25 September 1998 General Information Letter HQR0000997 - GENERAL INFORMATION LETTER Tax Treatment of English 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 E-mail message of December 18, 1997, sent to Mike Place of this office. Your inquiry was transferred to the Educational Services and Indians Unit, which now has responsibility for section 11 of Part III of Schedule V of the Excise Tax Act. ("section 11" and "the Act"). We apologize for the delay in responding to you. Our comments are set out below.

Facts

You have provided us with the following facts of a situation.

1. A sole proprietor owns and operates a language institute where English is taught (mostly) to XXXXX students.

2. The institute is registered with a provincial education department as a trade school.

3. The institute awards a certificate to successful students. Also, the language course is of such a quality that the students can write a university entrance exam.

Question

Would the supplies of the language school described above be eligible for exemption pursuant to section 11?

Response

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. The institute you have described 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. Thes 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.

Based on the description of the institute's activities, as outlined above, supplies of instruction in English as a second language made by it would appear to qualify for exemption pursuant to section 11. (You may wish to confirm that all the conditions for exemption are, in fact, met). You should also determine if there are other supplies made by the institute and if these are taxable supplies. If there are taxable supplies made by the institute, you should advise its proprietors of registration, collection and return filing obligations under the Act.

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

1 Legislative references are to the Excise Tax Act, unless otherwise noted

2 subsection 237(3) - minimum instalment base