GST/HST Memorandum 20-3 “Universities” December 2019

Meaning of “recognized degree-granting institution” in domestic context

3. For GST/HST purposes, 3 types of domestic entities qualify as universities:

• institutions that grant degrees and that are established as universities by legislation enacted by the appropriate Canadian jurisdiction in which they are situated, as well as colleges or similar organizations that are authorized by a relevant authority, such as a province under provincial legislation, to grant a degree where degree is defined by the relevant authority to mean a level of academic achievement, such as at the associate level or higher
• organizations that operate colleges affiliated with universities
• organizations that operate research bodies of universities

University usually but not always established by provincial legislation

4. A university is usually established by legislation enacted by the government of the province in which the institution is situated. However, if a university is built on federal land, then the establishing legislation is enacted by the federal government. The Royal Military College in Kingston, Ontario, is an example of a degree-granting institution that was established by federal legislation.

Example of degree authorization test being satisfied

Example 1

The Degree Authority Act (DAA) of a province requires private and out-of-province public post-secondary institutions to obtain consent from the Minister of Advanced Education (Minister) if they wish to grant or confer a degree in the province.

Under the DAA, degree means “academic achievement that is specified in writing to be an associate, baccalaureate, masters, doctoral or similar degree”.

The DAA prevents a person from directly or indirectly granting or conferring a degree unless the person is authorized to do so by the Minister and the Minister is satisfied that the person has met the necessary conditions.

Private College XYZ is a private, post-secondary institution that operates in the province. Private College XYZ has met the necessary requirements such that the Minister has granted Private College XYZ permission to grant or confer associate degrees under the DAA.

Private College XYZ is a university as defined in subsection 123(1) of the Act because the college has been authorized by the Minister to grant associate degrees, degree is defined in the applicable legislation and the definition of degree includes associate degrees. All of the conditions necessary for Private College XYZ to qualify as a university as defined in the Act have been met.

Meaning of “affiliated” organization

7. An organization is only considered to be operating a college affiliated with a university where there is a formal affiliation agreement that states that the parent organization (the university) agrees to grant degrees to graduates of the affiliated college in exchange for a certain amount of control over the academic standards of, and the courses offered by, the affiliated college.

Meaning of research body

8. An organization is considered to be a research body of a university if the organization is both:

• established and operated primarily to perform research
• owned and controlled by the university

9. To determine whether an organization was established primarily to perform research, the Canada Revenue Agency (CRA) normally looks to the instruments by which the organization was created, such as incorporating legislation, incorporating documents and by-laws. To determine whether the organization is operating primarily to perform research, the organization’s financial statements and/or information on the organization’s website may assist in making the determination.

Meaning of owned and controlled

10. An organization is considered to be owned by a university if one of the following conditions is met:

• the university owns all or substantially all (90% or more) of the shares or capital of the organization
• the university holds title to the organization’s assets or controls the disposition of these assets such that in the event of wind up or liquidation, these assets are vested in the university

11. An organization is considered to be controlled by a university if one of the following conditions is met:

• the university selects and appoints a majority of the members of the governing body of the organization (directors, governors, commissioners, etc.)
• the organization is required, by virtue of legislation, by-laws or an operating agreement, to submit its operating budget and, where applicable, its capital budget to the university for review and approval

Example re ownership and control test

Example 3

Organization C, which was incorporated under the legislation of a province, is established and operated primarily to undertake research activities related to the agricultural industry. It operates in space provided to it by University D.

Organization C receives funding from, and submits related expenditure statements to, the province. However, Organization C’s incorporating documents provide that upon dissolution, its assets shall be conveyed to University D. As such, Organization C is considered to be owned by University D.

The board of directors of Organization C has 14 seats in total and is made up of:

• 4 representatives from University D
• 2 representatives from the province
• 1 representative from the Government of Canada
• 5 representatives from private sector producers of agricultural products
• 2 members at large representing the purchasers of agricultural products

University D selects nominees representing University D, the private sector producers and the members at large (a total of 11 of the 14 members of the board). The province and the Government of Canada select their representatives. Once all 14 nominees are selected, University D appoints the board of directors. Organization C is not required to submit operating or capital budgets to University D for review and approval. However, because a majority of the members of Organization C’s board of directors are selected and appointed by University D, Organization C is considered to be controlled by University D.

