Please note that the following Policy Statement, although correct at the time of issue, may not have been updated to reflect any subsequent legislative changes.

GST/HST Policy Statement P-220

Date of Issue

October 26, 1998

Subject

Domestic entities that qualify as a "university" in the Excise Tax Act ("ETA").

Legislative Reference(s)

Subsection 123(1) - definition of "university" in the ETA.

National Coding System File Number(s)

11910-1

Effective Date

January 1, 1991

Issue and Decision:

The issue addressed by this policy is the type of domestic entity that will meet the definition of "university" in the ETA.

The term "university" is defined in subsection 123(1) of the ETA as "a recognized degree-granting institution or an organization that operates a college affiliated with, or a research body of, such an institution". The Department's position is that there are three categories of domestic entities that will qualify as a university. Those three categories are:

1. a degree-granting institution that grants degrees at least at the bachelor or equivalent level that is established as a university or degree-granting institution by legislation enacted by the appropriate Canadian jurisdiction in which it is situated1*, or

2. any organization that operates a college affiliated with an institution in #1. An organization is considered to operate an affiliated college of a university or degree-granting institution (the "parent") only where there is a formal affiliation agreement between the parent and the affiliate wherein the parent agrees to grant degrees to graduates of the affiliated college in exchange for a certain degree of control over the academic standards and course offerings of the affiliated college; or

3. a research body of an organization in #1. In order for an entity to be considered a research body of a university or degree-granting institution, the entity must be established and operated primarily to perform research2* and the research body must be owned and controlled by a university or degree-granting institution.

An organization will be considered to be owned by a university if:

(a) the university owns all or substantially all (at least ninety percent) of the shares or capital of the organization; or

(b) the university holds title to the assets of the organization or controls its disposition, such that in the event of wind-up or liquidation, these assets are vested in the university.

An organization will be considered to be controlled by a university if:

(a) the university selects and appoints a majority of the members of the governing body of the organization (e.g. directors, governors, commissioners); or

(b) the entity is required, by virtue of legislation, by-laws, or an operating agreement to submit to the university its operating and, where applicable, capital budget, for review and approval.

Sample Ruling 1:

Facts

Organization A is authorized under provincial legislation to grant degrees, but not to call itself a university.

Ruling Requested

Organization A qualifies as a university as that term is defined in the ETA.

Ruling Given

Organization A qualifies as a university pursuant to the ETA. The determining factor is not whether an organization has authority to refer to itself as a university, but whether it is a recognized degree-granting institution. If an organization has been authorized, by the appropriate Canadian jurisdiction in which it is situated, to grant degrees at least at the bachelor or equivalent level, it is a university as that term is defined in the ETA.

Sample Ruling 2:

Facts

Organization B operates an educational college that does not have the power to grant degrees. Organization B has entered into an agreement with University C, which is considered to be a university pursuant to the ETA, to purchase certain educational services from University C. Graduates of Organization B do not receive degrees from University C.

Ruling Requested

Organization B qualifies as a university as that term is defined in the ETA.

Ruling Given

Organization B does not qualify as a university pursuant to the ETA. An organization is considered to operate an affiliated college of a university or degree-granting institution (the "parent") only where there is a formal affiliation agreement between the parent and the affiliated college wherein the parent agrees to grant degrees to graduates of the affiliated college in exchange for a certain degree of control over the academic standards and course offerings of the affiliated college.

Sample Ruling 3:

Facts

Organization D performs research for University E. University E is considered to be a university pursuant to the ETA. Organization D is not owned or controlled by University E.

Ruling Requested

Organization D qualifies as a university as that term is defined in the ETA.

Ruling Given

Organization D does not qualify as a university pursuant to the ETA. In order for an organization to be considered a research body of a university or degree-granting institution, the organization must be established and operated primarily to perform research and the research body must be owned and controlled by the university or degree-granting institution.

Sample Ruling 4:

Facts

Organization R was incorporated under the Non-Profit Corporations Act of Province P to undertake research into xyz. Organization R operates in space provided for it by University U. University U is considered to be a university pursuant to the ETA. The incorporating documents of Organization R provide that upon dissolution any property shall be conveyed to University U. The board of directors of Organization R is appointed by University U and has 8 seats in total. The incorporating documents provide that the makeup of the board will be as follows: University U will have 2 seats, Province P will have 2 seats, the Government of Canada will have 2 seats, and producers of xyz will have 2 seats. Province P and the Government of Canada select their nominees for the board and University U appoints them to the board. Organization R receives funding from Province P and submits expenditure statements to the Province that relate to the funding. Organization R does not submit its operating or capital budgets to University U after approval by its board of directors.

Ruling Requested

Organization R qualifies as a university as that term is defined in the ETA.

Ruling Given

The Department's position is that when determining whether an organization is considered a research body of a university or degree-granting institution pursuant to the ETA, the organization must be established and operated primarily to perform research and the organization must be owned and controlled by a university or degree-granting institution.

An organization will be considered to be owned by a university if:

(a) the university owns all or substantially all (at least ninety percent) of the shares or capital of the organization; or

(b) the university holds title to the assets of the organization or controls its disposition, such that in the event of wind-up or liquidation, these assets are vested in the university.

An organization will be considered to be controlled by a university if:

(a) the university selects and appoints a majority of the members of the governing body of the organization (e.g. directors, governors, commissioners); or

(b) the entity is required, by virtue of legislation, by-laws, or an operating agreement to submit to the university its operating and, where applicable, capital budget, for review and approval.

Based on the information provided, Organization R is established primarily to perform research. Provided Organization R is in fact operated primarily to perform research, it will meet the criterion outlined above. However, this is not sufficient. Further, the Department is of the view that while Organization R is owned by University U, it is not controlled by it in that University U neither selects a majority of the board of directors nor reviews and approves Organization R's operating or capital budgets. Accordingly, Organization R does not qualify as a university as that term is defined in the ETA.

¹*. The appropriate Canadian jurisdiction in any location is usually provincial. However, if the land on which the university or degree-granting institution is built is federal land, then the legislation will be enacted by the federal government. An example of a degree-granting institution that is established by federal legislation is the Royal Military College in Kingston.

²*. Whether the entity is established primarily to perform research should be ascertained from the incorporating legislation or incorporating documents and by-laws. Provided the entity is operated primarily to perform research, it will meet this criterion.