GST/HST Ruling

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 114204

Dear [Client]:

Subject:	GST/HST RULING
		GST Ruling on Section 150 Election between Branches

Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to […][Foreign Co B Cdn Branch] and […][Foreign Co A Cdn Branch].

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

STATEMENT OF FACTS

Based on your letter of [mm/dd/yyyy], we understand […]: […] [information about [Foreign Co A Cdn Branch] and [Foreign Co B Cdn Branch]].

The following diagram provides a summary of the relationship between [Foreign Co A Cdn Branch] and [Foreign Co B Cdn Branch]:

				  [Foreign Holdings Co]
				       /	\
				      /	         \
			             /            \
			   [Foreign Co A]      [Foreign Co B]  
				  |	            |
                                  |                 |		[Foreign Country]
		__________________________________________________________________
				  |                 |		
				  |                 |		[Canada]
			  [Foreign Co A           [Foreign Co B
			   Cdn Branch] <---------  Cdn Branch]
				    	Services

RULING REQUESTED

You would like to know if […][Foreign Co A] and […][Foreign Co B] are entitled to make the election under section 150 of the ETA with respect to services supplied by [Foreign Co B Cdn Branch] to [Foreign Co A Cdn Branch] (and any other qualifying supply between the parties), so as to deem said supplies to be financial services.

RULING GIVEN

Based on the facts set out above, we rule that [Foreign Co A] and [Foreign Co B] are not entitled to make the election under section 150 of the ETA with respect to services supplied by [Foreign Co B Cdn Branch] to [Foreign Co A Cdn Branch].

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

EXPLANATION

It is our view that in order for the residency requirement in the definition of “closely related group” in subsection 123(1) to be met, the corporation must as a whole be resident in Canada since the election applies to the corporation as whole. Where a non-resident person has a permanent establishment in Canada, subsection 132(2) provides that the person is deemed to be a resident only in respect of the activities carried on through the permanent establishment. The person as a whole is not deemed to be resident in Canada. Accordingly, where a non-resident corporation has a permanent establishment in Canada and is deemed to have a restricted residency in Canada under subsection 132(2), that is, it is deemed to be resident in Canada in respect of, but only in respect of, the activities carried on through the permanent establishment, the residency requirement in the definition of “closely related group” in subsection 123(1) is not met.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4394. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Doris McMullan
Corporate Reorganizations Unit
Financial Institutions & Real Property Division
Excise and GST/HST Rulings Directorate

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 14th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 144811
Business Number: […]

Dear [Client]:

Subject:	GST/HST RULING
		83% Public Service Bodies’ rebate applicability 

Thank you for your letter of March 31, 2012, concerning the eligibility of […] (the Corporation) to claim an 83% public service body (PSB) rebate of the GST and the federal part of the HST with respect to the operation of a Community Health Centre. We apologize for the delay in our response.

The HST applies in the participating provinces at the following rates: 13% in Ontario; 14% in Prince Edward Island; and 15% in New Brunswick, Newfoundland and Labrador and Nova Scotia. The Government of Prince Edward Island has proposed to increase the rate of the HST in that province from 14% to 15% effective October 1, 2016. The GST applies in the rest of Canada at the rate of 5%.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

STATEMENT OF FACTS

It is our understanding that:

1. The Corporation is […][a] healthcare centre operating […][in Ontario].

2. The Corporation was incorporated in the Province of Ontario. […]

3. The Corporation is a registered charity for income tax purposes and is a charity for GST/HST purposes.

4. The Corporation is not registered for GST/HST purposes.

5. The Corporation has not been designated as a hospital authority for GST/HST purposes.

6. According to the Ontario Ministry of Health and Long-Term Care (MOHLTC) website, the Corporation is recognized as a Community Health Centre by the MOHLTC. That website indicates that Community Health Centres provide primary health and health promotion programs. Each Community Health Centre is an incorporated, non-profit agency, governed by a volunteer Board of Directors. Community Health Centres provide primary care services with an emphasis on health promotion and disease prevention. Community Health Centres also work with local residents to build the capacity of the community to improve its general health.

7. Services provided by the Corporation include the following:

* General healthcare, including health and nursing care, treatment and monitoring of temporary and chronic illness;

* 24 hour urgent on-call physician care;

* Preventative healthcare including general health teaching, routine physicals, vaccinations and screening for disease;

* Diabetes management and treatment services such as insulin initiation and adjudication, follow-up physician instructions and dietician counseling;

* […]

8. The services are provided by a multi-disciplinary team, including physicians, nurses, nurse practitioners, […], and social workers.

9. The Corporation does not provide chronic or palliative care requiring patients to stay overnight at the […][facility].

10. A physician is always available during the [facility’s] hours of service, which are mostly daytime, […]. There are [#] individual physicians on staff who collectively work the equivalent to [#] full-time physicians. The physicians are on call 24 hours per day, seven days/week.

11. The services rendered by the physicians to patients are part of a primary health care program. The physicians provide the same services as those a family physician/general practitioner would perform (e.g., primary health care, obstetric care, order prescriptions as required). Such physician services include diagnoses, treatment, general physical assessment and referrals to specialists.

12. […][Additional information about services rendered by physicians]

13. Besides purchases made for health care services, the Corporation also makes purchases related to the activities of healthcare promotion and patient outreach.

14. Other activities of the Corporation include teaching, […], nutrition education programs and cooking classes (e.g., to help diabetics learn what to cook; to teach those of low income), exercise programs […], and community wellness and health promotion workshops.

15. The Corporation receives funding from the provincial government to provide services. The audited financial statements for the year ended [mm/dd/yyyy], indicate that the Corporation received $[…] from the MOHLTC/[…] Local Health Integration Network as “Community Health Centre” funding.

16. […], the MOHLTC advised that the Corporation is approved as a health service provider, being a Community Health Centre that provides health services […].

RULING REQUESTED

You would like to know whether the Corporation is eligible to claim an 83% PSB rebate of the GST and the federal part of the HST, and as an entity resident in Ontario, an 87% PSB rebate of the provincial part of the HST for non-creditable tax charged in respect of property or services acquired in the course of its operations.

RULING GIVEN

Based on the facts set out above, we rule that the Corporation is a facility operator making facility supplies at […][a qualifying facility]. As such, it is eligible to claim an 83% PSB rebate of the GST and the federal part of the HST, and, as of July 1, 2010, an 87% PSB rebate for the provincial part of the HST (hereafter all referred to as the “83% PSB rebate”), for non-creditable tax charged in respect of purchases of property or services to the extent that the property or services are for consumption, use or supply in the course of activities engaged in by the Corporation in the course of operating the qualifying [facility] for use in making facility supplies, or of making facility supplies.

[…]

These rulings are subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

EXPLANATION

To be eligible for the 83% PSB rebate, an entity must be a “hospital authority”, a “facility operator” or an “external supplier”.

Hospital authority

A “hospital authority” is defined in subsection 123(1) as “an organization that operates a public hospital and that is designated by the Minister [of National Revenue] as a hospital authority” for GST/HST purposes.

The administrative criteria for designation as a hospital authority are set out in GST/HST Memoranda Series Chapter 25.2, Designation of Hospital Authorities. This memorandum is available on the Canada Revenue Agency’s website at http://www.cra-arc.gc.ca/E/pub/gm/25-2/README.html.

Since the Minister of National Revenue has not designated the Corporation as a “hospital authority”, it is not a hospital authority for GST/HST purposes.

Therefore, to determine whether the Corporation is eligible for the 83% PSB rebate, it is necessary to determine whether it is a “facility operator” or an “external supplier”.

Facility operator

A “facility operator” is defined in subsection 259(1) as meaning “a charity, a public institution or a qualifying non-profit organization (other than a hospital authority), that operates a qualifying facility”.

As the Corporation is a charity for purposes of the ETA, it meets the first requirement of the definition of “facility operator”. In order to meet the second requirement, it must operate a qualifying facility.

Qualifying facility

Subsection 259(2.1) sets out the criteria that must be met in order for a facility or part to be a qualifying facility, other than a public hospital, in a fiscal year, or any part of a fiscal year. A facility or part of a facility will be considered a qualifying facility if:

(a) supplies of services that are ordinarily rendered during that fiscal year or part to the public at the facility or part would be facility supplies if the references in the definition of “facility supply” in subsection 259(1) to “public hospital or qualifying facility” were references to the facility or part;

(b) an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part; and

(c) an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.

The requirements contained in (a) to (c) above must be met in order for a particular facility to be a “qualifying facility” for purposes of section 259. A discussion of these requirements follows.

Facility supply

Subsection 259(1) defines the term “facility supply” as an exempt supply (other than a prescribed supply) of property or a service in respect of which:

(a) the property is made available, or the service is rendered, to an individual at a public hospital or qualifying facility as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, which process

(i) is undertaken in whole or in part at the public hospital or qualifying facility,

(ii) is reasonably expected to take place under the active direction or supervision, or with the active involvement, of

(A) a physician acting in the course of the practise of medicine,

(B) a midwife acting in the course of the practise of midwifery,
(C) if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner acting in the course of the practise of a nurse practitioner, or

(D) a prescribed person acting in prescribed circumstances, and

(iii) in the case of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, requires or is reasonably expected to require that

(A) a registered nurse be at the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,

(B) a physician or, if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,

(C) throughout the process, the individual be subject to medical management and receive a range of therapeutic health care services that includes registered nursing care, and

(D) it not be the case that all or substantially all of each calendar day or part during which the individual stays at the public hospital or qualifying facility is time during which the individual does not receive therapeutic health care services referred to in clause (C), and

(b) if the supplier does not operate the public hospital or qualifying facility, an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.

A "physician" is defined in subsection 259(1) as “a person who is entitled under the laws of a province to practise the profession of medicine”.

As the Corporation does not provide chronic care at its [facility] that requires an individual to stay overnight, and because the Corporation operates its own [facility], subparagraph (a)(iii) and paragraph (b) of the definition of “facility supply” do not apply.

The definition of “facility supply” is to be applied on a supply-by-supply basis. To be a “facility supply”, the property made available or the service rendered to an individual at the qualifying facility must be an exempt supply (other than a prescribed supply).

Section 2 of Part II of Schedule V exempts a supply of an institutional health care service made by the operator of a health care facility if the institutional health care service is rendered to a patient or resident of the facility. The terms “institutional health care service” and “health care facility” are defined in section 1 of Part II of Schedule V.

Of note, if a supply is of an institutional health care service that falls within an exemption under section 2 of Part II of Schedule V, it is necessary to determine if the supply is excluded from the exemption because the supply is a cosmetic service supply or because the supply is not a qualifying health care supply, pursuant to sections 1.1 and 1.2 of Part II of Schedule V (Footnote 1) .

Section 1 of Part V.1 of Schedule V exempts supplies of property or services made by a charity unless specifically excluded under paragraphs (a) to (p) of section 1 of Part V.1 of Schedule V.

