GST/HST Memorandum 20-4 “Vocational Schools and Courses” December 2019

Typical attributes of vocational school

4. An organization that qualifies as a vocational school generally exhibits a number of the following characteristics:

• it is normally a corporation or an unincorporated association of some type (however, in some cases, the organization could be made up of a single individual)
• it identifies or advertises itself as a school and is known publically as a school
• it offers courses or programs following a scheduled curriculum under which the courses progress in the depth of learning from semester to semester
• it has a regularly enrolled student body that forms a class or classes
• it owns/rents/leases a site from which students are provided correspondence courses or instruction in courses
• it receives tuition, which is paid by the students (or the parents/guardians), for the provision of the correspondence courses or the service of instruction

“Established primarily” test

7. The CRA will consider an organization to be established primarily to provide correspondence courses, or instruction in courses, that develop or enhance students’ occupational skills if the organization provides documentation showing that the primary purpose (that is, the chief or most important purpose) for the establishment of the organization is to provide correspondence courses, or instruction in courses, that develop or enhance students’ occupational skills.

“Operated primarily” test

12. The second requirement is that the organization be operated primarily to provide correspondence courses, or instruction in courses, that develop or enhance students’ occupational skills. The CRA will consider this requirement to be met if more than 50% of the organization’s total annual revenues are attributable to the provision of courses that enhance occupational skills. All of the organization’s business revenue streams must be included when calculating the percentage attributable to the provision of courses that enhance occupational skills.

• enhance occupational skills

14. An organization that is commencing operations, or is considering commencing operations, will be considered to be operated primarily for the purposes of meeting the “operated primarily” requirement if its intent is to primarily offer correspondence courses, or instruction in courses, that develop or enhance students’ occupational skills. Documents such as an organization’s business plan may help to determine the organization’s intent.

15. Organizations must review their operations on an annual basis to determine whether they continue to meet the “operated primarily” requirement of the definition of vocational school.

16. For example, if an organization met the “operated primarily” requirement in a fiscal year and its intent is to primarily offer courses that enhance occupational skills, it will continue to be a vocational school in the following fiscal year. However, if the portion of the organization’s total annual revenues attributable to the provision of courses that enhance occupational skills falls to 50% or less during the following year, it may cease to be a vocational school for supplies made after that year.

Development or advancement test

18. Finally, to qualify as a vocational school, an organization must provide correspondence courses, or instruction in courses, that develop or enhance students’ occupational skills. These courses must meet at least one of the following requirements:

• they must have a direct link to skills that are essential for an individual to become employed in a particular field (that is, to gain employment in that field)
• they must directly build upon and/or enhance an individual’s skills in their chosen field, such that they can continue to work in that field (that is, to retain employment in that field)

22. Stand-alone courses that are provided over 1 or 2 days to meet provincial health and safety legislation do not, on their own, qualify as courses that enhance occupational skills.

Frequent exclusion of sole proprietors

25. A sole proprietor who provides instruction during private, one-on-one lessons with students while using programs customized for each student is normally not regarded as a vocational school. …

26. A sole proprietor, such as a teacher or a coach, who has a contract with a vocational school to provide a service of instruction as one of the sole proprietor’s business revenue streams is not considered a vocational school for purposes of that contract. This is because the self-employed person supplies the service to the vocational school … .

Example of non-qualifying body

Example 2

An organization was established to develop and administer a national examination for emergency responders. Although the organization is supplying a service of administering an examination in respect of an accreditation or designation, section 6 of Part III of Schedule V does not apply to the organization because the organization is not a professional or trade association, government, vocational school, university, public college or regulatory body. Therefore, the supply made by the organization of the service of administering the examination is not exempt under section 6 of Part III of Schedule V.

Example of requirement for testing and attestation

Example 6

A vocational school offers a diploma program in computer programming, which is offered on a pass/fail basis, determined by the students’ performance on tests, quizzes, assignments and projects. The program leads to a diploma that attests to the competence of individuals to practise or perform the trade or vocation of software developer. …

In addition to the diploma program, the school offers 3 courses:

• “Enhancing Your Webpage with Java”, which is also a credit course in the diploma program [exempt]
• “Programming in C++”, which is offered as an upgrade program and for which students are graded on a mid term assignment and final exam [exempt]
• “Supporting and Implementing Windows”, which is not offered as part of the diploma program and for which students are evaluated based on class attendance and participation

Certificates are issued to students upon completion of each of the courses. …

… [T]he supply of instruction in “Supporting and Implementing Windows” is not exempt under section 8 of Part III of Schedule V, regardless of the fact that a certificate is issued upon successful completion of the course. This course is not offered as a credit in a diploma program nor is it evaluated on a pass/fail basis, based on the students’ performance on tests, graded materials or projects. As the successful completion of this course is based solely on attendance and class participation, the certificate issued at the end does not attest to the competence of individuals to practise a trade or vocation.

Supply of solo and dual flight time above the Canadian Aviation minimum is taxable

51. The CRA has classified the federally required flight time into the following categories:

• dual flight time
• solo flight time
• build-up flight time

52. The CRA considers an individual to be under instruction and direct supervision while amassing dual and solo flight time hours.

53. Build-up flight time refers to additional flight time that must be completed by an individual, over and above dual and solo flight time, in order to obtain a pilot licence, a rating in respect of that licence, or a flight instructor rating or associated class. The CRA does not consider an individual to be under instruction and direct supervision while amassing build-up flight time hours. …

55. Where a student purchases hours of dual or solo flight time over and above the minimum time requirements in the federal legislation, the supply of the additional hours is not exempt under section 8 … .

56. The supply of build-up flight time relating to any of the above licences or ratings is also not an exempt supply for purposes of section 8 of Part III of Schedule V because students are not under instruction or direct supervision during this time.

CRA indicated (at para. 55) that the supply of solo and dual flight time by a flight school to would-be pilots can qualify as exempt vocational training only to the extent that such flight time does not exceed the minimum flight times set by federal regulation for the provision of licences and ratings – and that the purchase of hours in excess of this minimum is taxable.