GST/HST Policy Statement P-231

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.

Date of Issue

June 8, 1999

Subject

Courses that qualify for exemption pursuant to section 8 of Part III of Schedule V to the Excise Tax Act.

Legislative Reference(s)

Section 8 of Part III of Schedule V to the Excise Tax Act

National Coding System File Number(s)

11915-7-2

Effective Date

This policy comes into effect 90 days after the date of issue.

Text

Issue and Decision

A vocational school, school authority, university or public college (collectively referred to as "educational institution") may provide courses exempt of the Goods and Services Tax/Harmonized Sales Tax ("GST/HST") where the supply of courses satisfies the criteria in section 8 of Part III of Schedule V to the Excise Tax Act ("section 8").

Section 8 exempts the supply by an educational institution (other than a zero-rated supply) of a service of instructing individuals in, or administering examinations in respect of, courses leading to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licences, that attest to the competence of individuals to practise or perform a trade or vocation where (a) the document, class or rating is prescribed by federal or provincial regulation; (b) the supplier is governed by federal or provincial legislation respecting vocational schools; or (c) the supplier is a non-profit organization or a public institution.

This policy clarifies the meaning of "courses leading to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licences, that attest to the competence of individuals to practise or perform a trade or vocation" in section 8. There are three criteria established by this phrase, each of which must be met in order for a supply of instruction to be exempt under section 8. They are as follows:

(1) the supply by the educational institution must be in respect of courses leading to certificates, diplomas, licenses or similar documents ;

(2) the competency gained by the students must relate to the practise or perform[ance] of a trade or vocation;

(3) the certificate, diploma, license or similar document must attest to the competence of the students to practice the trade or vocation.

Each of these criteria is discussed below.

(1) Certificate, Diploma, Licence or Similar Document

In order for a course to be exempt of GST/HST, section 8 requires that a certificate, diploma, licence or similar document be issued to each student upon successful completion of the course of study. The Department accepts, as meeting the documentary requirements, any document that indicates that the student has successfully completed the course of study to which the document relates.

Generally, courses for which students are not issued some form of documentation at their conclusion do not satisfy the "certificate, diploma, licence or similar document" criterion, and are therefore not exempt under section 8.

(2) Trade or Vocation

Section 8 also requires that the course provide individuals with the competence to practise a trade or vocation, in order for the supply of the course to be exempt.

The Department will consider a course to provide individuals with the competence to practise a trade or vocation if the course has a direct link to skills that are recognized, by the Department, as relating to the ability to gain or retain employment. Generally, the Department does not consider, as relating to a trade or vocation, courses in sport, games, hobbies or other recreational or cultural pursuits, or courses that are designed to be taken for personal interest.

It is a question of fact whether a course provides skills that are recognized as relating to the ability to gain or retain employment. In making this determination, the Department will consider, among other factors, the curriculum and promotional material of the educational institution (e.g., in its brochures, advertisements, literature, course calendars, syllabi, telephone listings).

The intention of the person enrolling in the course is not considered by the Department in determining whether a course relates to a trade or vocation.

(3) Attest to the Competence of Individuals to Practice or Perform a Trade or Vocation

Section 8 requires the certificate, diploma, licence or similar document issued by an educational institution to "attest to the competence of individuals" to practice a trade or vocation. This policy applies to three broad categories of courses:

(a) courses that are part of a full-time program;
(b) part-time or upgrade courses that are not part of a full-time program; and
(c) preparatory courses for federally or provincially administered licences.

Each category is discussed below.

(a) Courses That Are Part of a Full-time Program

An individual course is considered by the Department to attest to the competence of individuals to practise or perform a trade or vocation if:

(i) The course is offered as a credit in a full-time program that is offered by the same institution; and

(ii) The full-time program is offered on a pass/fail basis, based on the evaluation of the student's performance on a single, or series of, tests, graded materials or projects.

