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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 129475
Business Number: [...]
September 22, 2011
Dear [Client]:
Subject:
GST/HST RULING
Application of HST to international student program
Thank you for your fax of October 20, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of an international student program by [...]. We apologize for the delay in responding to this enquiry.
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.
Statement of Facts
We understand:
1. [...] (the Corporation) is a for-profit corporation that operates a program for international students in [...] [City 1, Participating Province X] (the Program). The Corporation does not supply any other goods or services.
2. The Corporation is registered for GST/HST purposes, with GST/HST account number [...].
3. The Program consists of an academic component, a homestay component and other complementary elements, such as recreational activities and orientation.
4. The Corporation contracts with other businesses, referred to as "Agents", to recruit students to [...] [Participating Province X] to study at schools operated by [...] (the School District). Neither the students nor their parents enter into any contract directly with the School District.
5. A prospective student may apply directly to the Corporation; however, such a situation is unlikely. If the Corporation has an Agent in the student's home country, the student is required to apply to the Program through the Agent. Generally, the Corporation only contracts with the recruiting Agents. However, prospective students and parents must sign an Application for Admission form, which is submitted to the Corporation.
6. As part of the Program, the Corporation coordinates homestay arrangements for the international students. The Corporation recruits local host families and matches students with families. The Corporation continues to oversee the homestay arrangements after a student has been placed with a host family. All international students in the Program are required to participate in the homestay component.
7. International students enrolled in the Program are also provided with an activities component that includes eight outdoor recreational pursuits, including [...].
8. [...] [Information about how the Corporation carries on the activities of the Program that were once undertaken by the school districts]
9. You have provided us with the following documents:
1) Application for Admission;
2) A sample Host Family Agreement between the Corporation and the host parents;
3) A [...] between the Corporation and [...] [Individual A], whereby [Individual A] is engaged to recruit students for the Corporation in [...] [Country Y] (the " [Country Y] Agreement");
4) An agreement between the Corporation and [...] [Company B], whereby [Company B] is engaged to recruit students for the Corporation in [...] [ABC] (the " [ABC] Agreement");
5) A Memorandum of Understanding between the Corporation and the School District (the "MOU");
6) An invoice from the School District to the Corporation.
Application for Admission
10. The Application for Admission contains: [...]
11. The [...] set out the rules that the student must abide by while participating in the Program. For example [...].
Host Family Agreement
12. The Host Family Agreement is between the Corporation and the host parent(s). Neither the student nor their parents is a party to the agreement. The Host Family Agreement does not name any particular student.
13. The host family is required to provide room and board to the student placed in their home.
14. The host family receives $[...]/month per student, disbursed at the end of every month.
15. If a student placement [...].
16. In the Host Family Agreement, [...], the Director of the Corporation, is named as "legal custodian" of the student.
17. Citizenship and Immigration Canada's website provides the following information regarding custodianship of minor children studying in Canada:
"Minor children who come to Canada to study and who are not accompanied by a parent or legal guardian, must be cared for by a responsible adult in Canada. This person is known as a custodian.
...
The visa officer must be satisfied that adequate arrangements have been made for the care and support for minor children who travel to Canada to study."
[Country Y] Agreement
18. The [Country Y] Agreement is between the Corporation and [Individual A]. There are no other parties to the agreement. There is no mention of the School District in the agreement; the academic component and the homestay component of the Program are referred to as the Corporation's programs.
19. Under the [Country Y] Agreement, [Individual A] is required to recruit students in [Country Y] for the Program provided by the Corporation.
20. Pursuant to section [...] of the [Country Y] Agreement, the tuition fees to be paid by the students recruited by [Individual A] are $[...] CND for an academic year and $[...] for a semester.
21. Pursuant to section [...] of the [Country Y] Agreement, the Corporation is required to arrange accommodation for students recruited from [Country Y] through the [...] Program.
22. Section [...] of the [Country Y] Agreement states [...].
23. Pursuant to section [...] of the [Country Y] Agreement, enrollment in the [...] Program is a pre-condition for enrollment in all academic programs.
24. Section [...] of the [Country Y] Agreement sets out the other program fees: [...]
25. Pursuant to section [...] of the [Country Y] Agreement, [Individual A] is required to [...].
26. Pursuant to subsection [...] of the [Country Y] Agreement, if a student [...].
27. Pursuant to section [...] of the [Country Y] Agreement, [Individual A] is entitled to a commission of [...]% of the tuition fees per student successfully recruited into the Program.
28. Section [...] of the [Country Y] Agreement states that [Individual A] [...].
29. The second paragraph of section [...] of the [Country Y] Agreement provides as follows: [...]
30. [Individual A] is located in [Country Y].
[ABC] Agreement
31. The [ABC] Agreement is between the Corporation and [Company B]. There are no other parties to the agreement. There is no mention of the School District in the agreement. The [ABC] Agreement relates to the Program provided by the Corporation.
32. The preamble to the [ABC] Agreement states [...].
33. Pursuant to section [...] of the [ABC] Agreement, [Company B] is engaged as an "independent Agent" to recruit students from [ABC] for the Program in [...] [Participating Province X].
34. Pursuant to section [...] of the [ABC] Agreement, [Company B] may [...].
35. Pursuant to section [...] of the [ABC] Agreement, the Corporation is required to arrange homestay accommodations for the students no later than [...] days prior to the students' arrival.
