obtain a ruling on its behalf. Based on your [correspondence] received on [mm/dd/yyyy], and [mm/dd/yyyy], […][discussions] with you and with [the Corporation], […], and information on the Corporation’s website ([…]), we understand the following:
1. The Corporation is a Canadian corporation located in […][Province A], and is registered for GST/HST purposes.
2. The Corporation is not a vocational school for ETA purposes and is not offering courses that attest to an individual’s competence to practice or perform a trade or vocation.
3. The Corporation’s mandate is to promote education and social justice through its supply of English language instruction and examination assessment services.
4. You have stated that the Corporation was established and is operated primarily to provide instruction in English as a second language (ESL) and testing in the English language through the supply of the IELTS test and the preparation course for the IELTS test.
5. Based on revenue spreadsheets submitted for our review, over […]% of the Corporation’s revenue is generated through its supplies of the IELTS tests which include the preparation course.
6. The IELTS test measures the language proficiency of individuals who want to study or work in environments where English is used as a language of communication.
7. The IELTS test is recognized globally as a secure, valid and reliable indicator of the true-to-life-ability to communicate in English for education, immigration and professional accreditation. The IELTS is jointly owned by the British Council, International Development Program (IDP – IELTS Australia) and the Cambridge English Language Assessment. The Corporation purchases the IELTS test from the British Council.
8. The IELTS test does not have a pass/fail result but uses a nine-band scale to report test results that are valid for 2 years.
9. There are two version[s] of the IELTS test, the Academic and the General Training test. Each version of the test includes a preparation course of instruction called the “Road to IELTS”.
The two versions of the IELTS test are described below:
- IELTS Academic: for individuals looking to study at a university, at the undergraduate or postgraduate level, or join a professional association where English is a prerequisite.
- IELTS General Training: for individuals looking to apply to immigrate to Canada through a program such as the Express Entry program.
10. The Corporation established its own preparation course of instruction (the preparation course) […]. The preparation course is included with every supply of the IELTS test that the Corporation makes. The Corporation encourages all of its IELTS test registrants to participate in the preparation course that is included with the test.
11. The Corporation’s […][course outline], submitted by [the Corporation] describes the preparation course […]. Although there is no requirement to take the preparation course, an IELTS test registrant can join the preparation course at any point.
12. […][course description]
Each class focuses on improvement in one of the language macro-skills: Reading, Listening, Writing and Speaking.
13. At some point throughout the preparation course, one personalized e-writing task may be submitted for review where an instructor gives feedback by providing comments and pretest indicator scores. The Corporation also provides test day […][practice] at specified locations to IELTS test registrants.
14. The Corporation recommends the following guidelines to individuals who wish to participate in the preparation course, which includes an introduction class and instruction in Academic or General Reading, Listening, and two Academic or General Writing Tasks: […][course description]
15. The Test Report Form (TRF) provides an overall band score and band scores for each of the four components: Listening, Reading, Writing and Speaking. Included in the price of the IELTS test are [#] TRFs which the Corporation will provide to recognized institutions at the request of the individual. Additional TRFs can be requested from the Corporation for a fee.
16. The Corporation advised that the British Council does not allow them to discount the IELTS test fee once a fee has been stated. That is, the Corporation cannot offer an IELTS test-only option (without the preparation course) at a reduced fee. However, the Corporation offers a course-only option that includes up to 12 weeks of material. To register for the course-only option, the individual would have to contact the Corporation’s office directly as opposed to registering for the IELTS test online. If an individual purchases the course-only option through the Corporation and subsequently decides to register for the IELTS test, the Corporation would charge the difference in price plus an administration fee to the individual.
17. The Corporation initially viewed the supplies of instruction in the IELTS preparation course and the IELTS test as exempt supplies and did not charge GST/HST. However, it has come to the Corporation’s attention that the supplies may be taxable as the conditions of section 11 of Part III of Schedule V may not meet.
18. […]. The Corporation has updated its website to advise its clients that supplies of the IELTS preparation course and the IELTS test are subject to the GST/HST at the rate applicable in the respective province.
RULING REQUESTED
You have requested a ruling as to whether the Corporation’s supplies of the IELTS test, which includes the preparation course as described above, are exempt under section 11 of Part III of Schedule V.
RULING GIVEN
Based on the facts set out above, we rule that the Corporation’s supplies of administering the IELTS test, which includes instruction in the preparation course, are subject to the GST/HST under section 165 of the ETA at the applicable rate for the province in which the supply is made.
EXPLANATION
Generally, most supplies of property and services made in Canada are subject to the GST/HST, unless they are specifically identified as being exempt. Exempt supplies are listed in Schedule V and are not subject to the GST/HST.
Educational services
Part III of Schedule V exempts certain supplies of educational services. Although there are a number of exempting provisions found in Part III of Schedule V, each provision is quite specific with respect to the supplier, the recipient, and the type of service being supplied.
You asked whether section 11 of Part III of Schedule V applies to the Corporation’s supplies of administering the IELTS test and instruction in the preparation course as described above.
Section 11 of Part III of Schedule V, exempts “a supply of a service of instructing individuals in, or administering examinations in respect of, language courses that form part of a program of second-language instruction in either English or French, if the supply is made by school authority, a vocational school, a public college or a university or in the course of a business established and operated primarily to provide instruction in languages.”
In order for a supply of a service of instruction to be exempt under section 11 of Part III of Schedule V, the service of instruction must be in a language course, and that course must form part of a program of second-language instruction in either English or French.
After reviewing the preparation course described in the Corporation’s [course outline], it is the CRA’s opinion that the IELTS preparation course does not qualify as a language course. The IELTS preparation course focuses on preparing the individual to write the IELTS test and does not have the necessary components to qualify as instruction in a second-language. Therefore, the service of instructing individuals in the IELTS preparation course for the IELTS test is not a language course that forms part of a program of second-language instruction and would not be exempt under section 11 of Part III of Schedule V.
It is CRA’s view that the supply of the service of administering the IELTS test is not a language course that forms part of a program of second-language instruction, and in this instance, the supply of administering the IELTS test is not an examination in respect of a language course that forms part of program of second-language instruction under section 11 of Part III of Schedule V.
As there are no other provisions in the ETA that apply to the circumstances described above to exempt supplies made by the Corporation of administering the IELTS test, including instruction in the preparation course, as well as the preparation course-only option, the supplies are subject to the GST/HST (unless otherwise zero-rated) at the applicable rate for the province in which the supply is made.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 618-670-7964. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Karen Bennett
Aboriginal Affairs and Educational Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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