Single courses that are a component of a full-time program are exempt when taken on their own, even where the individual is not enrolled in the full-time program. The fact that the single course may be applied towards the requirements of the full-time program is sufficient for the course to be exempt under section 8.

Whether a series of courses constitutes a full-time program is a question of fact. Factors considered by the Department in determining whether a program of courses represents a 'full-time' program include the length of the program, the cost of the program and the curriculum and description of the program and its courses, as noted in the school's promotional material (e.g., brochures, advertisements, literature, course calendars, syllabi and telephone listings).

Further, in order to qualify for exemption under section 8, the entire full-time program must be administered on a pass/fail basis. A series of courses that are offered on a credit system (i.e., where a certain number of pass/fail credits must be obtained to qualify for a diploma) suggests the existence of a full-time program. However, the absence of such a credit system is not conclusive, and the series of courses may still qualify as a full-time program if the entire program is assessed on a pass/fail basis.

(b) Part-time or Upgrade Courses That Are Not Part of a Full-time Program

Where an individual part-time or upgrade course is not otherwise offered as part of a full-time program, yet it meets the criteria outlined in (1) and (2) above, it may nonetheless be exempt pursuant to section 8 if the competence of the students is evaluated on a pass/fail basis, based on the evaluation of the student's performance on a single, or series of, tests, graded materials or projects.

Courses that assign a pass/fail mark to students based on attendance alone, class participation alone, or a combination of attendance and class participation, do not lead to certificates that attest to the competence of individuals to practice a trade or vocation.

The Department considers the pass/fail element to be met where there is real potential for a student to be held back in the event that s/he is not competent in the course material. Whether a pass/fail element exists is a question of fact to be determined in each circumstance.

(c) Preparatory Courses for Federally or Provincially Administered Licences

This final category of courses relates to preparatory courses for provincially or federally administered licensing examinations. An example of a provincially administered licensing examination is the commercial trucking licence examination required under the Highway Traffic Act, and administered by a provincial ministry of transportation. An example of a federally administered licensing examination is the commercial pilot's licence examination required under the Canadian Aviation Regulations and administered by Transport Canada.

The Department considers preparatory courses for such licensing examinations to be exempt pursuant to section 8 where:

(i) the course is required by federal or provincial legislation;

(ii) the course is not required by federal or provincial legislation, but the certificate issued by an educational institution upon completion of the course is accepted by a federal or provincial licensing body in lieu of successful completion of a federally or provincially administered licensing examination; or

(iii) the course is not required by federal or provincial legislation, but it meets the requirements for part-time courses outlined above (i.e., either (a) the course is otherwise offered as part of a full-time program, and the full-time program is offered by the same institution and is otherwise exempt under section 8, or (b) the course evaluates the competency of the students on a pass/fail basis, based on the evaluation of the student's performance on a single, or series of, tests, graded materials or projects).

SAMPLE RULINGS

Sample Ruling 1

Statement of Facts

1. A school qualifies as a vocational school pursuant to section 1 of Part III of Schedule V, and is registered under and governed by provincial legislation respecting vocational schools.

2. In addition to a full-time computer programming program that is offered on a pass/fail basis and is exempt under section 8, the vocational school offers 3 part-time courses: Enhancing Your Webpage with Java Script, Programming in C++ and Supporting and Implementing Windows NT Workstation. Certificates are issued to students upon completion of each of the part-time courses.

3. The curriculum and promotional material of the vocational school indicate that the full-time program and the part-time courses provide skills related to the ability to gain or retain employment in the computer industry, and therefore relate to a trade or vocation.

4. The Enhancing Your Webpage with Java Script is a part-time course that is also a credit course in the full-time program. If an individual successfully completes the Java Script course, and later enrolls in the full-time program, the individual is given credit for the Java Script course and need not take the course again.

5. The Programming in C++ course is not otherwise offered as part of the full-time program. The students in the course are required to create a program that performs a task specified by the instructor. The grade obtained by the student on the assignment is the students' "mid-term" grade. In addition, the students are required to pass a final examination on the course material. The two marks are averaged for a final mark. If a student achieves an acceptable over-all grade in the course, s/he is issued a certificate. If the student does not achieve an acceptable standard, s/he does not obtain a certificate.