36. Section [...] of the [ABC] Agreement states as follow: [...].
37. Section [...] of the [ABC] Agreement states that [...].
38. The [ABC] Agreement does not set out the program fees.
39. Section [...] of the [ABC] Agreement states [...].
40. Section [...] of the [ABC] Agreement states [...].
41. Pursuant to section [...] of the [ABC] Agreement, [Company B] is entitled to a commission of [...]% of tuition fees per student successfully recruited into the Program.
42. Section [...] states [...].
43. Pursuant to section [...], if [Company B] [...].
44. Pursuant to section [...], if [Company B] [...].
45. [Company B] is located in [...] [Participating Province Z].
Memorandum of Understanding
46. The MOU outlines the business relationship between the School District and the Corporation.
47. Section 1 of the MOU states [...]. [Information about tuition fees and commission paid to any recruitment agency]
48. Section [...] states [...] [Information about the distribution of tuition fees between the Corporation and the School District]
49. Section [...] states [...].
50. Sub-paragraph [...] states [...]
51. The MOU sets out the roles and responsibilities of the Corporation as follows: [...]
52. Pursuant to subparagraphs [...] the Corporation will receive all fees from agents or families of students that the Corporation recruits. The School District will issue an invoice to the Corporation each semester.
53. Pursuant to paragraph [...] of the MOU, the School District shall supply the following to the Corporation: [...]
54. The MOU states that the relationship between the School District and the Corporation is [...].
Invoice
55. The invoice, dated [mm/dd/yyyy], covers the first semester of the [yyyy-yyyy] school year and sets out the total amount of tuition payable by the Corporation to the School District for [...] students ([...] students at $[...] per student and [...] student at $[...]). The tuition fee differs depending on the number of months a student is enrolled.
56. The individual students are not named on the invoice.
Ruling Requested
You would like to know:
1. Whether the Corporation is required to collect HST on its supplies; and
2. Whether the corporation is required to be registered for GST/HST purposes.
Ruling Given
Based on the facts set out above, we rule that:
1. The supplies of the Program made by the Corporation are exempt from HST under paragraph 9(a) of Part III of Schedule V. Therefore, the Corporation is not required to collect HST on these supplies; and
2. The Corporation is neither required nor permitted to be registered for GST/HST purposes.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Tax status of supplies
Based on the facts provided and information on the Corporation's website, the Corporation is supplying an international student program package. The Program package consists of several elements, including:
• academic instruction;
• homestay (room and board);
• orientation;
• health insurance; and
• recreational activities
Although certain elements of the Program package are rendered to the students by the School District and the host families, the Corporation is the supplier of the Program. The School District supplies academic instruction and the host families supply room and board to the Corporation; the Corporation then includes these elements in its Program package.
To determine whether the supplies made by the Corporation are taxable or exempt supplies for GST/HST purposes, it is first necessary to determine whether the Program package is a single supply or consists of multiple supplies. GST/HST Policy Statement, P-077R2, Single and Multiple Supplies, sets out the principles CRA will use to determine whether a transaction consisting of several elements constitutes a single supply or multiple supplies:
• Every supply should be regarded as distinct and independent.
• A supply that is a single supply from an economic point of view should not be artificially split.
• There is a single supply where one or more elements constitute the supply and any remaining elements serve only to enhance the supply.
The way in which the price for a program or package is set out does not in itself determine whether there are one or more supplies. Separately identified charges for certain elements do not necessarily mean that there are two or more supplies. The structure of the transaction is examined to determine if the provision of any particular element is contingent on the provision of one or more elements.
In this case, the provision of each element is contingent on the provision of the others. The recipient must acquire all the elements in the package; no element can be acquired separately or substituted. All students must participate in a homestay; they are not permitted to make their own arrangements for accommodations. No one element can be viewed as satisfying the recipient's needs on its own. The students enroll in the program to study in a foreign country. Therefore, they also require room and board, because they are away from home. The students would not need the room and board were they not receiving the academic instruction. The orientation, insurance and recreational activities serve only to enhance the academic instruction and homestay components.
The Program package supplied by the Corporation constitutes a single supply. In this context, it would be artificial to split the package. The academic instruction is the dominant element of the supply. All the elements included in the package have the same tax status as the dominant element. Therefore, the Corporation is making a single supply of a service of instructing an individual in a course.
Section 9 of Part III of Schedule V exempts the following from GST/HST:
9. A supply of a service of tutoring or instructing an individual in
(a) a course that is approved for credit by, or that follows a curriculum designated by, a school authority;
(b) a course that is a prescribed equivalent of a course described in paragraph (a); or
(c) a course the successful completion of which is mandatory for admittance into a particular course described in paragraph (a) or (b) and not for admittance into any other course that is a prerequisite to the particular course.
The Corporation is making a single supply of a service of instructing an individual in a course that is approved for credit by a school authority. The course is in fact rendered to the students by a school authority and is the exact same course supplied by the school authority directly to [Participating Province X] secondary school students. Therefore, the supply of academic instruction by the Corporation is exempt under paragraph 9(a). As all the elements included in the Program package have the same tax status as the academic instruction, the entire supply is exempt under paragraph 9(a).
Registration
In general, every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered for GST/HST purposes. A commercial activity includes the making of taxable supplies in the course of a business but does not include the making of exempt supplies.
As the Corporation is only engaged in providing exempt supplies, it is not required, or permitted, to be registered for GST/HST purposes. Therefore, you should contact our Business Enquiries line at 1-800-959-5525 for further information and instruction on cancelling the Corporation's registration.
For more information about cancelling the Corporation's GST/HST registration please refer to the enclosed GST/HST Memoranda Series 2.7, Cancellation of Registration.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-3158. 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,
Heather Reardon
Charities, Non-profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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