As the Corporation is a charity, the services supplied by it to patients would generally be exempt under section 2 of Part II or section 1 of Part V.1 of Schedule V.

Second, paragraph (a) of the definition of “facility supply” requires that the exempt property be made available or the exempt service be rendered to an individual at the qualifying facility. Therefore, only the exempt property made available or exempt services rendered by the Corporation to patients at the Corporation’s [facility] would meet this requirement. In other words, a service that is not rendered at the [facility] will not constitute a facility supply.

Third, the combination of paragraph (a), subparagraphs (a)(i) and (ii) and clause (a)(ii)(A) of the definition of “facility supply” further requires that the exempt property made available or exempt service rendered at the qualifying facility be part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative care. This process must be undertaken in whole or in part at the qualifying facility and reasonably be expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of the practise of medicine (or in certain circumstances, a midwife, a nurse practitioner or a prescribed person in prescribed circumstances).

The reference to “medically necessary process” in the definition of “facility supply” is qualified by the requirement that a physician be reasonably expected to be actively involved in the process. As such, only exempt supplies that are part of a medically necessary process of health care for individuals with active physician involvement will constitute facility supplies. Supplies that do not meet this requirement do not fall within the definition of “facility supply”. For example, supplies that a person may make in the course of such activities as research, nutrition education programs and cooking classes, exercise programs and community wellness and health promotion workshops would not fall within the definition of “facility supply”, and tax on purchases related to such activities would not be eligible for the 83% PSB rebate.

The Corporation offers primary health care services (e.g., diagnostic, treatment, general physical assessment, referrals) to patients registered with it. You have advised that the services rendered by the Corporation at its [facility] are comparable to those provided at a walk-in medical clinic where physicians and other health care professionals such as nurses, are on staff providing various health care services to individuals during set hours of operation.

Accordingly, exempt supplies of health care services provided by the Corporation at its [facility], that are part of a medically necessary process of health care for an individual for purposes described in paragraph (a) of the definition of “facility supply” and are rendered under the active direction or supervision, or with the active involvement, of a physician, will meet the requirements of subparagraphs (a)(i) and (a)(ii) and will, therefore, constitute facility supplies.

Qualifying funding

Paragraph (b) of the definition of “qualifying facility” in subsection 259(2.1) requires that an amount, other than a nominal amount, be paid or payable to the operator of the facility as “qualifying funding” in respect of the facility or part for the fiscal year or part.

Subsection 259(1) defines “qualifying funding” of the operator of a facility for all or part of a fiscal year of the operator as meaning a readily ascertainable amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the operator in respect of the delivery of health care services to the public for the purpose of financially assisting in operating the facility during the fiscal year or part, as consideration for an exempt supply of making the facility available for use in making facility supplies at the facility during the fiscal year or part or as consideration for facility supplies of property that are made available, or services that are rendered, at the facility during the fiscal year or part and is paid or payable by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and

(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.

The funding provided to the Corporation by the MOHLTC/[…] Local Health Integration Network under the Agreement meets the requirements of the definition of “qualifying funding” as it is a readily ascertainable amount of money paid or payable in respect of the delivery of health care services to the public in the circumstances described above.

Accreditation, licence or other authorization

Paragraph (c) of the definition of “qualifying facility” in subsection 259(2.1) requires that an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.

The [facility] operated by the Corporation […][meets] this criterion as the Corporation has authorization recognized by the MOHLTC respecting the [facility], as evidenced by the document described under Fact 16 above. The letter from the MOHLTC, dated [mm/dd/yyyy], supports the fact that the Corporation is a Community Health Centre authorized by the MOHLTC to provide health services. Further, the MOHLTC previously advised the CRA that Community Health Centres are health facilities and that it provides them funding so they may provide primary health care and health promotion services to local residents.

Summary of Facility Operator Criteria

To summarize, the Corporation’s [facility] [meets] all of the requirements of paragraphs (a) to (c) of the definition of “qualifying facility” in subsection 259(2.1) and, as a result, the Corporation is a facility operator for purposes of section 259. Accordingly, the Corporation qualifies for the 83% PSB rebate of non-creditable tax, to the extent that property or services are for consumption, use or supply in the course of activities engaged in by the Corporation in the course of operating the [facility] for use in making facility supplies, or of making facility supplies […].

Home medical supply

Section 259 also extends the 83% rebate to a “facility operator” that makes a home medical supply. Subsection 259(1) defines the term “home medical supply” as meaning an exempt supply (other than a facility supply or a prescribed supply) of property or a service

(a) that is made

(i) as part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability, or providing palliative health care, and

(ii) after a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances, has identified or confirmed that it is appropriate for the process to take place at the individual's place of residence or lodging (other than a public hospital or a qualifying facility),

(b) in respect of which the property is made available, or the service is rendered, to the individual at the individual's place of residence or lodging (other than a public hospital or a qualifying facility), on the authorization of a person who is responsible for coordinating the process and under circumstances in which it is reasonable to expect that the person will carry out that responsibility in consultation with, or with ongoing reference to instructions for the process given by, a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances,

(c) all or substantially all of which is of property or a service other than meals, accommodation, domestic services of an ordinary household nature, assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the individual, and

(d) in respect of which an amount, other than a nominal amount, is paid or payable as medical funding to the supplier in respect of the supply.

Medical funding

The term “medical funding” of a supplier in respect of a supply is defined in subsection 259(1) as meaning an amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the supplier in respect of health care services for the purpose of financially assisting the supplier in making the supply or as consideration for the supply by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and

(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.

[…]

Rebate regarding activities that qualify as “facility supplies” […]

As discussed above, the definitions of “facility supply” […] require that an exempt supply made to an individual at a qualifying facility […] be part of a medically necessary process of health care for the individual and meet certain criteria. As such, not all supplies made by the Corporation will automatically constitute facility supplies […]. The determination of whether a particular supply is facility supply […] is to be made on a case-by-case basis.

As the Corporation provides a variety of services, the 83% PSB rebate rate may not apply to all of its purchases. Pursuant to subsection 259(14), where all or substantially all of the non-creditable tax charged for a claim period is tax incurred in its capacity as a facility operator, the Corporation will be entitled to claim an 83% PSB rebate on all of the non-creditable tax charged for that claim period. In other words, if 90% or more of the non-creditable tax charged for a claim period is tax incurred in activities engaged in by the Corporation in the course of operating a qualifying facility for use in making facility supplies, or of making facility supplies […], then the Corporation will be entitled to claim an 83% PSB rebate on all of the non-creditable tax charged for that claim period. If less than 90% of non-creditable tax charged in a claim period is for these purposes, then the Corporation is entitled to claim an 83% PSB rebate to the extent the non-creditable tax charged is for activities engaged in by the Corporation in the course of operating a qualifying facility for use in making facility supplies, or of making of facility supplies […].

The Corporation (as a charity) may be entitled to claim a 50% rebate of the GST and the federal part of the HST and, as a resident in Ontario, may also be entitled to an 82% rebate of the provincial part of the HST (hereafter all referred to as the “50% charity rebate”), for non-creditable tax charged on purchases of property and services that are not eligible for the 83% PSB rebate.

Recap of Rebate Eligibility

In conclusion, the Corporation meets the definition of “facility operator” and therefore qualifies for the 83% PSB rebate in respect of non-creditable tax charged to the extent that it intends to consume, use or supply property or services in the course of activities engaged in by the Corporation in the course of operating its [facility] for use in making facility supplies, or of making facility supplies […]. For purchases of goods and services that may be made which do not qualify for the 83% rebate, the 50% charity rebate may be available, subject to rules for that rebate. For more information on the charity rebate, refer to GST/HST Guide RC4082, GST/HST Information for Charities, which can be found at http://www.cra-arc.gc.ca/E/pub/gp/rc4082/README.html.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4390. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

John Ware
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 Sections 1.1 and 1.2 of Part II of Schedule V

A supply that is a cosmetic service supply or a supply in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes is generally deemed under section 1.1 of Part II of Schedule V not to be included in Part II of Schedule V and is therefore not exempt under section 2 of Part II of Schedule V. A cosmetic service supply is defined in section 1 of Part II of Schedule V to mean "a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes."

In addition, section 1.2 provides that for the purposes of Part II of Schedule V, other than sections 9 and 11 to 14, a supply that is not a "qualifying health care supply" is deemed not to be included in Part II of that Schedule. Generally, supplies deemed not to be included in Part II of Schedule V would be taxable at the applicable rate of GST/HST, unless they are exempted pursuant to another provision.

The expression "qualifying health care supply" is defined in section 1 of Part II of Schedule V to mean, "a supply of property or a service that is made for the purpose of
(a) maintaining health,
(b) preventing disease,
(c) treating, relieving or remediating an injury, illness, disorder or disability,
(d) assisting (other than financially) an individual in coping with an injury,
illness, disorder or disability, or
(e) providing palliative health care."

For more information on the expression “qualifying health care supply”, please refer to GST/HST Notice 286, Draft GST/HST Policy Statement – Qualifying Health Care Supplies and the Application of Section 1.2 of Part II of Schedule V to the Excise Tax Act to the Supply of Medical Examinations, Reports and Certificates.

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 14th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 151960
Business Number: […]

Dear [Client]:

Subject:	GST/HST RULING
		Services relating to individuals with autism

Thank you for your letter of March 14, 2013, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your services for individuals with autism. We apologize for the delay in our response.

The HST applies in the participating provinces at the following rates: 13% in Ontario; 14% in Prince Edward Island; and 15% in New Brunswick, Newfoundland and Labrador and Nova Scotia. The Government of Prince Edward Island has proposed to increase the rate of the HST in that province from 14% to 15% effective October 1, 2016. The GST applies in the rest of Canada at the rate of 5%.

Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

STATEMENT OF FACTS

We understand the following:

1. You operate a business as a sole proprietor in British Columbia […].

2. You are a Board Certified Behavior Analyst (BCBA) specializing in Applied Behavior Analytic (ABA) services for children with autism. […].

3. You are a Behavioral Consultant, which is generally a synonymous term with BCBA. As such, you assess, design and monitor behavioral intervention for children and adolescents with autism.

4. You are qualified as an Autism Service Provider (ASP) on the Registry of Autism Service Providers (RASP) list. The RASP list is a list of qualified professionals providing treatment services to individuals with autism.

5. In order to qualify for funding received under the Ministry of Children and Family Development’s (Ministry’s) autism funding for the “Children Under Six” program, parents must hire behavior consultants and other professionals who are on the RASP list.

6. […][Outlines some types of client behaviors].

7. Your service is typically comprised of the development/design/assessment of individualized written, scripted programming/curriculum based on the principles of behavior analysis, designed to remediate deficits in the areas of academics, social skills, communication, self-help skills and leisure skills. This design takes up most of your time.

