GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, ON K1A 0L5
October 2, 1998
Dear Mrs. XXXXX
This is in reply to your letter of August 26, 1997, to XXXXX Tax Services Office concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the activities of XXXXX[.] Your inquiry was forwarded to our office for reply. We apologize for the delay in replying to you. Our comments are set out below.
On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. It is our understanding that you do not make any supplies in the participating provinces and for this reason our response will address only the GST.
Statement of Facts
Our understanding of the facts from the documentation submitted and from a telephone conversation with XXXXX on November 28, 1997, is set out below.
1. XXXXX. ("the business") is the name of your business, the principal activity of which is French language instruction.
2. The business is not incorporated and has separate records and bank accounts. Income from the business is shown as "professional income" on tax returns. You run the business from a separate office in your home. There is no staff except yourself at present; however, in the future you may have other employees on a subcontractor basis.
3. The business name is registered as "XXXXX pursuant to XXXXX[.] This registration is effective XXXXX[.]
4. The business is a "certified educational institution" pursuant to sections 118.5 and 118.6 of the Income Tax Act. (This certification entitles qualifying persons to obtain a tuition tax credit for income tax purposes.)
5. The unique feature of the business is that the courses are designed and delivered XXXXX according to linguistic requirements, level achieved and target level and individual availability with respect to hours, location, schedule, etc. Courses offered include those described below.
French as a second language
• Basic courses to develop skill in French as a second language: speaking, writing, reading, understanding.
• Refresher courses designed to improve writing, reading, comprehension and oral expression.
• Special courses (e.g., preparation for civil service bilingualism test).
• Preparation for certain functions in oral French (e.g[.], speeches).
• French grammar courses.
French as a mother tongue
• Refresher courses.
• Grammar courses.
Ruling Requested
That the supplies of instruction in French as a second language made by XXXXX are not subject to GST pursuant to section 11 of Part III of Schedule V of the Excise Tax Act. ("section 11" and "the Act").
Ruling Given
Section 11 exempts supplies of a service of instructing individuals in, or administering examinations, in respect of, language courses that form part of a program of second language instruction in either English or French, where the supply is made by a school authority, public college, or university or an organization that is established and operated primarily to provide instruction in languages.
"School authority", "public college", and "university" are terms which are defined in subsection 123(1) of the Act. XXXXX does not fall within these definitions. Therefore, to qualify for exemption, it must qualify as an "organization that is established and operated primarily to provide instruction in languages".
To determine whether an organization is established primarily to provide instruction in languages, we will examine an organization's governing documents. These documents include letters patent, articles of incorporation, memoranda of agreement and by-laws and should contain information as to the reason or purpose for the establishment of the organization. If that information is not readily available, how the organization is operated will be evidence of the purpose for its establishment. With respect to the operated primarily requirement, the organization's revenue and human resources should primarily be attributed to the supply of instruction in languages.
Based on the description of your activities, as outlined above, supplies of instruction in French as a second language made by XXXXX qualify for exemption pursuant to section 11. This means that you are not required to charge GST on supplies of instruction in French as a second language. However, supplies of instruction in French as a mother tongue are not exempt pursuant to section 11. Therefore, if the revenue XXXXX receives from instruction in French as a mother tongue exceeds $30,000 in a particular year, you will be required to register for GST purposes, charge tax on these supplies and file a GST return on a regular basis. More information on registration can be obtained from the XXXXX Tax Services office at XXXXX[.] The telephone number is XXXXX[.]
This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 954-5125.
Yours truly,
Pauline Greenblatt
Educational Services and Indians Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate
| Legislative References: |
section 11/Part III/Schedule V; ss. 123(1); s. 240; s. 148 |
| NCS Subject Code(s): |
119151 |
Email this Content