6. The Supporting and Implementing Windows NT Workstation is not offered as part of the full-time program. The course is intended to provide individuals with knowledge of Microsoft computer operating systems, and to prepare them to successfully complete an examination as part of the Microsoft Certified Professional Program. The students are not required to produce a product or project. Nor are they required to write examinations. However, the course is offered on a pass/fail basis. Grades are assigned based on attendance and class participation.

Ruling Given

The supply of a service of instructing in courses is made by a vocational school that is regulated by provincial legislation governing vocational schools. Therefore, based on the facts set out above, the tax status of the courses is as follows:

The Enhancing Your Webpage with Java Script and Programming in C++ courses are exempt under section 8. Enhancing Your Webpage with Java Script is exempt under section 8 since it assists an individual to practise a trade or vocation and is otherwise offered as a credit in a full-time program of courses offered by the same institution and that is exempt under section 8.

Programming in C++ is also exempt under section 8, since it assists an individual to practise a trade or vocation, a certificate is issued upon successful completion of the course and the competence of the students is evaluated on a pass/fail basis, based on the evaluation of the student's performance on a combination of graded materials and examinations.

Supporting and Implementing Windows NT Workstation is not exempt by section 8, since it is a single, part-time course that is neither offered as a credit in the full-time computer programming program, nor offered on a pass/fail basis based on the evaluation of the student's performance on a single, or series of, tests, graded materials or projects. Courses that assign a pass/fail grade to students based on attendance alone, class participation alone, or a combination of attendance and class participation, do not lead to certificates that attest to the competence of individuals to practice a trade or vocation.

Sample Ruling 2

Statement of Facts

1. A school qualifies as a public college pursuant to section 1 of Part III of Schedule V, and is a public institution for the purposes of the ETA.

2. Pursuant to the Highway Traffic Act of Ontario, the Ministry of Transportation ("Ministry") requires successful completion of an air brake endorsement examination and an air brake demonstration prior to the issuance of the licence. The legislation does not require any conditions to be met before the examination or demonstration is attempted. The Ministry administers the requisite examination and demonstration.

3. The public college offers several courses designed to prepare students to write their examinations and take their road tests for commercial vehicle licences. One of the courses offered by the public college is an air brake endorsement course. The course is not offered on a pass/fail basis.

4. The curriculum and promotional materials of the public college indicate that the course provides skills related to the ability to gain or retain employment in the transportation industry. Therefore it relates to a trade or vocation.

5. As a matter of administrative policy, the Ministry will issue an air brake endorsement to an individual, without requiring the individual to undergo the requisite air brake endorsement examination and demonstration, where the individual presents to the Ministry a certificate indicating successful completion of an approved course offered by an approved institution.

6. The public college, and its air brake endorsement preparatory course, are both approved by the Ministry.

Ruling Given

The supply of a service of instruction in courses is made by a public college that is a public institution for the purposes of the ETA. Therefore, based on the facts set out above, the tax status of the courses is as follows:

The air brake endorsement preparatory course is exempt under section 8. While the air brake endorsement preparatory course is not required by legislation, the certificate issued by the public college upon completion of the course is accepted by a provincial licensing body in lieu of successful completion of a federally or provincially administered licensing examination.

Sample Ruling 3

Statement of Facts

1. A school qualifies as a vocational school pursuant to section 1 of Part III of Schedule V, and is registered under and governed by provincial legislation respecting vocational schools.

2. The Aeronautics Act, Canadian Aviation Regulations and Canadian Aviation Regulations Standards (collectively referred to as "federal legislation") set out certain written examination and flight test requirements that must be met in order for individuals to obtain various aeroplane pilots' licences. The examinations are administered by Transport Canada.