8. These programs are ultimately delivered to the child directly by the parents/guardian and Behavioral Interventionists (BIs) hired by the parents/guardian, who spend more time with the child than you and so implement the plan you develop.

9. In order to develop the programming based on each child’s current abilities, you assess his/her skills via direct observation and interviews of parents and/or significant others in the child’s life. You carry out functional assessments of the child’s problematic, excessive behaviors and develop behavioral interventions designed to decrease these behaviors and replace them with more functional, positive behaviors. You spend time with the child and observe behavior. The child’s initial program is designed using the results of the assessment.

10. You pass on plan/program information to the child’s parents/guardian so the plan/program can be implemented. This may involve some training of the child, but more so involves your relaying information about the instructional procedures for the behavior intervention plan to the child’s parents/guardian and to others who provide supervision and personal care to the child (referred to as tutors, instructors or BIs, all being synonymous terms, who are engaged at the decision of the parents). Your assistance with the plan/program implementation is ongoing, as you give tools and instruction to those working with the child on how to best work with the child. You observe and analyze. You monitor the plan/program regularly to determine if it needs modification.

11. BIs work directly with the child and their services are less costly than your services. They implement the plan/program that you develop. BIs are expected to exactly follow the developed plan/program in one-to-one sessions with the child. BIs possess no clinical expertise and are unqualified to provide services without the support of a Behavioral Consultant. They are care providers.

12. You sometimes provide instruction to school team members, depending on the child’s age and whether the family chooses. […].

13. You oversee and supervise the plan/program. You observe the plan/program over time to ensure it is run correctly, and adjust it as necessary. If the child is successful in a skill, you will move on to write a plan/program for a new skill. You monitor progress and results from the direct work performed by the parents/guardian and BIs to determine if the implemented plan/program needs adjustments. You meet with the BIs, parents/guardian and the child weekly to make adjustments to the plan/program design and/or behavioral interventions.

14. Parents connect with you through referrals from doctors or psychologists. A medical doctor or psychologist will diagnose a particular child as having autism, and tell the parents that the RASP list is a good place to look for a Behavioral Consultant. Doctors refer parents to you because you are on the RASP list.

15. You enter into a contract with the parents/caregiver of a child […].

This contract indicates, in part: […][the timing, approach and content of the services]

16. […][Details and guidelines about mutual expectations between the parties and the levels of service available]

17. The Ministry’s Autism Funding Unit allots funds for services for clients who are 19 years of age or under. Over 19, there is a different program that funds such services.

18. The Ministry funding is always insufficient to cover all the necessary programs of treatments. Where the funding directed to the child exceeds the approved limit, you invoice the child’s parents/guardian for the excess amounts. Invoices you send are in the child's name, with your authorization number. The parent submits the form to the Ministry’s Autism Funding Unit.

19. Invoices generally itemize activities. Program Development work time is listed on invoices as "Behavior Consultation", per the request of the Ministry’s Autism Funding Unit, which does not require much detail.

20. No provinces have licensing requirements for behavioral consultants/analysts.

21. The consideration for your services is not covered under the Medical Services Plan of British Columbia.

RULING REQUESTED

You would like to know whether supplies of your service are exempt from GST/HST.

RULING GIVEN

Based on the facts set out above, we rule that supplies of the above-described service made after February 11, 2014, are exempt from GST/HST, pursuant to section 14 of Part II of Schedule V.

However, supplies of the above-described service made prior to February 12, 2014, were taxable, pursuant to section 165.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

EXPLANATION

Generally, most supplies of property and services made in Canada are subject to GST/HST, pursuant to section 165, unless they are specifically exempt under Schedule V. Part II of Schedule V sets out the health care services that are exempt from GST/HST.

Effective for supplies made after February 11, 2014, section 14 of Part II of Schedule V exempts:

“a supply (other than a zero-rated supply or a prescribed supply) of a training service, or of a service of designing a training plan, if

(a)     the training is specially designed to assist individuals with a disorder or disability in coping with the effects of the disorder or disability or to alleviate or eliminate those effects and is given or, in the case of a service of designing a training plan, is to be given to a particular individual with the disorder or disability or to another individual who provides personal care or supervision to the particular individual otherwise than in a professional capacity; and

(b) one of the following circumstances exists:

(i)     a person acting in the capacity of a practitioner, medical practitioner, social worker or registered nurse, and in the course of a professional-client relationship between the person and the particular individual, has certified in writing that the training is or, in the case of a service of designing a training plan, will be an appropriate means to assist the particular individual in coping with the effects of the disorder or disability or to alleviate or eliminate those effects,

(ii)     a prescribed person, or a member of a prescribed class of persons, has, subject to prescribed circumstances or conditions, certified in writing that the training is or, in the case of a service of designing a training plan, will be an appropriate means to assist the particular individual in coping with the effects of the disorder or disability or to alleviate or eliminate those effects, or

(iii) the supplier

(A) is a government,

(B) is paid an amount to make the supply by a government or organization administering a government program targeted at assisting individuals with a disorder or disability, or

(C) receives evidence satisfactory to the Minister that, for the purpose of the acquisition of the service, an amount has been paid or is payable to a person by a government or organization administering a government program targeted at assisting individuals with a disorder or disability.”

Effective for supplies made after February 11, 2014, section 15 of Part II of Schedule V provides that:

“a training service or a service of designing a training plan is not included in section 14 if the training is similar to training ordinarily given to individuals who

(a) do not have a disorder or disability; and

(b) do not provide personal care or supervision to an individual with a disorder or disability.”

Section 15 of Part II of Schedule V is not applicable in this case since the training involved is not similar to training ordinarily given to individuals who do not have a disorder or disability.

The GST/HST applies to supplies of property and services. A supply is defined in subsection 123(1), in part, as “the provision of property or a service in any manner”.

Where a supplier provides a combination of service elements to its clients, it is important to determine if the supplier has made single or multiple supplies. As explained below, the tax status of training services and of services of designing a training plan were different for the period before February 12, 2014. As you provide an element of training services, it is important to properly characterize the supplies you make to be able to apply the ETA provisions to your situation.

Whether a person is making a single supply or multiple supplies is a question of fact. The common law principles of single supply and multiple supplies are described in GST/HST Policy Statement P-077R2, Single and Multiple Supplies.  The characterization of a transaction as a single supply or multiple supplies considers the interrelationships among the various elements of the agreement, the purpose of an agreement, the needs of the customer, and the economic reality of the transaction. There is a single supply where one or more elements constitute the supply and any remaining elements serve only to enhance the supply. Where the essential elements are part of a single composite supply, that single supply cannot be artificially split into separate supplies.

In addition, an important question to consider is what has been supplied for the payment made. Policy Statement P-077R2 also explains that the way in which the consideration for a transaction is set out does not in itself determine whether there are one or more supplies. A single consideration does not automatically mean that there is one supply.  Equally, separately identified consideration for certain elements do not necessarily mean that there are two or more supplies. Thus, one cannot rely solely on the breakdown of charges in an agreement or on an invoice to conclude that a supplier is making multiple supplies of different goods and/or services.

Based on the facts set out above, we conclude that you are making a single supply of a training plan/program design service.

To arrive at this conclusion, we considered information obtained from your letter, phone conversations with you, the sample agreement you have with parents/guardians, and the […][guidelines and mutual expectations between the parties]. Your main activity is training plan/program design. There are numerous work elements, such as training or instruction, included as part of this overall supply of training plan/program design, however, we do not consider that these individual tasks or elements carry sufficient weight on their own to warrant being considered separate supplies. Your work revolves around the effectiveness of the plan/program (e.g., assessment to help design plan/program, observation, evaluation of plan/program, modification of plan/program). The dominant aspect of your work revolves around the status of the designed plan/program. The various work elements (e.g., training, etc) are integral components of the training plan/program design services that are all intertwined, interdependent, and inextricably bound up with each other. Therefore, we conclude that the characterization of the supplies would be of training plan/program design services.

The training plans/programs you design are for training that is specially designed to assist individuals with autism in coping with its effects or to alleviate or eliminate those effects. The training is to be given to a particular individual with autism or to another individual who provides personal care or supervision to the particular individual otherwise than in a professional capacity (e.g., parents/guardians). Therefore, the criterion of paragraph 14(a) of Part II of Schedule V is met.

The funding for the acquisition of your training plan/program design services comes from the Province of British Columbia. Where funding is not contributed (e.g., due to the approved limit being exceeded), medical doctors or psychiatrists have referred parents to you as your training plan/program design services are an appropriate means to assist the particular child with autism in coping with the effects of the disorder or disability or to alleviate or eliminate those effects. Therefore, the criterion of paragraph 14(b) of Part II of Schedule V is met.

Since the criteria under section 14 of Part II of Schedule V (in its current form) are satisfied, supplies of your services of training plan/program design are currently exempt. Therefore, supplies of training plan/program design services described in section 14 of Part II of Schedule V, made after February 11, 2014, are exempt from GST/HST.

However, prior to February 12, 2014, there were no exemptions in the ETA that covered such supplies of training plan/program design services. Prior to February 12, 2014, section 14 of Part II of Schedule V exempted supplies of training services, but did not exempt supplies of designing a training plan/program. Since the supplies you make are of training plan/program design services, section 14 of Part II of Schedule V did not apply to exempt your supplies of services prior to February 12, 2014.

Since training plan/program design services were not included in the exemption prior to February 12, 2014, they were taxable when made before February 12, 2014 […]

It should also be noted that, in the event where the B.C. provincial government pays the child/parent/guardian directly, you are required to maintain satisfactory documentary evidence to that effect in order to substantiate that the condition in the exempting provision has been met.

Please see GST/HST Info Sheet GI-113, Specially Designed Training to Assist Individuals with Autism, at http://www.cra-arc.gc.ca/E/pub/gi/gi-113/README.html, for more information.

[…]

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4390. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

John Ware
Health Care Sectors
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 163518
Business Number: […]

Dear [Client]:

Subject:	GST/HST RULING
		Application of GST/HST to […][a Bread Product]

Thank you for your fax of July 15, 2014, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of […] (the Product).

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

STATEMENT OF FACTS

Our understanding of the facts is as follows:

1. You are a sole proprietorship (operating as […]) registered for GST/HST purposes.

2. You describe the Product as organic bread […]

3. The Product is further described as a dinner-sized bread weighing […] grams and available in salty and sweet varieties.

4. The dough used to make the Product is made up of organic flour, water, organic canola oil, organic milk, salt, organic sugar and yeast.

5. In baking the Product, the dough is […]

6. There are 3 varieties of the Product:

1. […] – […][describes ingredients of variety 1];
2. […] – […][describes ingredients of variety 2];

3. […] – […][describes ingredients of variety 3].

7. The shelf-life of the Product is only one day as no preservatives are added to the dough.

8. The Product is sold fresh and warm. Once the Product cools down, you discount the price as it is meant to be eaten warm.

9. […].

RULING REQUESTED

You would like to confirm the tax status of the Product.

