Dear XXXXX
This is in response to a memorandum dated November 7, 1995, sent to Joanne Houlahan, Manager, Charities, NPO's and Educational Services, regarding the treatment provided to XXXXX under the Excise Tax Act (ETA) and the Income Tax Act (ITA). We apologize for the delay in responding to your query.
You have raised the concern that, while the Department has expressed the view that a particular XXXXX is regarded as providing a child care service under the Excise Tax Act, the Taxation Rulings Directorate has expressed a seemingly opposite view, based on a review of promotional materials, that another XXXXX school provided an educational program and not a child care service.
You are correct in stating that GST Rulings and Interpretations viewed the service provided by XXXXX as a child care service because:
• the school was licensed as a nursery school,
• the school is for children aged 2.5 to 6 years and therefore the children are below the age where school attendance is compulsory,
• XXXXX It is our understanding from conversations held with officers at the Taxation Rulings Directorate that each XXXXX school must be considered separately before determining if the school is providing child-care or educational services. Furthermore, a ruling issued by Taxation Rulings Directorate in 1996, specified that "fees charged by an educational institute in respect of children below the regular age for starting school (pre-kindergarten) will normally qualify as child care expenses [under the ITA] unless there is clear and conclusive evidence that the fees are paid in respect of a program of education".
In a situation where an educational institution is providing both educational and child care services, the Taxation Rulings Directorate makes a distinction between (i) a program of education which is more goal-oriented and where the child is expected to learn skills and progress through a planned program of instruction, and (ii) a child care service where the child is not expected to achieve any specific educational goals.
In conclusion, it is our view that the position expressed in the GST ruling to the XXXXX school does not contradict the position held by Taxation. As the school provided an element of child care and an element of education, in order to establish whether the primary purpose of the program was care and supervision to children, it was necessary to consider the following factors: the nature of the license to operate, the nature of activities as described in promotional literature and the age of children registered in the program. Based on the consideration of these factors, it is our opinion that services provided by the XXXXX school in XXXXX are exempt under section 1 of Part III of the ETA as a child care service.
If you require additional information, please feel free to contact me at (613) 952-0420.
Lorrie Grannary
Tax Policy Officer Charities,
NPO's and Educational Services
Public Service Bodies and Governments
Ref.: s. 1, Pt. IV, Sch. V.
| c.c.: |
J. Houlahan
L. Grannary
Subject File |
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