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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 109656
Business Number: […]
June 26, 2012
Dear [Client]:
Subject: GST/HST INTERPRETATION
Dance lessons as vocational courses under the ETA
Thank you for your fax of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to dance lessons provided by the […][Dance school]. We apologize for our delay in responding.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
RULING REQUESTED
Your client has previously been provided two rulings on this matter by two of our field offices.
[…]
We have reviewed your letter as well as the information provided by your client respecting this file. We note that your letter does not set out any additional facts which would permit us to alter the previous rulings which your client has been provided with. However we can provide the following comments regarding the Canada Revenue Agency’s (CRA’s) position on the subject of dance instruction as vocational training.
INTERPRETATION GIVEN
Section 8 of Part III of Schedule V to the ETA provides that the supply of a course is exempt of the GST/HST if the supply is made by a vocational school and the course is a supply of a service of “instruction in, or administering examinations in respect of, courses leading to certificates…that attest to the competence of individuals to practise or perform a trade or vocation....”
Is the organization a vocational school?
The ETA defines “vocational school” as follows: “vocational school” means an organization that is established and operated primarily to provide students with correspondence courses, or instruction in courses, that develop or enhance students’ occupational skills.
Policy paper P-229, Definition of “Vocational School” in Section 1 of Part III of Schedule V to the Excise Tax Act, explains how to determine if an organization is a “vocational school” within the meaning of the ETA:
The [above definition] sets out three principle criteria that an organization must meet to be considered a vocational school:
(a) the organization must be established primarily to provide correspondence courses or instruction in courses, that develop or enhance students' occupational skills;
(b) the organization must be operated primarily to provide correspondence courses, or instruction in courses that develop or enhance students' occupational skills;
(c) the correspondence courses or instruction in courses must develop or enhance students' occupational skills.
To ascertain whether an organization is "established primarily" to provide correspondence courses, or instruction in courses that develop or enhance students' occupational skills, the [CRA] will review the organization's governing documents. These documents, which include the letters patent, articles of incorporation, memoranda of agreement, by-laws, and articles should reveal the purpose of the organization. Where these documents are not available or are not determinative, the [CRA] will look to the activities of the organization (i.e., the extent to which the organization provides courses that develop or enhance students' occupational skills) as evidence of the purpose for its establishment.
The [CRA] will consider an organization to be "operated primarily" to provide correspondence courses or instruction in courses that develop or enhance students' occupational skills, if more than 50% of its total annual revenues are derived from tuition for courses, or may be attributed to the provision of instruction in courses, that develop or enhance students' occupational skills… Consequently, revenues earned from the provision of property or services that are related to, or dependent on, the provision of the instruction [in such courses] will be included in the revenue calculation for determining the primary purpose of the organization.
The determination of whether more than 50% of a dance school’s total annual revenue is derived from courses which develop or enhance a student’s occupational skills can be somewhat complex and is ultimately a question of fact to be decided on a case by case basis. This income stream may include fees for the provision of property or services that are related to, or dependent on, the provision of courses or instruction which clearly develops or enhances a student’s occupational skills such as the purchase of a curriculum or syllabus, an examination or testing fee or a certification fee. It may also include courses which develop or enhance a student’s occupational skills but which are not exempt of tax because they do not meet the requirements of section 8 which are described in more detail below.
For the purposes of this income test, income from non-vocational dance courses (e.g. courses taken for general interest, fitness or recreation) cannot be included in the amount of revenue derived from courses that develop or enhance a student’s occupational skills, even if the dance school uses this source of added income as a means to defray the costs of providing courses which are vocational in nature.
With respect to the courses being offered, policy P-229 states:
To be considered a vocational school the…instruction in courses offered by an organization must develop or enhance students' occupational skills. On this basis, "occupational courses" must have a direct link to skills that are essential for an individual to gain or retain employment.
The [CRA] does not consider the following courses to develop or enhance a student's occupational skills:
* sports
* games
* hobbies; or
* other recreational or cultural pursuits, that are designed for personal interest.
The [CRA] will examine the curriculum and promotional material of an organization to identify the type of courses provided, whether the courses lead to certificates, diplomas or similar documents, and whether the courses are marketed as providing skills needed for employment or for recreational or personal interest. How the organization promotes its activities (e.g., in its brochures, advertisements, literature, course calendar, telephone listings) will also provide insight into whether its courses "develop or enhance students' occupational skills."
An organization should review its operations on a yearly basis to ascertain whether it continues to satisfy the “operated primarily” requirement for a “vocational school”. If an organization meets the requirements as a vocational school in its previous fiscal year, and its intent continues to be primarily to offer courses that develop or enhance students’ occupational skills, it will continue to be a vocational school for the following fiscal year. If, however, in that following year the organization fails to meet the “operated primarily” requirement, it will cease to be a vocational school for supplies made after that year.
We are of the opinion that the [Dance school] was established primarily to provide instruction in dance courses that develop or enhance student’s occupational skills. It is a question of fact whether the [Dance school] was operated primarily to provide instruction in dance courses that develop or enhance students' occupational skills in any given fiscal year. Therefore we are unable to conclude if the [Dance school] would be considered a vocational school for purposes of the ETA.
Meeting the definition of vocational school does not relieve an organization from collecting and remitting the GST/HST. However, some supplies made by the vocational school may be exempt. GST/HST is not collected on exempt supplies and a GST/HST registrant may not claim input tax credits for any GST/HST paid or payable on purchases or expenses related to making exempt supplies.
Dance lessons as courses leading to certificates…that attest to the competence of individuals to practise or perform a trade or vocation
Once it has been determined that an organization meets the definition of a “vocational school”, this does not necessarily mean that the dance lessons it supplies are exempt. The dance lessons must also meet the requirements of the exempting provisions of Section 8 of Part III of Schedule V to the ETA.
In order for a course to be exempt of GST/HST, section 8 requires that a certificate, diploma, licence or similar document be issued to each student upon successful completion of the course of study and that the document attest to the competence of the students to practice or perform a trade or vocation.
Courses for which students are not issued some form of documentation at their conclusion do not satisfy the "certificate, diploma, licence or similar document" criterion, and are therefore not exempt under section 8.
Generally, courses in sport, games or hobbies or other recreational or cultural pursuits, or courses designed for personal interest are not considered to be part of a full time program which provides an individual with the competence to practise or perform a trade or vocation.
For instruction in dance to meet the requirements of section 8 the instruction should be part of a full time program which provides an individual with the competence to practise or perform the vocation of a professional dancer or dance instructor. This instruction must further be attested to by a certificate, diploma, licence or similar document.
For example, in all six levels of the Royal Academy of Dance Vocational Syllabus a student must pass an exam in order to continue to the next level. A student is awarded a certificate only on successful completion of the level being examined. The certificate attests to the student’s ability to audition for entrance into a higher-level of dance instruction or to pursue a non-performing career in dance.
In our correspondence to you we have referred you to our policy papers P-229, Definition of “Vocational School” in Section 1 of Part III of Schedule V to the Excise Tax Act; and P-231 Courses that Qualify for exemption Pursuant to Section 8 of Part III of Schedule V to the Excise Tax Act. Both these documents are available on our website. In particular, our policy paper P-229, Definition of “Vocational School” in Section 1 of Part III of Schedule V to the Excise Tax Act should help you determine whether the [Dance school] was operated primarily to provide instruction in dance courses that develop or enhance students' occupational skills in any given fiscal year.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-0329. 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,
Michael Mavis
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
Email this Content