RULING GIVEN

Based on the facts set out above, we rule that supplies of the Product are subject to the GST/HST under subsection 165(1) and 165(2) of the ETA. They are not zero-rated under section 1 of Part III of Schedule VI to the ETA.

EXPLANATION

Generally, in accordance with section 165, every recipient of a taxable supply made in Canada is required to pay GST/HST on the value of the consideration for the supply. Zero-rated supplies (listed in Schedule VI to the ETA) are subject to the GST/HST at the rate of 0%. Exempt supplies (listed in Schedule V to the ETA) are not subject to the GST/HST.

Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section.

Paragraph 1(o) excludes from zero-rating “food or beverages heated for consumption”. Food or beverages heated for consumption include food supplied by establishments that have been heated or kept hot so that it can be consumed hot.

The tax status of any cooked foods depends on the way they are sold. For example:

• if they are sold from a heated cabinet, they are not zero-rated;
• if the establishment has a separate take-out counter, any hot foods sold from this counter are not zero-rated; or
• if the food and beverages are purchased and heated at the point of purchase, they are not zero-rated.

Food heated for consumption can be differentiated from food that is hot as a result of the cooking process. Food that is hot as a result of the cooking process, while still hot, may be zero-rated if it is hot only as a result of that cooking process and has been randomly chosen by the purchaser.

In determining whether a food item has been heated for consumption or is hot as a result of the cooking process, the specific facts must be considered. It is our opinion that the supplies of the Product are considered goods heated for consumption. Measures have been implemented to ensure that the Product is generally sold hot. One such measure is having a baking oven […][on-site] to ensure fresh batches of the Product can be baked in front of the customer.

Furthermore, it is our view that the Product is cooked on a “just-in-time” basis. A day’s supply of the Product is not baked at the beginning of the day so that it would only be by chance that a customer would purchase the Product while hot. A fresh supply of the Product is made in front of the customer anytime an order is received. We think it is reasonable to say that the average customer purchasing from you would prefer to eat the Product while hot. This is evidenced by the fact that cold or even lukewarm supplies of the Product are sold at a discount.

As supplies of the Product are normally made while the Product is fresh and hot, the Product is excluded from zero-rating under paragraph 1(o) of Part III of Schedule VI to the ETA. The Product is taxable […].

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-721-5220. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Zubair Patel, CGA
GST/HST Rulings Officer
Basic Groceries and Recapture of Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 164658

Dear [Client]:

Subject:	GST/HST RULING
		Eligibility for input tax credits (ITCs) on amounts paid to law firm

Thank you for your letter of [mm/dd/yyyy], concerning your eligibility to claim ITCs for $[…] in HST you paid to […] (the Law Firm).

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

STATEMENT OF FACTS

From your letter and documentation, we understand that:

1. You operate a taxi business and, at all relevant times, were registered for GST/HST.

2. On [mm/dd/yyyy], while you were operating your taxi, you were involved in an accident. As a result, you could not work and did not earn any business income for about two years.

3. You paid the Law Firm to seek compensation for your losses arising from the accident. For example, the Law Firm’s statements of account itemized the following services:

* Drafting and issuing Statement of Claim;
* Reviewing all pleadings;
* Attendance at Examinations for Discovery;
* All settlement negotiations;
* Reviewing all accident benefits documentation; and
* Settling of claim for civil damages.

4. The statement of account for [mm/dd/yyyy], indicates that the Law Firm received $[…] in trust as settlement and that the Law Firm’s fees of $[…], HST of $[…], and two other disbursements ($[…] paid to […][A] and $[…] paid to […][B]) were deducted from that amount and the remainder of $[…] was paid to you.

5. The statement of account for [mm/dd/yyyy], indicates that the Law Firm received $[…] in trust from […][C] as settlement. It shows that the Law Firm’s fees of $[…], HST of $[…], disbursements of $[…], and HST of $[…] were deducted from that amount and the remainder of $[…] was paid to you.

6. On [mm/dd/yyyy], you signed a Release indicating that, in return for a payment in the amount of $[…], inclusive of all claims, pre-judgment interest, costs, disbursements and taxes thereon, you released and forever discharged […][D] from all claims for any and all losses sustained by you in consequence of a motor vehicle accident which occurred on or about [mm/dd/yyyy], and described in the action in […][a particular court in Province 1] bearing court file no.: […], commenced in […][City 1, Province 1].

RULING REQUESTED

You would like to know if you can claim an ITC of $[…] for the [total amount of] HST paid to the Law Firm.

RULING GIVEN

Based on the facts set out above, we rule that you are not eligible to claim ITCs for the HST paid to the Law Firm.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

EXPLANATION

Subsection 169(1) provides that a GST/HST registrant is generally eligible to claim an ITC for the GST/HST paid or payable on property and services based on the extent to which the property or service is acquired for consumption, use or supply in the course of the registrant’s commercial activities.

Further, subsection 141.01(2) provides that a person is deemed to have acquired property or a service for consumption or use in commercial activities only to the extent that the property or service is acquired for the purpose of making taxable supplies for consideration (e.g., fees or charges) in the course of an endeavour (e.g., a business) of the person. To the extent that the property or service is acquired for the purpose of making supplies in the course of an endeavour that are not taxable supplies made for consideration, or for a purpose other than making supplies, the person is considered to have acquired the property or service for consumption or use otherwise than in commercial activities.

The settlement amount paid to you was compensatory. As the Law Firm’s services were acquired by you for consumption or use otherwise than in making taxable supplies for consideration, the conditions of subsection 169(1) are not met. As such, you are not entitled to claim an ITC for any of the HST paid on the Law Firm’s fees and disbursements.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (780) 495-5512. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Heather Gibbard
Insurance and ITC Allocation Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 165068
Business Number: […]

Dear [Client]:

Subject:	GST/HST RULING
      		Application of GST/HST to Services of Instruction

Thank you for your [correspondence] of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to services of instruction in Advanced Cardiac Life Support (ACLS).

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

STATEMENT OF FACTS

Based on your fax and information from your website, we understand the facts are as follows:

1. You are a sole proprietor that operates as […][the Company].

2. Your business was set up to teach ACLS […].

3. The Heart and Stroke Foundation provides a certification upon completion of the ACLS course.

4. The courses are provided at […] (the Hospital).

5. The Hospital pays for the courses provided to its staff.

6. […].

7. […].

RULING REQUESTED

You would like to know whether the courses in Advanced Cardiac Life Support you provide are exempt from GST/HST under section 8 of Part III of Schedule V.

RULING GIVEN

Based on the facts set out above, we rule that your services of instruction in Advanced Cardiac Life Support are taxable supplies and are not exempt under section 8 of Part III of Schedule V.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

EXPLANATION

Part III of Schedule V exempts certain supplies related to educational services provided by educational institutions. In particular, services of instruction provided to students who have enrolled in eligible courses or programs offered by certain educational institutions, such as elementary and secondary schools, vocational schools, public colleges and universities, are exempt. For purposes of the GST/HST, the tax treatment of instructional services may vary depending on the nature of the supplier (for example, type of educational institution) and the types of services that are provided (for example, instruction that is recreational vs occupational).

Instructional services provided by a self-employed coach, instructor, teacher or other type of individual educator are normally taxable supplies unless they are music lessons, or services of tutoring or instructing an individual in “a course that is approved for credit by, or that follows a curriculum designated by,” an [elementary or secondary] school authority.

Section 8 of Part III of Schedule V provides, in part, a specific exemption from GST/HST for a supply made by a vocational school 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, except where the supplier has made an election under this section in prescribed form containing prescribed information.

For an organization to be considered a vocational school and thus be treated in a manner similar to a public college or similar institution, it must be established and operated primarily to provide correspondence courses, or instruction in courses that develop or enhance students’ occupational skills. To be exempt, courses must be designed primarily to develop occupational skills and must be part of a program leading to a diploma or certification of competence similar to that provided by a public college or similar institution. While standalone ACLS courses may be beneficial and in some cases a job requirement, on their own they would not be considered to lead to an occupation. Hence, a supplier that only offers courses that occur during a brief, concentrated period of time, such as a day or several consecutive days, cannot offer a progression and depth of learning that would lead to a diploma or certification of competence in a specific vocation.

Generally, vocational schools have all or some of the following characteristics:

* The organization is normally a corporation or an unincorporated association of some type, not an individual;
* The organization identifies or advertises itself as a school and is known publically as a school;
* The organization offers courses or programs following a scheduled curriculum under which the courses progress in the depth of the learning from semester to semester;
* The organization has a regularly enrolled student body who form a class or classes;
* The organization is paid by the students, or their parents if they are under the provisional age of majority, for the service of instruction they receive; and
* The organization owns, rents or leases a place from where students are provided correspondence courses or instruction in courses.

In this instance, it has not been established that you are in fact operating a vocational school. In addition, it is our view that your services of instruction would not be 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 a trade or vocation. As such, the services of instruction are not exempt under section 8 of Part III of Schedule V.

ADDITIONAL INFORMATION

In general, every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to register for GST/HST purposes. An exception to this requirement is where a person is a “small supplier”. A person (who is not a charity or public service body) is a small supplier during any particular calendar quarter and the following month if the total value of the consideration for world-wide taxable supplies (other than supplies of financial services, sales of capital property, and goodwill attributable to the sale of a business) made by the person, or an associate of the person, at the beginning of the particular calendar quarter, that became due, or was paid without becoming due, in the previous four calendar quarters does not exceed $30,000.

A person must make a determination at the end of each calendar quarter as to whether they continue to qualify as a small supplier. A person who no longer qualifies as a small supplier is required to register and must apply to the Minister for registration before the thirtieth day after the day the person first makes a taxable supply in the course of the commercial activity in Canada otherwise than as a small supplier.

For further information on GST/HST registration, collection and remittance of tax, and input tax credit entitlement, please refer to Guide RC4022, General Information for GST/HST Registrants. This publication is available on the CRA’s website at: www.cra-arc.gc.ca/E/pub/gp/rc4022.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9264. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

C. Christmas
Aboriginal Affairs and Educational Sector Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 165356
Business Number: […]

Dear [Client]:

Subject:	GST/HST RULING
		Application of GST/HST to Services of Instruction in First Aid and Safety

Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to services of instruction in first aid and safety. We apologize for the delay in our response.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

STATEMENT OF FACTS

Based on your letter and information from your website, we understand the facts are as follows:

1. […][The Company] (the Company) was incorporated as of [mm/yy].

2. […].

3. The Company has [#] training facilities in […][Canadian Cities], […][and also supplies training services at other locations in Canada].

4. […], the Company offers […][XYZ] industry [first aid and] safety training programs.

5. […][The Company offers courses of various duration].

RULING REQUESTED

You would like to know whether the services of instruction in first aid and safety that the Company provides are exempt from GST/HST under section 8 of Part III of Schedule V.

