Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: 122959
Attention: XXXXX XXXXX
April 9, 2010
Dear XXXXX:
Subject:
GST/HST
Recapture of Input Tax Credits
Thank you for your letter of XXXXX, concerning the application of Goods and Services Tax (GST)/Harmonized Sales Tax (HST) and the Recapture of Input Tax Credits (RITCs).
The Government of Canada and the Governments of Ontario and British Columbia have each signed a Comprehensive Integrated Tax Coordination Agreement on the implementation of HST in their respective provinces. Legislation required to implement the HST in Ontario effective July 1, 2010, has now been received Royal Assent by the Parliament of Canada and the Legislative Assembly of Ontario. In British Columbia, required provincial legislation has been introduced but is still under consideration by the Legislative Assembly of British Columbia. However, many of the rules which would apply to transactions will be contained in regulations made under the Excise Tax Act (ETA) which have not yet been made by the Government of Canada.
In Ontario, the HST rate will be 13%, consisting of a 5% federal part (equivalent to the existing GST) and an 8% provincial part. In British Columbia, the HST rate is proposed to be 12%, consisting of a 5% federal part (equivalent to the existing GST) and a 7% provincial part.
The following interpretation is based on Temporary Recapture of Input Tax Credits Requirement, Information Notice No. 5, released by the Government of Ontario on February 1, 2010, and Temporary Recapture of Input Tax Credits Requirement, Tax Information Notice No. 4, released by the Government of British Columbia on February 19, 2010. This interpretation should not be taken as a statement by the Canada Revenue Agency (CRA) that these RITC rules will be made in their current form.
Additional Facts
The XXXXX has XXXXX who provide flight training, but are not community colleges.
Interpretation Requested
We have assumed that the following questions relate to XXXXX companies that are large businesses as defined in the provincial publications referenced above.
1(a) Will there be a restriction on the input tax credits (ITCs) relating to fuel purchased for use on aircraft?
1(b) Will there be a restriction on ITCs relating to fuel purchased for ground vehicles which are:
i. Ramp vehicles?
ii. Road vehicles?
1(c) Will there be a restriction on the ITCs relating to the purchase of food for:
i. Sale or provision to passengers?
ii. Refunded to employees for travel related meal expenses?
1(d) Will (are) there restrictions on ITCs for HST/(GST) on per diem meal allowances paid to employees with respect to out of town travel?
1(e) We understand that educational institutions are exempt from HST/GST provided at least 50% of their revenues are education related, can you confirm that? You asked how to determine whether a flight school is a "vocational school" for purposes of the Act.
Interpretation Provided
1(a) The RITC requirement does not apply to fuel used in a propulsion engine.
(b) Only specified road vehicles are subject to RITCs. A specified road vehicle is defined as a vehicle that
• is a motor vehicle;
• is licensed, or required, under applicable provincial law, for use on a public highway (a vehicle that is licensed, or required to be licensed, exclusively for use elsewhere than on a public highway would generally not be considered to be a specified road vehicle); and
• weighs less than 3000 kgs at the time the vehicle is first licensed or required to be licensed.
(i) Based on the definition, a ramp vehicle which is licensed, or required to be licensed, exclusively for use elsewhere than on a public highway would generally not be considered to be a specified road vehicle.
(ii) A road vehicle that meets the specified road vehicle criteria listed above would be considered a specified road vehicle.
(c)
(i) No, RITCs will not apply to the sale of food to passengers or the provision of food to passengers where the food is part of the consideration for the air transportation service.
(ii) Yes, if a large business, as defined in provincial publications referenced above, pays an allowance or reimbursement to an employee or a partner for travel related meal expenses in circumstances where ITCs would be available to the large business in respect of that allowance or reimbursement, the large business would generally be subject to RITCs. Under subsection 236(1) of the ETA, the ITC eligibility for meals is limited to 50%.
(d) Yes, if a large business, as defined in provincial publications referenced above, pays a per diem meal allowance to employees with respect to out of town travel where ITCs would be available to it in respect of that allowance, then the large business would generally be subject to RITCs. Under subsection 236(1) of the ETA, the ITC eligibility for meals is limited to 50%.
(e) The enclosed GST/HST Policy Statement P-229 Definition of "Vocational School" in Section 1 of Part III of Schedule V sets out CRA's position for identifying whether an organization qualifies as a vocational school for the purposes of the Act. The requirement to be a vocational school is not based solely on revenue but rather there are three criteria which must be met. They are:
(i) the organization must be established primarily to provide correspondence courses or the instruction in courses, that develop or enhance students' occupational skills;
(ii) the organization must be operated primarily to provide correspondence courses, or instruction in courses that develop or enhance students' occupational skills; and,
(iii) the correspondence courses or instruction in courses must develop or enhance students' occupational skill.
These criteria are explained in detail in Policy Statement P-229.
Organizations that are a vocational school for purposes of the GST will qualify as a vocational school for purposes of the HST.
Meeting the definition of vocational school does not make an organization exempt from 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.
For information on when supplies of flight training made by a vocational school may be exempt, please refer to the enclosed Policy Statements Statement P-231, Courses that qualify for exemption pursuant to section 8 of Part III of Schedule V to the Excise Tax Act and P-034R2, Tax Status of Flying Time Pursuant to Section 8 of Part III of Schedule V to the ETA.
The foregoing comments represent our general views with respect to the Recapture of Input Tax Credits as announced in Information Notice No. 5, released by the Government of Ontario on February 1, 2010, and in Tax Information Notice No 4, released by the Government of British Columbia on February 19, 2010, as they relate to the subject matter of your request. Any change to the wording of Recapture of Input Tax Credits rules or any regulations regarding the HST in Ontario or British Columbia, if made, could have an effect on the interpretation provided herein. 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 CRA with respect to a particular situation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-0301.
Yours truly,
Owen W. Newell, CGA
Manager
General Operations Unit
Excise and GST/HST Rulings Directorate
Enc.:
GST/HST Policy Statement P-034R2
GST/HST Policy Statement P-229
GST/HST Policy Statement P-231
UNCLASSIFIED
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