28 April 2000 GST/HST Interpretation 30301 - The Zero-Rating of Training Services Supplied by

Dear XXXXX

Thank you for your letter of February 24, 2000 in which you request two separate interpretations in connection with the application of section 169 and section 18 of Part V of Schedule VI to the Excise Tax Act (the Act), in regards to the training services supplied by XXXXX a GST/HST registrant, XXXXX XXXXX, an unregistered non-resident.

Interpretation Requested

On the first issue regarding the supply of the training services made by XXXXX to XXXXX, you wish that we confirm that such a supply is zero-rated pursuant to section 18 of Part V of Schedule VI to the Act.

Secondly, you also wish that we confirm that XXXXX is eligible to claim input tax credits in respect of the goods and services tax (GST) paid on its acquisition of property and services to the extent that the property and services are acquired for use in the provision of zero-rated supplies of service to XXXXX.

In consideration of the background information supplied in your letter and following my telephone conversations with XXXXX of your office, I understand the facts as follows:

•   XXXXX, a GST/HST registrant, is a registered and accredited post-secondary institution in XXXXX and operates as a vocational school.

•   Under an agreement entered into between XXXXX agrees to supply XXXXX with training services in Canada, in relation to international trade and commerce. The agreement provides that XXXXX will render the training services to XXXXX who will travel to Canada on student visas.

•   The XXXXX can choose to register with XXXXX under the XXXXX[.] Those students who wish to enroll in either program pay a tuition to XXXXX which includes accommodation and meals supplied at XXXXX facilities.

•   XXXXX invoices XXXXX for the budgeted costs to administer these programs plus an additional amount per student, on a cost-plus contract, for services rendered.

•   The XXXXX who successfully complete the XXXXX receive XXXXX while the students who successfully complete the XXXXX[.]

•   The students are XXXXX residents who enter Canada under a student visa only and return to XXXXX upon completion of their studies.

Interpretation Given

Based on the information provided, XXXXX, as indicated previously, is registered as an institution under the XXXXX The accreditation by the above XXXXX is voluntary.

Generally, a supply of training services made by a vocational school is an exempt supply by virtue of section 8 of Part III of Schedule V to the Act, and therefore the input tax credits are not available to the supplier (i.e., a registered institution). Section 8 of Part III of Schedule V provides in part that:

"A supply, other than a zero-rated supply, made by a ... vocational school ... of a service of instructing individuals in, or administering examinations in respect of, courses leading to certificates, diplomas, ... that attest to the competence of individuals to practice or perform a trade or vocation where ...

(b) the supplier is governed by ... provincial legislation respecting vocational schools ...".

For further information, please refer to Policy Statements P-229 and P-231, entitled "Definition of "Vocational School["]" and "Courses that Qualify for Exemption", respectively. I have taken the liberty of enclosing these for your convenience.

As you can see, section 8 of part III of Schedule V to the Act excludes a zero-rated supply. Accordingly, one must determine at the outset whether the supply of training services is zero-rated.

Section 18 of Part V of Schedule VI to the Act, zero-rates a supply made to an unregistered non-resident person of a service of instructing non-resident individuals in, or administering examinations in respect of, courses leading to certificates, diplomas, etc., that attest to the competence of the individuals to whom the service is rendered or the examination is administered to practice or perform a trade or vocation.

XXXXX[.] These programs provide successful students with a broad range of skills in matters of international trade. Therefore, if the Certificate or Diploma which is issued attests to the competence of the successful individual in such matters, through instruction or examination, section 18 of Part V of Schedule VI to the Act may apply to zero-rate the supply of the training service made by XXXXX[.] If such should be the case, the supply made by XXXXX would be excluded from section 8 of Part III of Schedule V to the Act, as a zero-rated supply.

In respect of the second issue concerning input tax credits, section 169 of the Act generally provides for input tax credits for GST/HST paid or payable by a GST/HST registrant who acquires goods or services for consumption, use or supply in the course of its commercial activities.

As mentioned previously, where XXXXX acquires goods and services for use in connection with a zero-rated supply of training services, such acquisitions would generally be viewed as being acquired in the course of XXXXX commercial activities. Accordingly, XXXXX would be eligible for input tax credits, in connection with those goods and services acquired for consumption, use or supply in the course of providing a supply of training services, where the supply is zero-rated under section 18 of Part V of Schedule VI to the Act.

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 interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency 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 (613) 957-8220.

Yours truly,

Daniel E.B. Chamaillard, Senior Technical Analyst
Border Issues Unit
General operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

Enclosures

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