RULING GIVEN

Based on the facts set out above, we rule that the services of instruction provided by the Company are taxable supplies and are not exempt under section 8 of Part III of Schedule V.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

EXPLANATION

Part III of Schedule V exempts certain supplies related to educational services provided by educational institutions. In particular, services of instruction provided to students who have enrolled in eligible courses or programs offered by certain educational institutions, such as elementary and secondary schools, vocational schools, public colleges and universities, are exempt. For purposes of the GST/HST, the tax treatment of instructional services may vary depending on the nature of the supplier (for example, type of educational institution) and the types of services that are provided (for example, instruction that is recreational vs occupational).

Section 8 of Part III of Schedule V provides, in part, a specific exemption from GST/HST for a supply made by a vocational school 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, except where the supplier has made an election under this section in prescribed form containing prescribed information.

For an organization to be considered a vocational school, and thus be treated in a manner similar to a public college or similar institution, it must be established and operated primarily to provide correspondence courses, or instruction in courses, that develop or enhance students’ occupational skills. To be exempt, courses must be designed primarily to develop occupational skills and must be part of a program leading to a diploma or certification of competence similar to that provided by a public college or similar institution. While standalone first aid and safety courses may be beneficial and in some cases a job requirement, on their own they would not be considered to lead to an occupation. Hence, a supplier that only offers courses that occur during a brief, concentrated period of time, such as a day or several consecutive days, cannot offer a progression and depth of learning that would lead to a diploma or certification of competence in a specific vocation.

Generally, vocational schools have all or some of the following characteristics:

* The organization is normally a corporation or an unincorporated association of some type, not an individual;
* The organization identifies or advertises itself as a school and is known publically as a school;
* The organization offers courses or programs following a scheduled curriculum under which the courses progress in the depth of the learning from semester to semester;
* The organization has a regularly enrolled student body who form a class or classes;
* The organization is paid by the students, or their parents if they are under the provisional age of majority, for the service of instruction they receive;

* The organization owns, rents or leases a place from where students are provided correspondence courses or instruction in courses.

In this instance, it has not been established that the Company is in fact operating a vocational school. In addition, it is our view that the services of instruction would not be 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 a trade or vocation. As such, the services of instruction are not exempt under section 8 of Part III of Schedule V.

ADDITIONAL INFORMATION

In general, every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to register for GST/HST purposes. An exception to this requirement is where a person is a “small supplier”. A person (who is not a charity or public service body) is a small supplier during any particular calendar quarter and the following month if the total value of the consideration for world-wide taxable supplies (other than supplies of financial services, sales of capital property, and goodwill attributable to the sale of a business) made by the person, or an associate of the person at the beginning of the particular calendar quarter, that became due, or was paid without becoming due, in the previous four calendar quarters does not exceed $30,000.

A person must make a determination at the end of each calendar quarter as to whether they continue to qualify as a small supplier. A person who no longer qualifies as a small supplier is required to register and must apply to the Minister for registration before the thirtieth day after the day the person first makes a taxable supply in the course of the commercial activity in Canada otherwise than as a small supplier.

For further information on GST/HST registration, collection and remittance of tax, and input tax credit entitlement, please refer to Guide RC4022, General Information for GST/HST Registrants. This publication is available on the CRA’s website at: www.cra-arc.gc.ca/E/pub/gp/rc4022.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9264. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

C. Christmas
Aboriginal Affairs and Educational Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 168474
Business Number: […]

Dear [Client]:

Subject:	GST/HST RULING
		Psycho-Vocational Rehabilitation Assessment Services and Job Search Support Services

This is in regard to your request for a ruling concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to payments made to [the] […]([…][Contractor]) by […]([…][X]) for Psycho-Vocational Assessment Services and Job Search Support Services further to the Memoranda of Agreement which were faxed to the CRA on December 15, 2014 and December 19, 2014.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

STATEMENT OF FACTS

We understand

1. […]

2. […]

3. […]

Psycho-Vocational Assessment Services

4. [X] and (the “Contractor”) entered into a Memorandum of Agreement (MOA1), effective [mm/dd/yyyy] to [mm/dd/yyyy] entitled “Psycho-Vocational Assessment Services”. The terms of the MOA1 include the following:

a) Section 1.1 states “The Contractor shall provide to [X] the specific Psycho-Vocational Assessment Services as described in Schedules A, A1, C, D, Attachments 1, 2, 3, 4 and at the rates set out in Schedule B. The Schedules and Attachments are attached to and form part of this Agreement.”

b) Section 1.3 states “This Agreement is a non-exclusive Agreement, and the Contractor acknowledges that Psycho-Vocational Assessment Services are provided to [X] by other Contractors. The Contractor agrees and acknowledges that [X], its directors, officers, employees, or agents have not made any representations or warranties in regard to the quantity of referrals/requests for specific Psycho-Vocational Assessment Services during the Term of this Agreement. The Contractor acknowledges that any referrals or requests for Psycho-Vocational Assessment Services made by [X] under this Agreement are only as requested by [X]. The Contractor shall only provide Services to a […][client] after receiving authorization from a […].”

c) Section 1.6 states, in part, “[X] reserves the right to provide referrals to other providers of the Services and/or to initiate a competitive process to identify other providers of the Services where the Contractor is unable to provide the Services in a timely manner, does not meet reasonable referral acceptance rates, or provides Services in an unsatisfactory manner.”

d) Section 4.3 states “The Contractor shall reference the Services provided to only one (1) [client] in an invoice. Where a Contractor is providing Services for multiple [clients] simultaneously, the Contractor shall submit a separate invoice for Services rendered for each [client].”

e) Section 4.6 states “The Contractor shall not charge any fee or charges associated with the Services provided under this Agreement directly or indirectly to the [client] or, any other individual, business or other entity.”

f) Section 5.1 states “[X] shall pay the Contractor in accordance with Schedule B for providing Services only if the Services have been authorized by [X] and if the Contractor has provided the Services in compliance with the terms and conditions of this Agreement.”

g) Section 10.1 states “During the Term of this Agreement, the Contractor shall ensure that the Contractor, their employees, servants, agents and/or subcontractors providing Services have the appropriate professional qualifications, skills, experience and licenses as required and defined for Services provided in Schedule A.”

h) Section 11.1 states “The Contractor shall maintain all records and books concerning the Services provided and fees invoiced by the Contractor under this Agreement.”

i) Section 11.4 states “[X] may, at any time during the Term of this Agreement, audit all of the Contractor’s accounting records and books concerning Services provided under this Agreement, including any and all documents and other materials, in whatever form they may be kept, upon which the accounting records and invoices are based.”

j) Section 13.1 states “[X] shall have the right to access the Contractor’s locations during regular business hours for the purpose of ensuring that the quality of the Services provided are satisfactory to [X]. When requested by [X], the Contractor shall meet with representatives of [X] to review the quality of the Services and attend to any matter of concern to [X].”

k) Section 24.1 states “The Contractor is an independent Contractor and neither the Contractor, nor their directors, officers, employees, servants, agents, or subcontractors are the directors, officers, employees, or agents of [X].”

l) Section 31.1 states “[X] reserves the right to terminate all or any part of this Agreement upon the occurrence of any of the following events that includes, but is not limited to:

(a) the Contractor’s failure to deliver Services in accordance with the terms of this Agreement to the satisfaction of [X]; or

(b) the Contractor’s failure to ensure that the Services are provided by the appropriate qualified and/or certified personnel and in compliance with regulations and/or licenses as required by this Agreement; or

(c) the Contractor’s failure to meet the Performance Standards as outlined …”

m) Schedule A to the MOA1 entitled “Psycho-Vocational Assessment Services” includes the following:

i. Section 1.1 states “Psycho-Vocational Assessment is a specialized testing intended for [clients] with suspected or confirmed learning disabilities, post-traumatic stress, English as a second language, pain-focused behaviour, or any other psychological or emotional barrier which would hinder routine psychometric testing. The assessment involves in-depth vocational assessment by a qualified Psychologist, to ensure that the above issues are identified and addressed for purposes of vocational rehabilitation planning and development of the vocational rehabilitation plan.

Psycho-Vocational Testing may include, but is not limited to, the administration of a battery of specialized tests…such as interest, aptitude, achievement, personality, etc. to identify and address specific issues related to vocational planning. Learning disability testing may also be included where specifically requested by […] and identified in the referral form.”

ii. Section 1.3 states “The Provider will ensure that validated and published test protocols are adhered to for each test and/or inventory administered.

In addition the contract-defined requirements, Psycho-Vocational Assessment services must be provided in accordance with the professional standards and Code of Conduct of the professional governing body/college for the provider.”

iii. Section 2.1.1 states “[X] is not bound by any estimated quantities or referrals or work volumes.”

iv. Section 2.1.2 states “Referrals will be distributed to Contractors based upon, but not limited to:

		* Proximity of the [client] to the nearest service locations;
		* Specific [client] requirements (i.e. language, etc.);
		* Availability of the Contractor to provide the specific services required by the [client];
		* Timeliness of referral to admission interval within a region.”

v. Section 2.1.3 states “[X] reserves the right to change the referral distribution process at any time as it deems necessary to meet operational requirements.”

vi. Section 2.2.1 states “The [client] must be referred for Services by [X]; the Contractor may only administer tests, assessments, or Services which are specifically identified in the referral form received.”

vii. Section 2.4.1 states “The Contractor must acknowledge a referral through the […] Portal within twenty-four (24) hours, excluding Saturday, Sunday and […][Province 1] statutory holidays. If a Contractor fails to acknowledge a referral within the timelines stated the referral may be redistributed.”

viii. Section 2.5 states “[X] may monitor referral acceptance rates, as measured by the percentage of referrals received that are accepted and booked for an appointment. Contractors are expected to maintain a reasonable referral acceptance rate as compared to their network peers.”

ix. Section 3.1 states “The Contractor must complete a final Psycho-Vocational Assessment report summarizing the final test results and conclusions.”

x. Section 3.3 states “The Contractor’s Psycho-Vocational Assessment report must be submitted to [X] within thirty (30) business days from the date of referral.”

xi. Subsection 3.6 states “The Contractor’s Psycho-Vocational Assessment report, submitted…must include, but is not limited to, all of the following information:

		* Service Delivery Information (Date of Initial Contact, Testing Start Date, Testing Completion Date)
		* Relevant background information
		* Protocol
		* Test(s) administered
		* Test results including standardized scores
		* Summary of findings
		* Recommendations and/or Conclusions
		* Response(s) to specific referral questions
		* Additional relevant information”

xii. Section 4.1 states “This Service must be delivered by [X] Approved Personnel meeting the following qualification requirements:

4. 1.1 Must be performed by a registered Psychologist who is a current member in good standing with […]

n) Section 7.1 states “The Contractor acknowledges that [X] Officer shall not have authority to bind [X] and to deviate from Fee Schedule B. No additional charges shall be invoiced to or payable by [X].” Schedule B includes the following fees for each [client] referred and for whom services/programs are appropriately delivered:

	* Psycho-Vocational Testing/Assessment 				$[…] flat fee
	* Psycho-Vocational Testing/Assessment Plus Disability Testing 	$[…] flat fee
	* Psycho-Vocational Testing/Assessment – Document review    	$[…] flat fee
    	(generally paid where a referral results in a cancelled appointment)

o) Section 7.2 states “No additional charges shall be invoiced to [X] without the prior authorization by [X] Manager of […]…”

p) Section 7.3 states “The flat fee for Psycho-Vocational Assessment Services is inclusive of all elements except travel time and expenses outlined in Schedule A1...”

q) Attachment 3 to MOA1 entitled “Reference – Roles and Responsibilities” includes the following:

The […] in […] “is responsible for the vocational rehabilitation decisions under the claim. […] is the primary vocational rehabilitation professional responsible for ensuring the delivery of high quality vocational rehabilitation to assist [clients] in achieving timely and safe return to work and other appropriate rehabilitation outcomes.