3. A vocational school operates as a flight school, and offers 2 full-time programs designed to prepare students to write their examinations and take their flight tests for the following flight licence examinations: Private Pilot Licence (Aeroplane) and Commercial Pilot Licence (Aeroplane).

4. There are several elements to the Commercial Pilot Licence (Aeroplane) program, including ground school preparatory courses and flight test preparatory courses. There is not a pass/fail element to the ground school training, however, it is required by the federal legislation. The flight training preparatory element is offered on a pass/fail basis based on the students' performance on a demonstration flight.

5. The vocational school supplies the full-time program, including these various elements, as a single supply.

6. In addition to the full-time programs, the vocational school offers two separate part-time preparatory courses for the following licence ratings: the VFR Over-the-Top Rating and the Instrument Rating. The federal legislation requires that the flight test preparatory courses be completed in order to obtain these ratings. In addition, the flight time required to obtain the Instrument Rating can be applied as credit toward the requirements of the Commercial Pilot's Licence (Aeroplane).

7. The part-time preparatory courses for the ratings are offered to persons seeking to obtain their commercial pilot's licence, as well as to holders of a private pilot's licence seeking additional privileges to their licence.

8. The curriculum and promotional materials of the vocational school indicate that the Commercial Pilot's Licence (Aeroplane) program provides skills related to the ability to gain or retain employment in the transportation industry. Therefore it relates to a trade or vocation.

Ruling Given

The supply of a service of instructing in courses is made by a vocational school, and the documents and ratings to which the courses lead are prescribed by federal regulation. Therefore, based on the facts set out above, and as outlined in Policy P-034R, the tax status of the supplies is as follows:

The courses leading to a Private Pilot's Licence (Aeroplane) are not exempt under section 8, since they do not have a direct link to skills that are recognized as relating to the ability to gain or retain employment. Specifically, the Department considers the Private Pilot's Licence (Aeroplane) to be taken for personal interest, providing the individual with the right to fly a vehicle, and therefore not related to a trade or vocation.

The full-time program of courses leading to the Commercial Pilot's Licence (Aeroplane) is exempt under section 8 since it relates to a trade or vocation, a certificate is issued upon its completion and the program evaluates the competence of the students on a pass/fail basis, based on the students' performance on an examination. In addition, the ground school element is required by federal legislation.

The VFR Over-the-Top Rating and the Instrument Rating are also exempt supplies, pursuant to section 8 since they relate to a trade or vocation, certificates are issued upon their completion and the flight test preparatory courses are required by federal legislation. In addition, the requirements of the Instrument Rating can be applied as credit towards the Commercial Pilot's Licence (Aeroplane), which is a full-time program offered by the same institution, that is otherwise exempt pursuant to section 8

Sample Ruling 4

Statement of Facts

1. A vocational school is registered under and governed by provincial legislation respecting vocational schools in a province.

2. The workers' compensation legislation of the province requires employers in the logging industry to employ a certain number of people with a minimum level of occupational first aid training.

3. In accordance with the requirements of the legislation, the vocational school offers a series of part-time occupational first aid courses, including Occupational First Aid Courses, Level 1 through 3 and Occupational First Aid Renewal or Recertification. Each course is offered on a pass/fail basis based on a project in which students are required to demonstrate and apply a first aid technique related to the logging industry. A certificate is issued at the end of each course stating that a student has successfully completed the course.

Ruling Given

The supply of a service of instructing in courses is made by a vocational school that is governed by provincial legislation respecting vocational schools. Therefore, based on the facts set out above, each of the above-noted occupational first aid courses are exempt. The curriculum and promotional materials of the vocational school indicate that the programs are intended to provide skills related to the ability to gain or retain employment in the logging industry, in accordance with the requirements of the provincial workers compensation legislation.

Further, since the competence of the students is evaluated on a pass/fail basis, based on the evaluation of the student's performance on a combination of tests and projects, the courses attest to the competence of the individual to practice the trade or vocation.

Section 8 of Part III of Schedule V to the ETA