Because Organization C was established and is operated primarily to perform research and is both owned and controlled by University D, Organization C qualifies as a university for GST/HST purposes.

Accreditation requirement/exemption application to all students

18. An accreditation or designation is an official authorization that attests to the fact that an individual has met certain pre-determined standards set forth by a regulatory body. Examples include trade accreditations, such as welding tickets, and professional designations, such as P.Eng (Professional Engineer).

19. The supply of a certificate or of a service of instruction or of administering an examination that is exempt under section 6 of Part III of Schedule V is exempt for all students in the course, including those who are not taking the course to obtain, maintain or upgrade an accreditation or designation.

20. Section 6 of Part III of Schedule V does not exempt the supply of a service of instruction or of administering an examination in a course that is not required for accreditation or designation but simply broadens one’s knowledge in a field. In addition, section 6 does not exempt the supply of a service of instruction or of administering an examination in a course that may be occupationally related and required for accreditation or designation by a professional association if there is no regulatory body.

Example of enrolment for personal reasons not tainting exemption

Example 5

University F allows members of the public who meet certain minimum criteria to enroll in courses at the University for reasons that include personal interest and professional development. Among the courses offered is a Canadian literature course that students in University F’s Bachelor of Arts program must complete in order to earn a degree. An individual who is not enrolled in a degree program and who has a personal interest in Canadian literature registers for this course.

Although the individual is not enrolled in a degree program at University F, the Canadian literature course is a course for which credit may be obtained toward a degree. As such, University F’s supply of instructing the individual in the course is exempt from the GST/HST.

Application of single-supply doctrine

39. If the service of instruction and course materials form part of a single supply of a service of instruction and the supply of the service of instruction is an exempt supply, the course materials included in the single supply will not be subject to the GST/HST.

Distinction between instruction and admission to event (before listing of 27 distinguishing factors)

57. The supply of instruction in courses is a service for GST/HST purposes and is exempt from the GST/HST if it meets the requirements set out in Part III of Schedule V or zero-rated if it meets the requirements set out in section 18 of Part V of Schedule VI.

58. By contrast, the supply of an admission to a seminar, activity or event is a supply of intangible personal property for GST/HST purposes and may be subject to the GST/HST.

Examples: student union counselling services fees

25. Examples of the supplies referred to in section 7.1 of Part III of Schedule V include supplies of student union memberships and counselling services where the consideration for these supplies must be paid by students because they receive a supply that is exempt under section 7 of Part III of Schedule V.

Meaning of program

46. For the purposes of the exemption under section 16 of Part III of Schedule V, a program is understood to be a particular set of 2 or more courses that is:

• offered by a university
• identified as such by that university
• reviewed and approved by a council, board or committee of that university

47. Workshops, conferences, retreats and seminars are generally not considered to be courses.

Exclusion for recreational pursuits

53. In determining whether a course is recreational in nature, it is important to consider the design of the course being offered rather than the intention of the individual taking the course. Other factors that may be examined include the course’s objectives and subject matter; how the course is marketed; the methods of teaching, evaluating and monitoring course participants; and the instructors’ qualifications.

54. Examples of recreational courses include non-credit courses in subjects such as dancing, skating, cooking or sailing.

55. While a course may not have been designed primarily for recreational purposes, it must still satisfy the other conditions set out in section 16 of Part III of Schedule V, as noted above. That is, in order for the supply of a service of instructing individuals in, or administering examinations in respect of, a course to be exempt, all of the following conditions must be met:

• the course must be 1 of at least 2 courses that make up a program offered by a university
• the program must be subject to review and approval by a council, board or committee of the university
• the council, board or committee that reviews and approves the program must have been established by the university for the purpose of reviewing its course offerings