To this end, […] may utilize the […] to deliver specific services required for the vocational planning process or as part of the Rehabilitation Plan…

[…] is responsible to provide specific, high quality, Psycho-Vocational Assessment Services under the direction of […] in Vocational Rehabilitation Services. In so doing, […]…

* Delivers approved Psycho-Vocational Assessment Services as outlined in the Agreement with [X];

* Communicates and involves the [client], […] and any other relevant stakeholders in the vocational Service where appropriate;

* Completes and submits reports on a timely basis.

[…] will ensure that Services are delivered as per the contract defined terms, provide recommendations that are appropriate to the [client]’s individual circumstances and entitlement level under the claim, and strive to obtain the [client]’s active participation throughout the provision of Services.”

Job Search Support Services

5. [X] and […](“Provider/Contractor”) entered into a Memorandum of Agreement (MOA2), effective [mm/dd/yyyy] to [mm/dd/yyyy], entitled “Job Search Support Services”. The terms of MOA2 include the following:

a) Section 1.1 states “The Provider shall provide to [X] the specific Job Search Support Services as described in Schedules A, C, Attachments 1, 2, 3, and […] and at the rates set out in Schedule B. The Schedules and Attachments are attached to and form part of this Agreement. The Provider acknowledges by executing this Agreement that […] forms part of this Agreement...”

b) Section 1.3 states “This Agreement is a non-exclusive Agreement, and the Provider acknowledges that Services are provided to [X] by other Providers. The Provider agrees and acknowledges that [X], its directors, officers, employees, or agents have not made any representations or warranties in regard to the quantity of referrals/requests for Services during the Term of this Agreement. The Provider acknowledges that any referrals or requests for Services made by [X] under this Agreement are only as requested by [X]. The Provider shall only provide Services […] after receiving authorization from […].”

c) Section 1.6 states “[X] reserves the right to provide referrals to other Providers of the Services and/or to initiate a competitive process to identify other Providers of the Services where the Provider is unable to provide the Services in a timely manner, does not meet reasonable referral acceptance rates, or provides Services in an unsatisfactory manner.”

d) Section 4.1 states “The Provider shall only submit invoices for authorized Services as described in Schedules A, A1, A2, B, C, D, Attachments 1, 2, and […] provided to a [client]. The Provider acknowledges that the […] shall not have authority to deviate from Fee Schedule B. No additional charges shall be invoiced to or payable by [X].”

e) Section 4.3 states “The Provider shall reference the Services provided to only one (1) [client] in an invoice. Where a Provider is providing Services for multiple [clients] simultaneously, the Provider shall issue a separate invoice for Services rendered for each [client].”

f) Section 4.6 states “The Provider shall not charge any fees or charges of any nature for Services provided under this Agreement directly or indirectly to the [client] or, any other individual, business or other entity.”

g) Section 5.1 states “[X] shall pay the Provider in accordance with Schedule B for providing Services only if the Services have been authorized by [X] and if the Provider has provided the Services in compliance with the terms and conditions of this Agreement.”

h) Section 11.1 states “The Provider shall maintain all records and books concerning Services provided and fees invoiced by the Provider under this Agreement.”

i) Section 11.3 states “When requested by [X], the Provider shall make available all records and books concerning the Services, together with the supporting or underlying documents and materials, to [X] for inspection, audit, or reproduction by its employees and/or subcontractors or authorized representatives, during normal business hours…”

j) Section 24.1 states “The Provider is an independent Contractor and neither the Provider, nor their directors, officers, employees, servants, agents, or subcontractors are the directors, officers, employees, or agents of [X].”

k) Schedule A to the MOA2 entitled “Job Search Support Services” includes the following:

i. Section 1.0 states “[…] offers a variety of quality programs and services to assist [clients] to achieve timely and safe return to work. […] works directly with [clients] to develop suitable return to work or vocational rehabilitation plans.

[…] may refer [clients] to an external Provider to deliver specific Job Search Support services that facilitate successful return to suitable and durable employment with a new employer and to obtain the best possible return to work outcomes.

The three (3) main types of Services that may be requested by […] are:

		* Resume and Cover Letter Preparation
		* Job Search Skills
		* Individualized Job Placement”

ii. Section 1.1 entitled “Resume and Cover Letter Preparation” states, in part, “This service is designed for [clients] who have an identified occupational goal(s) and job target(s). It is intended to provide the [client], who will be undertaking independent job search activity, with a professional quality, marketable resume(s) and cover letter(s) appropriate to the [client]’s occupational goal(s) and job target(s)”

iii. Section 1.2 entitled “Job Search Skills” states, in part, “The primary objectives of the job search skills service are to:

		* enable the [client] to organize, develop and implement a focused and effective job search action plan; motivate the [client] to participate in actual job search activities;

		* develop and/or re-establish attitudes, skills, behaviours, and knowledge necessary to conduct an active independent job search and successfully attain suitable employment;

		* provide the [client] with a professional quality resume and cover letter in accordance with format and content, and quality requirements …”

iv. Section 1.3 entitled “Individualized Job Placement” states, in part, “The Provider will assist the [client] to prepare for and undertake an active job search, and will identify and secure durable employment consistent with the occupational goal(s) and job target(s) identified on the referral form. With agreement of the […], efforts may also focus on other employment consistent with the [client]’s aptitudes, interests, abilities, and transferable skills that will maximize the [client]’s earnings up to the targeted wage rate.

All negotiations for work assessments, on the job training, or wage subsidy will be conducted by […] in Vocational Rehabilitation Services.”

v. Section 2.2.1 states “The [client] must be referred for Service by [X]; the Provider may only provide Services which are specifically identified in the referral form received.

vi. Section 7.1 states “The Provider acknowledges that [X] Officer shall not have authority to bind [X] and to deviate from Fee Schedule B. No additional charges shall be invoiced to or payable by [X].” Schedule B includes the following fees:

		* Resume and Cover Letter Preparation	   $[…] flat fee
		* Job Search Skills			   $[…] flat fee
		* Job Placement				   $[…] flat fee
		* Job Placement Extension		   $[…] per week
		* Durable Placement Fee (permanent)	   $[…] flat fee
		* Durable Placement Fee (temporary)	   $[…] flat fee
		* Service Cancellation Fee		   $[…] flat fee

vii. Section 7.2 states “No additional charges shall be invoiced to [X] without the prior authorization by [X] Manager of […]…”

viii. Section 7.3 states “The flat fee for Services/programs is inclusive of all elements except travel time and expenses outlined under Schedule A2…”

RULING REQUESTED

You would like to know

1. Whether [X]’s supply of Psycho-Vocational Assessment Services under the MOA1 with [X], effective [mm/dd/yyy] to [mm/dd/yyyy] is a taxable supply and is subject to the GST/HST?

2. Whether [X]’s supply of Job Search Support Services under the MOA2 with [X], effective [mm/dd/yyyy] to [mm/dd/yyyy], is a taxable supply and is subject to the GST/HST?

RULING GIVEN

Based on the facts set out above, we rule that

1. [X]’s supply of Psycho-Vocational Assessment Services under the MOA1 with [X], […] is an exempt supply pursuant to section 7 of Part II of Schedule V to the ETA. As such, the consideration paid for this supply is not subject to the GST/HST.

2. [X]’s supply of Job Search Support Services under the MOA2 with [X], […] is a taxable supply and is subject to the GST/HST.

EXPLANATION

Generally, most supplies of property or services made in Canada are subject to the GST/HST, unless the supply is specifically zero-rated (subject to GST/HST at the rate of 0%) or exempt (not subject to the GST/HST) under the ETA. Exempt supplies are listed in Schedule V to the ETA.

Ruling 1

Section 7 of Part II of Schedule V to the ETA exempts the supply of a number of services including the supply of psychological services rendered to an individual by a practitioner of the service. “Practitioner” is defined in section 1 of Part II of Schedule V to mean, in respect to a psychological service: (a) a person who practises the profession of psychology; (b) where the person is required to be licensed or otherwise certified to practise the profession in the province in which the service is supplied, is so licensed or certified; and (c) where the person is not required to be licensed or otherwise certified to practise the profession in that province, has the qualifications equivalent to those necessary to be so licensed or otherwise certified in another province. In the current case, the MOA1 requires that [X] psychologists be registered as members in good standing with […]. As […] is the regulatory body for the profession of psychology in […][Province 1], a member of […] in good standing will meet the definition of a "practitioner" for purposes of section 1 of Part II of Schedule V.

In addition to meeting the exempting provision above, section 1.2 of Part II of Schedule V to the ETA provides that for the purposes of this Part, other than sections 9 and 11 to 14, a supply that is not a "qualifying health care supply" is deemed not to be included in Part II of that Schedule. Further, a supply that is a “cosmetic service supply” and a supply in respect of a “cosmetic service supply”, that is not made for medical or re-constructive purposes are also, generally, not to be included in Part II pursuant to section 1.1 of Part II of Schedule V. Therefore, to be included under the exempting provision in section 7, the service provided must also meet the definition of a “qualifying health care supply” and not be a “cosmetic service supply”.

A “qualifying health care supply” is defined in section 1 of Part II of Schedule V to the ETA to mean, “a supply of property or a service that is made for the purpose of

(a) maintaining health,

(b) preventing disease,

(c) treating, relieving or remediating an injury, illness, disorder or disability,

(d) assisting (other than financially) an individual in coping with an injury, illness, disorder or disability, or

(e) providing palliative health care.”

A “cosmetic service supply” is also defined in section 1 to mean, “a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes.”

In this case, the supply of psycho-vocational assessment services being rendered to an individual would fall within paragraph (c) or (d) of the definition of “qualifying health care supply” as the purpose of the service is to confirm or identify the issues related to an individual’s injury or disability for the purpose of vocational rehabilitation planning and the development of the individual’s vocational rehabilitation plan. In addition, the supply of psycho-vocational assessment services would not be a “cosmetic service supply”.

