25 September 1998 General Information Letter HQR0000981 - GENERAL INFORMATION LETTER Tax Treatment of French Language Instruction

                                                                        GST/HST Rulings and Interpretations
 Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, Ontario K1A 0L5

Dear XXXXX

This is in reply to your facsimile message of December 11, 1997, to Ms. XXXXX of the Ottawa Tax Services office concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the above-noted subject. Your inquiry was forwarded to our office for reply. We apologize for the delay in responding 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 in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. We would point out that our comments apply to supplies of language instruction apply in both GST and HST provinces, with the appropriate application of HST tax rates, as required.

Question

You asked about the tax treatment of supplies of instruction in French as a second language made by a language instructor to your XXXXX. Specifically, you asked if these supplies are exempt of GST/HST pursuant to the exemption in section 11 of Part III of Schedule V of the Excise Tax Act ("section 11" and "the Act").

Response

The tax treatment of supplies of instruction in French or English as a second language will be exempt if all conditions for exemption in section 11 are met.

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. A language teacher providing language instruction does not fall within these definitions. Therefore, to qualify for exemption, the language teacher 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, most of the organization's revenue and human resources should be attributed to the supply of instruction in languages.

If an instructor's business is primarily that of providing second-language instruction to persons in French, then the supplies of instruction will be exempt of GST. However, as regards the language instructor employed to provide French language instruction to your minister, in the absence of specific information regarding this individual's business, we can only advise that the foregoing criteria must be satisfied to qualify for exemption pursuant to section 11. The language instructor that your department hires is obliged to determine the tax status of his or her supplies.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the information provided to you. These comments should not be considered to be a ruling and, in accordance with the guidelines set out in section 1.4 of Chaprter 1 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.

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 Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate

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