11 June 1998 GST/HST Interpretation HQR0001181 - Application of the GST/HST to the Supply of Hands-on Computer Software Training Workshops

                                                                        GST/HST Rulings and Interpretations
Place Vanier, Tower C, 9th Floor
25 McArthur Avenue
Vanier, Ontario K1A 0L5

I refer to XXXXX E-mail message of May 5, 1998, concerning the operations of the above-referenced firm. XXXXX provided the following information in her message:

1. XXXXX is registered for GST/HST purposes (BN XXXXX provided training services at its site XXXXX to XXXXX and XXXXX of the XXXXX

3. XXXXX is an authorized training partner of XXXXX

4. The following courses were provided by XXXXX to its client:

 XXXXX - This hands-on workshop provides the technical detail required to configure, use and support the XXXXX 16 and 32 bit versions. Basic programming concepts and familiarity with another operation system (e.g., DOS) is highly recommended as a prerequisite.

 XXXXX - This hands-on workshop provides the technical detail required to develop and maintain realtime applications running under XXXXX 16 and 32 bit versions. Recommended prerequisites are a working knowledge of the programming language and completion of the XXXXX

5. XXXXX invoiced its client a total of XXXXX U.S. XXXXX for each course plus the GST at 7%).

6. The client has advised XXXXX that it (the client) is exempt from paying taxes.

The issue to be determined is if the supply of these courses (i.e., a supply of training services) qualifies for zero-rating under either Schedule VI, Part V, sections 18 or 23 to the Excise Tax Act.

I would first like to discuss Schedule VI, Part V, section 23. This provision zero-rates a supply of an advisory, professional or consulting service made to a non-resident person, subject to the exclusions outlined in paragraphs (a) to (d). The supply of the computer software training courses (i.e., training services), as outlined in point 4 above, would not be excluded by paragraphs (a) to (d). However, the question to be determined is if the supply of the training services is a supply of an advisory, professional or consulting service.

Prior to June 10, 1993, a supply of an advisory, professional or consulting service was zero-rated under Schedule VI, Part V, section 7 to the Act. GST Memorandum 300-5 (Exports), dated October 15, 1992, contains the Department's interpretation of advisory, consulting or professional services for purposes of Schedule VI, Part V, section 7. These interpretations are still valid.

The memorandum states that an advisory service refers to a service of giving an opinion, or counsel, or of recommending a plan or course of action. A consulting service refers to a service of providing information, instruction or expert advice. A consultant generally provides services relating to a field of specialized knowledge or training. An advisory or consulting service may address business, management, marketing, data processing, public relations and other issues or problems faced by the client. An advisory or consulting service does not include any work that might be undertaken or performed as a result of the plans or recommendations accepted by the client or the advice provided to the client.

A professional service refers to a service provided by an individual whose vocation or occupation requires special, usually advanced, education and skills. For purposes of this provision, the individual providing the service should be a member of a professional association, a professional corporation or a similar body, which is recognized by a statute in at least one province of territory or by one federal body, and enforces standards of professional practice as well as a code of ethics.

The computer software training courses supplied by XXXXX to its client would not have been regarded, prior to June 10, 1993, as a supply of advisory or consulting services for purposes of Schedule VI, Part V, section 7 and would still not be regarded as a supply of advisory or consulting services for purposes of Schedule VI, Part V, section 23. In addition, it does not appear that the supply of the computer software training courses would be considered to be a supply of professional services. Therefore, the zero-rating provisions of Schedule VI, Part V, section 23 would not apply.

Schedule VI, Part V, section 18 zero-rates a supply made to an unregistered non-resident (other than an individual) of a service of instructing non-resident individuals in, or administering examinations in respect of, courses leading to certificates, diplomas, licences or similar documents, or classes or rating in respect of licences, that attest to the competence of the individuals to whom the service is rendered or the examination is administered to practise or perform a trade or vocation. Zero-rating applies to courses commencing, and examinations administered, on or after November 5, 1991.

This provision was introduced to ensure that registered Canadian suppliers of training services described in the section were put on a equal footing with foreign suppliers when competing for the business of non-residents. It should also be pointed out that, prior to the introduction of this provision, these services were considered to be primarily for consumption, use or enjoyment in Canada and, as stated above, were not considered to be advisory, professional or consulting services. Therefore, the supply was excluded from zero-rating under Schedule VI, Part V, section 7 to the Act as it read in 1991.

Although XXXXX may have received certificates from XXXXX which indicate that they have taken the two courses described above, it is not likely that these certificates attest to XXXXX competence to practise or perform a trade or vocation. XXXXX may wish to confirm this fact with XXXXX Therefore, the supply of the training services would not be zero-rated under Schedule VI, Part V, section 18.

As there are no other zero-rating provisions which could apply, the supply by XXXXX to its client, which was performed entirely in a non-participating province (i.e., XXXXX ), is subject to the GST at 7%.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 952-6743.

Garry L. Ryhorchuk
Senior Rulings Officer
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

Legislative References: Paragraph 142(1)(g), Section 144.1, Schedule VI, Part V, sections 7 (as it read in 1991), 18 and 23 Schedule IX, Part V, paragraph 2(a)

GST Memorandum 300-5 (Exports)

Department of Finance Press Release dated November 5, 1991

Department of Finance Explanatory Notes dated February 1993 (Page 327)

H.Q. letter dated 91/03/14 (File : 1400) to XXXXX

H.Q. letter dated 92/02/17 (File : 11640-3(glr)) to XXXXX

NCS Subject Code(s): 11640-3