Based on the above, [X]’s supply of psycho-vocational assessment services would meet the conditions of section 7 of Part II of Schedule V to the ETA and it is, therefore, an exempt supply for purposes of the ETA. As such, the consideration paid for this service is not subject to the GST/HST.

Ruling 2

Concerning the supply of job search support services, there are no exempting provisions in the ETA that would apply to these services. As a result, the supply of these services is a taxable supply and the consideration paid or payable for these services is subject to the GST/HST.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-841-4707. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Brent Fleming
Government Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 159222

Dear Sir:

Subject:	GST/HST RULING
		GST/HST on fees relating to a loan

Thank you for your letter of December 11, 2013, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to fees relating to a loan. We apologize for the delay in our reply.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

You asked us to refer to the following documentation provided to us by […][ACo]:

* Term Sheet dated [mm/dd/yyyy], between [ACo] and […][BCo];

* Assignment Agreement dated [mm/dd/yyyy], between [ACo], […][CCo], and [BCo]; and

* Acknowledgement and Agreement dated [mm/dd/yyyy], addressed to [CCo] and signed by […] on behalf of [BCo].

STATEMENT OF FACTS

Based on telephone conversations with […] of your office and the documentation provided, we understand that:

1. [CCo] carries on an auctioneering and liquidation business and is registered for GST/HST.

2. In [mm/yyyy], [CCo] provided a loan to [BCo] pursuant to the Term Sheet, Assignment Agreement, and Acknowledgement Agreement, all of which are described below.

Term Sheet

3. On [mm/dd/yyyy], [ACo] and [BCo], a resident of Canada, executed a term sheet (the Term Sheet).

4. The Term Sheet was a conditional offer for the provision of a loan which was open for acceptance by a stated deadline.

5. The Term Sheet set out terms and conditions that would be subject to the full scrutiny of a due diligence review that would include, but not necessarily be restricted to, considerations contemplated therein, as follows:

* Borrower: [BCo]

* Lender: [ACo] or any company [ACo] chooses to use

* Loan Facility: a demand term loan in the amount of $[…]

* Rate of Interest: […][the Bank] Daily Prime Interest Rate plus […]% per annum payable monthly in arrears.

* Commitment Fee: $[…] plus HST is payable on the execution by [BCo] of the Lender’s Commitment Letter (which we understand to be the Term Sheet itself).

* Closing Fee: [BCo] agrees to pay a fee equal to […]% of the maximum of the Loan Facility, which is earned at the time the Lender first advances the Loan Facility with payments being postponed until the earlier of the maturity date of the Loan Facility or payout of the Loan Facility.

* Term: […] months, on demand.

* Interest Rate Adjustment Date: [BCo] shall pay interest on the entire loan facility amounts monthly, in arrears, on the 30th day of each month. Such interest will be calculated monthly and will accrue daily on the basis of a 365 day year.

* Principal and Interest Payments: The Loan Facility is to be repaid as follows: interest only payable monthly in arrears plus a principal repayment equal to $[…] of the principal balance owing on a monthly basis on the outstanding loan. The outstanding principal balance together with any accrued interest and fees is due and payable […] months from the date of the initial advances, unless the Term shall have been otherwise extended as provided herein. Interest will be applicable to any fees owing from the commencement of the loan.

* Collateral: The collateral for the loans will be all of the owned equipment, vehicles, office furniture, trademarks or trade names of [BCo] whether located on site or in other locations and a personal guarantee.

* Security: [BCo] will grant a general security agreement (GSA) in favour of the Lender providing the Lender with a fixed and floating charge over all of the present and after acquired property and undertaking of [BCo]. The GSA will provide the Lender with a first charge position on assets. It will provide the Lender with a second fixed and floating charge on all other assets of [BCo], including its debtor accounts. All shareholder advances to [BCo] shall be postponed in favour of the Lender.

* Title: The loan segments are subject to the Lender receiving an opinion satisfactory to the Lender that the Lender has good title to its security.

* Registrations: The loans are subject to the Lender receiving all necessary registrations with respect to its security and its legal counsel being satisfied with all aspect of this transaction.

* A waiver must be executed by [BCo’s] landlord in favour of the Lender using language suitable to the Lender that takes priority over the landlord’s rights to the Collateral.

* Assignment: The Lender may assign the loan agreement in whole or in part to its bank or another financial institution without prior written approval of [BCo].

* Appraisal Requirements: It is a condition of this letter that asset appraisals be completed by […][X]. The cost of these appraisals will be absorbed in the work fee.

* Other: All legal fees in connection with this agreement are for the account of [BCo]. [BCo] shall provide evidence that it has obtained a receivable and inventory financing on terms and conditions satisfactory to the Lender.

6. As provided for in the Term Sheet, [BCo] signed and returned two (2) copies of the Term Sheet with a cheque in the amount of $[…] (the Commitment Fee) plus HST which signified [BCo’s] acceptance to the general terms and conditions contained in the Term Sheet.

Assignment Agreement

7. On [mm/dd/yyyy], [ACo], [CCo], and [BCo] entered into an Assignment Agreement (Assignment Agreement) which contained the following provisions:

* Pursuant to the Term Sheet, [ACo] agrees to make certain loans and advances to [BCo], subject to the terms and conditions of the Term Sheet (the “Credit Facilities”);

* Pursuant to terms of the Term Sheet, [ACo] has the discretion as to the entity that will enter into the loan arrangements with [BCo] and fund the advances made to [BCo] pursuant to the Term Sheet;

* [ACo] has designated [CCo] as the Lender under the Term Sheet;

* For consideration of $[…] paid by [CCo] to [ACo], [ACo] assigns to [CCo] all of its right, title and interest in the Term Sheet and the Credit Facilities.

* [ACo] represents that the Term Sheet is in full force and effect and unamended and [ACo] has not knowingly discharged [BCo] from the Term Sheet or assigned any rights or obligations under the Term Sheet;

* [CCo] accepts the assignment of [ACo’s] rights and obligations in the Term Sheet and indemnifies [ACo] from any claims by [BCo] arising in connection with the Term Sheet or the performance of the Lender’s obligations under the Term Sheet;

* [BCo] acknowledges that it has taken notice of the assignment and expressly consents to it.

* The Assignment Agreement sets forth the entire agreement and understanding among the parties with respect to the subject matter and supersedes any prior agreements or understandings, whether oral or in writing. The Assignment Agreement may not be modified except in writing signed by the parties.

Acknowledgement Agreement

8. On [mm/dd/yyyy], […], on behalf of [BCo], signed an Acknowledgement and Agreement (the Acknowledgement Agreement) which is addressed to [CCo] (in this agreement called the Lender).

9. The Acknowledgement Agreement states that it is regarding the demand loan to [BCo] in the amount of $[…] (in this agreement called the “Loan”) pursuant to the Term Sheet as assigned by [ACo] to [CCo].

10. The Acknowledgement Agreement also provides that in consideration of [CCo] providing financial assistance to [BCo] and for other valuable consideration, the receipt and sufficiency of which is acknowledged, [BCo] acknowledges and agrees that the Term Sheet and all terms and conditions thereof will continue in full force and effect notwithstanding the advance of the Loan by [CCo] and will govern the relationship between [CCo] and [BCo] in relation to the Loan as if the Term Sheet were a loan agreement entered into at the time of the advance of the Loan.

11. [CCo] advanced the funds to [BCo] in [mm/yyyy] and, since that time, has been collecting the interest and HST for the loan. It is expected that [CCo] will be collecting the Closing Fee when the loan matures or is paid out.

RULING REQUESTED

You would like to know if the interest and the Closing Fee are subject to GST/HST.

RULING GIVEN

Based on the facts set out above, we rule that the interest and the Closing Fee are consideration for [CCo’s] supply of a financial service which is exempt under section 1 of Part VII of Schedule V to the ETA. Accordingly, [CCo ] is not required to charge GST/HST on the interest or the Closing Fee.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

EXPLANATION

A GST/HST registrant is not required to charge GST/HST on an exempt supply. A supply of a financial service is exempt under section 1 of Part VII of Schedule V to the ETA unless it is zero-rated under Part IX of Schedule VI to the ETA. A supply of a financial service may be zero-rated when supplied by a financial institution to a non-resident, if certain other conditions are met.

A “financial service” is defined in subsection 123(1). A supply is a financial service where it is included in any of paragraphs (a) to (m) of the definition of financial service and is not otherwise excluded by any of paragraphs (n) to (t) of that same definition.

A financial service as defined in subsection 123(1) includes in paragraph (g) the making of any advance, the granting of any credit or the lending of money. [CCo] is making a supply of a financial service to [BCo] under paragraph (g) of the definition of financial service which is exempt under section 1 of Part VII of Schedule V to the ETA. The interest and the Closing Fee are consideration for this exempt supply. Accordingly, [CCo] is not required to collect GST/HST on the interest or the Closing Fee.

It should be noted that where a person pays an amount as or on account of tax in error (e.g., an amount charged as GST/HST was paid on an exempt supply), the supplier may credit, adjust, or refund the amount to the person, if certain conditions are met. For further information on refunding, adjusting or crediting amounts of tax that were charged in error, refer to GST/HST Memorandum 12.2, Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act.

[CCo] may be considered to be a de minimis financial institution. In general, a person is considered to be a de minimis financial institution if the person earns a significant amount of interest, certain dividends, or income from separate fees or charges for financial services. For further information, refer to GST/HST Memorandum 17.7, De Minimis Financial Institutions, or go to www.cra.gc.ca/slfi.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (780) 495-5512. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Heather Gibbard
Financial Services Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 161175
Business Number: […]

Dear [Client]:

Subject:	GST/HST RULING
		Immigration Medical Examinations 

Thank you for your fax of [mm/dd/yyyy] and our telephone conversation of [mm/dd/yyyy] concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of Immigration Medical Examinations. We apologize for the delay in this response.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

STATEMENT OF FACTS

We understand the following from your fax and our telephone conversation:

1. The Immigration and Refugee Protection Act (IRPA) and its regulations set out, among others, the medical requirements that foreign nationals (individuals) must meet in order to come to Canada as temporary or permanent residents. In addition, the IRPA sets out the grounds on which a person may be found to be inadmissible to Canada.

2. The objectives of the IRPA include ensuring that the movement of people into Canada contributes to the country’s cultural, social and economic interests and affirming Canada’s humanitarian commitments while protecting the health, safety and security of Canadians.

3. With few exceptions, the Immigration Medical Examination is a mandatory requirement under the IRPA (subsection 16(2) of the IRPA).

4. The Immigration Medical Examination is a medical evaluation (medical screening) completed by panel physicians (medical doctors) as well as health facilities in Canada, such as laboratories, medical clinics, centers or hospitals. A Medical Report form (IMM 1017) and other supplemental forms or an on-line submission of examination results must be provided. According to section 29 of the Immigration and Refugee Protection Regulations, the Immigration Medical Examination includes any or all of the following:

a) physical examination;
b) mental examination;
c) review of past medical history;
d) laboratory tests;
e) diagnostic tests; and
f) medical assessment of records respecting the applicants (foreign nationals).

5. Occasionally, additional reports are required by medical specialists such as psychiatrists, respirologists etc. to supplement the IMM 1017 and other forms.

6. Once completed by the panel physicians, the forms and applicable laboratory and other diagnostic test results are sent to […][XYZ] for assessment and determination of whether the person’s health condition is:

a) likely to be a danger to public health;
b) likely to be a danger to public safety; or
c) might reasonably be expected to cause excessive demand on health or social services. (Footnote 1)

7. […]

8. Panel physicians are medical doctors that […] provide Immigration Medical Examinations. A foreign national must have an Immigration Medical Examination from one of the panel physicians […]. Their own medical doctor cannot conduct the medical exam.

9. The panel physicians invoice [XYZ] for Immigration Medical Examinations […].

10. In the past, the panel physicians did not charge the GST/HST on the fee for the Immigration Medical Examinations, however, the panel physicians have now been advised by the Canada Revenue Agency (CRA) that the GST/HST must be collected on their fee for the Immigration Medical Examinations.

RULING REQUESTED

You would like to know if the supply of Immigration Medical Examinations provided by panel physicians is taxable for GST/HST purposes.

RULING GIVEN

Based on the facts set out above, we rule that:

1. The supply of an Immigration Medical Examination by panel physicians made before March 22, 2013 is an exempt supply of a service pursuant to section 5 of Part II of Schedule V.

2. The supply of Immigration Medical Examination by panel physicians made after March 21, 2013 is a taxable supply of a service for GST/HST purposes.

EXPLANATION

Supplies made before March 22, 2013

Part II of Schedule V sets out the health care services that are exempt under the GST/HST.

Section 5 of Part II of Schedule V exempts a supply of a consultative, diagnostic, treatment or other health care service that is rendered by a medical practitioner to an individual.

The term "medical practitioner" is defined in section 1 of Part II of Schedule V, for purposes of Part II of Schedule, to mean "a person who is entitled under the laws of a province to practise the profession of medicine or dentistry". The panel physicians (medical doctors) are medical practitioners for purposes of Part II of Schedule V.

The supply of Immigration Medical Examinations by panel physicians to [XYZ] that consist of performing a medical examination and providing a written report are exempt supplies of services pursuant to section 5 of Part II of Schedule V for supplies made before March 22, 2013. However, if the services provided by the panel physicians are cosmetic service supplies as defined in section 1 of Part II of Schedule V, the supply of these services would not be exempt from the GST/HST by virtue of the application of section 1.1 of Part II of Schedule V.

Supplies made after March 21, 2013

Amendments were made to provisions relating to the supply of health care services in Part II of Schedule V clarifying that GST/HST applies to supplies of reports, examinations and other property or services that are not made for the purpose of the protection, maintenance or restoration of the health of a person or for palliative care. The amendments apply to supplies made after March 21, 2013.

Section 1.2 of Part II of Schedule V has been added and provides that for the purposes of Part II of Schedule V, other than sections 9 and 11 to 14 (Footnote 2) , a supply that is not a “qualifying health care supply” is deemed not to be included in Part II of Schedule V and is therefore not exempt under any provision in Part II.

The term “qualifying health care supply” has also been added to section 1 of Part II of Schedule V and is defined to mean

“a supply of property or a service that is made for the purpose of

(a) maintaining health,
(b) preventing disease,
(c) treating, relieving or remediating an injury, illness, disorder or disability,
(d) assisting (other than financially) an individual in coping with an injury, illness, disorder or disability, or
(e) providing palliative health care.”

As a result of this amendment, services performed by health care professionals may be taxable or exempt depending on their purpose. This will particularly affect supplies of medical examinations, reports and certificates. In these cases it will be necessary to determine the purpose of the supply to determine its tax status.

Supplies of medical examinations, reports or certificates that meet the conditions of section 5 of Part II of Schedule V will be exempt if the supply is made for a purpose that meets the definition of qualifying health care supply and is not a cosmetic service supply. Supplies of medical examinations, reports and certificates that are made solely for other purposes, such as enabling a third party to make a decision for insurance or legal purposes, would be deemed not to be included in Part II of Schedule V and would be taxable for GST/HST purposes.

The purpose of the Immigration Medical Examination services provided by panel physicians is to assess if foreign nationals (individuals) meet the medical requirements for immigration to Canada as temporary or permanent residents. This purpose is not one included in those listed in the definition of the term “qualifying health care supply”. The fact that the medical examination may uncover health issues of the individual does not change the purpose of the supply.

Accordingly, the supply of Immigration Medical Examination services provided by panel physicians is not a qualifying health care supply as defined under section 1 of Part II of Schedule V. Therefore, the supply is deemed under section 1.2 of Part II of Schedule V not to be included in Part II of Schedule V and is not exempt under any provision in Part II of Schedule V. As no other exempting or relieving provision applies, the supply of the Immigration Medical Examination services made after March 21, 2013 is subject to GST/HST at the applicable rate (5%, 13%, 14% or 15%) depending on the place of supply, unless the supplier is a small supplier.

For additional information, please refer to GST/HST Notice No. 286, Draft GST/HST Policy Statement - Qualifying Health Care Supplies and the Application of Section 1.2 of Part II of Schedule V to the Excise Tax Act to the Supply of Medical Examinations, Reports and Certificates.

It should be noted that even though the supply of Immigration Medical Examination services by panel physicians made after March 21, 2013 is a taxable supply for GST/HST purposes, GST/HST will not apply to payments made to physicians who are not GST/HST registrants. Generally, GST/HST registrants must collect GST/HST on their taxable (other than zero-rated) supplies of property and services in Canada. However, a person who is a small supplier and not a registrant is not required to collect tax on certain supplies it makes. For GST/HST purposes, a registrant includes a person who is registered for GST/HST and a person who is required to be registered for GST/HST purposes.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-572-2636. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Maria Forte-Long
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 Those criteria are found in section 38 of the IRPA.

2 Section 9 of Part II of Schedule V exempts supplies of properties and services covered by a provincial health insurance plan, section 11 exempts supplies of food to a health care facility, section 13 exempts supplies of home care services and section 14 exempts supplies of various training services. Please refer to those sections for the conditions required in order for the supply to be exempt.

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 162107

Dear [Client]:

Subject:	GST/HST RULING
		Application of section 140 – [Additional contributions]

Thank you for the letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to payments of additional contributions made by existing members of the […] Club (“the Club”).

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

STATEMENT OF FACTS

We understand the facts based on your submissions and information on the Club’s website as follows:

1) The Club is a private yacht club that is registered for purposes of the GST/HST. It is a not-for-profit corporation without share capital that operates a clubhouse and docks for use by members who are recreational boaters.

2) When applying for membership, individuals certify that they agree to pay all fees and assessments set by the Club and that privileges of the Club will not be available until notification of the acceptance of their application.

3) Access to the property is by use of a proximity card where parking is free and close to the docks and clubhouse.

4) The Club maintains a website for general information and has a members’ section which is used to provide confidential information and Club specific information.

5) The Club has [#] wet mooring slips ([…] to […] ft.) provided with potable water and 20 or 30 amp outlets, for which there is no additional charge; the service docks and their self-service pump-out facility and a crane are available to members at no charge.

6) The Club has several membership categories but only one permits members to dock their boats in one of the Club’s boat slips; it is the […][Type X] membership.

7) Ten directors from the [Type X] membership are responsible for the management of the Club and the work of committees.

8) According to the Membership Information Bulletin, a [Type X] member is […]. In contrast, a […][Type Y] member is […]. Other membership categories (e.g., […]) have no voting rights.

9) In addition to the annual membership fees, all [Type X] members are required to make a capital contribution in the form of a non-interest bearing, repayable debenture. In the case of a new [Type X] member that has not made any previous capital contribution to the Club, whether in the form of a debenture or otherwise, HST is accounted for by the Club on the initial debenture payment.

10) Upon termination of a [Type X] membership (resignation or death of member), the capital invested is returned to the member.

11) In [mm/yyyy], the Club’s membership voted to levy an additional capital contribution to be paid by [Type X] members in the form of a debenture to pay for capital improvement projects with respect to the Club facilities. The debenture was increased by $[…] for [yyyy] and [yyyy]. This additional capital is also repayable upon termination of the [Type X] membership.

12) The Club considers the sum of any initial debenture payment and any subsequent capital call, characterized at the time of call as repayable, as representing a debt by the Club to the member making such payments.

RULING REQUESTED

You would like to know whether HST applies with respect to the additional [mm/yyyy] capital contribution as well as with respect to any subsequent similar capital calls, when such amounts are paid by existing [Type X] members.

RULING GIVEN

Based on the facts set out above, we rule that the Club is required to account for the HST payable on the [mm/yyyy] capital contributions paid by [Type X] members.

EXPLANATION

Whether an additional contribution paid by an existing member of the Club is additional consideration for the supply of a “membership” as defined under subsection 123(1), or consideration for a security that is deemed to be a supply of a membership under section 140 is a question of fact. Where a membership in the Club is a taxable supply, as a GST/HST registrant, the Club would be required to account for the HST payable on such consideration.

Subsection 123(1) sets out that “membership” includes a right granted by a particular person that entitles another person to services that are provided by, or to the use of facilities that are operated by, the particular person and that are not available, or are not available to the same extent or for the same fee or charge, to persons to whom such a right has not been granted, and also includes such a right that is conditional on the acquisition or ownership of a share, bond, debenture or other security. The conditions may be set out in by-laws, a separate agreement under which the membership is conveyed, or the term or conditions of the security.

Section 140 provides that where a person makes a supply of a share, bond, debenture or other security (with certain exceptions) that represents capital stock or debt of a particular organization, and ownership of the security by the recipient is a condition of the recipient’s, or another person’s, obtaining a membership, or a right to acquire a membership, in the particular organization or in a related organization, the supply of the security is deemed to be a supply of a membership and not a supply of a financial service.

Section 140 is to ensure that the full value of a taxable supply of a membership in an organization, such as a private recreational club, is subject to tax if the cost of obtaining the membership consists partly of the cost of purchasing otherwise exempt shares or other securities of the organization as a condition of membership.

Part VI of Schedule V to the ETA includes exemptions for certain supplies of memberships, none of which would appear to apply with respect to a supply of a membership that is made or is deemed to be made by the Club.

The [mm/yyyy] capital contribution paid by [Type X] members as well as any similar future payments made by existing [Type X] members is additional consideration for a supply of a membership as defined in subsection 123(1) that is taxable, or is consideration for a security that is deemed to be a supply of a membership under section 140 that is taxable; therefore the Club would be required to account for the HST payable on such amounts.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling is currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4393. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Jasmine Gallant
Special Provisions-FI Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate