Schedule V

Where Mr. X agreed to purchase a newly constructed home from its builder and is subsequently paid $100,000 by the builder for the purchase agreement’s cancellation, does s. 221(2) apply to relieve the builder from having to pay GST/HST on the $100,000 if Mr. X is registered? CRA responded:

Generally, when a purchaser, such as Mr. X, enters into an agreement of purchase of sale for the acquisition of a newly constructed house, the purchaser, Mr. X, is acquiring an interest in real property, namely an interest in a residential complex. If Mr. X subsequently receives consideration to transfer that interest to builder (the Vendor), Mr. X would be considered to be making a sale of the interest in the residential complex. …

If Mr. X is not a builder in his own right (for example, at the time of entering into the agreement of purchase and sale, he intended to acquire the house for his personal use), the sale of that interest would generally be exempt under section 2 of Part I of Schedule V to the ETA. Where that is the case, tax would not be payable by the recipient and, therefore, subsection 221(2) would not apply.

If Mr. X, however, is considered to be a builder in his own right (for example, at the time of entering into the agreement of purchase and sale, he did so for the primary purpose of selling the interest or the house itself), tax would be payable by the Vendor calculated on the value of consideration ($100,000) for the supply. If Mr. X is a non-resident or is resident by reason only of subsection 132(2), or the Vendor in the scenario is GST/HST registered, pursuant to paragraph 221(2)(a) or (b) respectively, Mr. X would be relieved of his obligation to collect the tax payable.

Assignment of purchase agreement is assignment of interest in house

This publication addresses the situation where

• a purchaser (referred to as the first purchaser) enters into a purchase and sale agreement with a builder (Builder A) for the construction and sale of a new house, and
• the first purchaser subsequently assigns the agreement to an assignee (referred to as the assignee purchaser) before Builder A transfers possession or ownership of the house to the first purchaser and before any individual has occupied the house as a place of residence or lodging.

Generally, upon entering into an agreement for the construction and sale of a new house, the first purchaser is considered to have acquired an interest in the house. For GST/HST purposes, the assignment of the agreement to the assignee purchaser is normally considered to be a sale of the first purchaser's interest in the new house. The sale of an interest in a new house is generally taxable where the person selling the interest is a builder of the house.

Mr. X agreed to purchase a residential condominium unit from a builder who would build the condominium complex (the “Builder”). His intention was to sell his right to purchase the unit prior to or at the completion date, and this in fact occurred as an assignment to Mr. Y, who paid to Mr. X at the time of the assignment an amount identified as the assignment price and an amount equal to the deposit previously paid by Mr. X to the Builder. On completion, the Builder charged Mr. Y the balance of the purchase price (i.e., the total purchase price less the deposit paid) plus GST calculated on the total purchase price.

In finding that the assignment was not exempt (under s. 2(a) or otherwise), CRA stated:

By signing a binding purchase and sale agreement, Mr. X acquired an interest in the unit, which is an interest in a residential complex for GST/HST purposes. It is that interest in a residential complex that Mr. X sold to Mr. Y by assigning the purchase and sale agreement to Mr. Y.

For GST/HST purposes, Mr. X is a "builder" of the unit as Mr. X entered into the purchase and sale agreement with the intention of reselling the unit or the interest in the unit.

The correspondent paid an assignment fee to an individual (the Seller) for the assignment of the Seller’s interest in an agreement for the purchase from the builder of a residential condominium unit. Such interest was an interest in a residential complex, so that the assignment was exempt under s. 2 if the Seller had entered into the purchase agreement for the property with the primary intention of using it as his or her place of residence.

A agreed to purchase a unit in a condo development under the “PA” from the builder (the Vendor). A then assigned his rights under the purchase agreement, including rights to a parking stall and locker, and the benefit of the deposits he had made, to B in consideration for a stipulated sum.

CRA found that the assignment of A's rights, benefits and obligations under the PA to B is a supply of an interest in a residential complex, which would qualify for exemption from GST under s. 2 of Part I of Sched. V provided A is not considered to be a “builder,” which would be the case “if A entered into the PA with the primary intention of reselling the Condominium (or an interest thereof) in the course of a business or an adventure or concern in the nature of trade.”

CRA went on to note that given that LP#1 was a builder who claimed input tax credits on its purchase of the building from the developer, a subsequent sale of the building would not be exempted under s. 5, stating:

Section 5 of Part I of Schedule V exempts the sale of a multiple unit residential complex (that is, the Residence) by a builder of the complex (that is, LP#1) where the builder received an exempt supply of the complex by way of sale or where the builder was required to self-supply under subsection 191(3) with respect to the complex, and that supply was the last supply of the complex made to the builder by way of sale. Generally, this exemption will not apply where the builder has claimed an ITC in respect of the builder’s last acquisition of the complex or in respect of an improvement to the complex.

Addition of central air conditioning, for instance, would cause loss of exemption

21. One instance where the sale of a previously occupied residential complex is taxable is where the vendor has claimed ITCs in respect of the acquisition of or an "improvement" to the complex and the sale is not made subsequent to a change-in-use. Note that the definition of "improvement" provides that an "improvement" constitutes any goods or services used in improving capital real property to the extent that the expenditure therein would be included in determining the "adjusted cost base" of the complex for income tax purposes. For example, central air conditioning added to a residential complex would normally constitute an improvement.

Overview and example

41. Section 5.2 of Part I of Schedule V to the Act exempts the sale of land (as well as an interest in the land) that forms part of a residential complex where the land is sold without the building. This exemption is provided under the following conditions:

• immediately before the land is sold, the land was being leased on an exempt basis as described by paragraph 7(a) of Part I of Schedule V to the Act, i.e., the land was leased for at least one month to an owner or occupant of a residential unit affixed to the land for use by an individual as a place of residence; and
• if the building and the land were sold together at that time, the sale would have been an exempt sale of a residential complex under any of sections 2 to 5 of Part I of Schedule V.

Example

Several years ago, the Martin family built their family's cottage on land they leased from a property development company for use as a summer residence. The company now sells the half hectare on which the cottage stands to the Martins. This sale of the half hectare is an exempt supply under the terms of section 5.2 of Part I of Schedule V.

In its 2 May 2012 Tax News Item "Property and Services Offered in a Senior Citizens' Residence," Revenu Quebec indicated that various services would be part of a single supply of residential accommodation in the residence, including meals, monitoring, housekeeping in common areas, snow removal, cable television, weekly housekeeping, laundry, group transportation as well as transportation for medical appointments and assistance with certain activities of daily living. CRA stated that it will accept the same position:

provided such services form part of a single supply the predominant element of which is that of a residential unit made by way of lease, licence or similar arrangement. The types of additional services that may be include are discussed in …GST/HST Notice 224 under "Ancillary property and services."

Examples of ancillary services assimilated to rental supply (under Issue No. 2)

Examples of ancillary property and services include: meals, a laundry service for bed linens and towels; housekeeping services; entertainment and activities for the benefit of all residents including religious services, gardening, musical programs, exercise classes, bingo and shuffleboard; use of a recreation area and lounge rooms; a library at the facility; or any of the following services provided on a 24-hour per day basis: general building security, medic alert system monitoring, building patrol, security camera monitoring, telephone and door reception and responding to general emergencies.

...[A]n operator may provide, together with long-term occupancy of a room, daily services of administering medication and weekly assistance with bathing individuals staying at the facility. These services would not, on their own, be sufficient to alter the characterization of the supply as that of a residential unit.

However, some residential care facilities, such as nursing homes or extended care facilities, provide significant nursing and personal care services to individuals on a regular basis. These services may be essential to the overall supply made by the operator and may alter the fundamental nature of the supply. ...

The provision by a corporation to its employees of temporary lodging in a condominium leased to it by a subsidiary would be an exempt supply because there was no charge to the employees.

Homes in a new residential subdivision may be supplied under long-term leases, especially on First Nations lands. The “buyer” might acquire a home under a 99-year lease or sublease for a single lump sum (which might not be related to any lease intervals during the term) or for an upfront payment coupled with periodic charges. At the time of the upfront payment made at the lease’s inception, how is the lessor to determine known whether the long-term lessee will commence to engage in short-term rentals at a future juncture and, thus, whether it should charge GST/HST on a portion of the up-front payment?

In answering, CRA implicitly assumed that there would be periodic charges in addition to the up-front charge, so that throughout the term of the lease of, say, 99 years, there would be recurring “lease intervals” for purposes of s. 136.1(1). It then indicated that where a home leased to the lessee was exempted under Sched. V, Pt. 1, s. 6 or 6.1, the portions of the upfront payments that were “attributable” to such lease intervals would be exempted – whereas the portion of the upfront payment attributable to any subsequent lease intervals where the use became taxable would be subject to GST/HST.

A portion of a retirement home that was used for a higher level of services was characterized as being used for supplies that were exempt under s. 2 of Part II of Schedule V and not under s. 6 of Part I of Schedule V. Accordingly, a lease of those premises to the operator of the premises was not exempt from GST (under s. 6.1 of Part I of Schedule V), and was subject to tax.

Discussion of the requirements for the lease of units in a hotel, which had been partially converted into a nursing home, to be exempt under s. 6 or s. 6.1.

A mutual fund trust that acquires existing nursing homes and extended health-care facilities from arm's length vendors and then leases the nurses homes and extended care facilities to a Canadian corporation on a long-term basis will not be subject to tax on the lease of those parts of the nursing homes and extended care facilities that fall within the definition of residential complex. The part of what otherwise would be a residential building that is leased for business use is not considered to be reasonably necessary for the use and enjoyment of the building as a place of residence.

A lease of vacant land by O to L will become exempt when L subleases the land to D who acquires possession of the land in order to construct a single unit residential complex on it in the course of his commercial activities.

Shortly before the occupancy of a newly constructed apartment complex (expected to be predominantly occupied by students), LP#1 purchases the building from the developer with a view to leasing it to another partnership (LP#2) That “headlease” will not be exempt given inter alia that more than 10% of the apartment units will be leased for short-term stays during the regular academic session (and that percentage will increase to 90% or more during the summer). In this regard, CRA stated that s. 6 “does not deal with the situation where the residential complex is supplied to a person under a head lease (such as the Master Lease) for a subsequent supply to another person.” Therefore, LP#2 will be required to pay GST on its lease payments to LP#1.

The Municipality, as Landlord, leases real property including a building containing residential units, common areas, administrative office space and associated external areas and outbuildings to Tenant on an exempt basis under s. 6.11 of Part I of Sched. V, who, in turn, supplies the real property on an exempt basis to Subtenants under s. 6 of Part I of Sched. V. The Landlord will renovate the premises, with a negotiated entitlement to be reimbursed by Tenant (under a MOU) for costs incurred in excess of $XX.

In indicating that the reimbursements likely would be consideration for the supply of a separate service by Landlord, CRA stated:

There is nothing in the MOU that provides that the amount paid by the Tenant to the Landlord are to be treated as rent for purposes of the Lease Agreement, nor is there any suggestion that failure to pay the amount would result in a default under the Lease Agreement.

In response to a question as to whether "each occupant of a residence must benefit from a supply of at least 10 meals per week in order that the supply is exempted by virtue of section 6.2," CRA stated (Tax Interpretations translation):

…we are in agreement with your interpretation that the requirement of 10 meals per week attaches to the residence and not to each occupant of the residence. Thus, if for example a residence is occupied by 2 persons who have concluded an agreement to receive 10 meals per week in total, the supply of meals is exempted if the other conditions of section 6.2 are satisfied.

a purchaser of a block of shares in a co-operative corporation which is the beneficial owner of a recreational vehicle park thereby becomes entitled to be licensed a particular site in the park provided that the purchaser pays his or her portion of the "assessments" for common costs. Such purchase, which is characterized as a single supply of real property by way of license, is not exempt under s. 7(a)(i) of Part I of Sched. V given that, except in exceptional circumstances, a recreational vehicle does not qualify as a residential unit. The payment of the assessments also is not exempt under s. 7(a)(i).

the lease to the individual of land located at a seasonal waterfront resort site specifies that the site shall be used for recreational use only. The individual stays in a manufactured trailer on the site for approximately 95% of the period from the beginning of May to Thanksgiving while maintaining a primary residence in the city (with the resort unit being supported on concrete blocks for permanent stability and connected in a permanent way to hydro, gas, water and septic facilities.) Given that the unit is used as the individual's place of residence (albeit not the primary place of residence) it qualifies as a place of residence and the lease is exempt under s. 7(a)(i) of Part I of Sched. V.

a lease of land located at a lake resort site became exempt under s. 7(a)(i) when the individual's husband retired and began to use a park model trailer, which was installed in a permanent manner at the site (including connection to hydro, gas, water and septic facilities), as his place of residence from May to October of each year, with the individual spending her weekends and summer periods there. Although an individual may have more than one place of residence, a place of residence would not normally include an abode of a transient nature.

Reconfiguration of lots engages the s. 9(2)(c) exclusion because this requires 2 steps (a consolidation and subdivision into 3 lots)

Example 2

Ms. Fields purchased three separately titled properties that she holds primarily for personal use and enjoyment. The properties are contiguous to one another and share common boundaries as shown in Diagram 1.

Diagram 1

Ms. Fields decides to sell the three properties, but would first like to reconfigure these three pieces of land into three rectangular lots of the same shape and size with each having a separate legal description. She expects this will make them easier to sell. She ultimately ends up with the three properties regrouped as in Diagram 2:

Diagram 2

Would the supply of one of the lots shown in Diagram 2 be an exempt supply of land by an individual or does paragraph 9(2)(c) of Part I of Schedule V apply in this situation?

Generally, in order to give rise to the reconfigured lots as shown in Diagram 2, Ms. Fields would have had to combine the three lots shown in Diagram 1 into a single lot, lot D, with a single legal title (Diagram 1A ) ^{Footnote 2}.

Diagram 1A

Lot D is considered to be one parcel of land. D is then subdivided or severed into three parts described as lots E, F and G. Thus, paragraph 9(2)(c) of Part I of Schedule V applies, and the sale of lots E, F and G would be taxable unless the lot is sold to a former spouse or former common-law partner of Ms. Fields or an individual related to her and the lot is for that individual's personal use and enjoyment.

After a fire in a condominium unit, the contractor performing restoration work charges GST/HST to the condo corporation. Do the restoration services come within Sched. V, Pt. I, s. 13 as a service that “relates to the occupancy or use of the unit” – or is the condo corporation regarded as a bare trustee for and on behalf of all residential unit owners, so that there is a supply of the restoration services directly to each of the owners or the particular owner whose unit sustained the damage? CRA responded:

Generally, a condo corporation’s supply, to a resident, of a service of restoring a residential condominium unit back to its original state where the unit sustained damage due to a fire would relate to the use or occupancy of the unit. As such, the condo corporation’s supply of the service to the resident would be exempt under section 13 of Part I of Schedule V… .

CRA went on to indicate that as the condo corporation thus would be making an exempt supply, it would not be entitled to an input tax credit for the GST/HST charged to it.

Company A (a registered charity) and Company B form a joint venture to establish and operate an interim-care nursing home, with each supplying institutional health care services. Under the joint venture agreement, Company B is responsible for the day-to-day management of the nursing home and receives taxable management fees for its services. The agreement also states that the nursing home employees are employees of Company B, with Company B being reimbursed by the joint venture for their total compensation.

Ruling

The allocation to the payroll expenses to the joint venture participants are not subject to GST as the amounts are not consideration for a taxable supply.

The manager and a registered charity form a joint venture with respect to an interim care nursing home (fully funded by the province) of the charity under which the charity will contribute the nursing home to the joint venture and the manager will operate the home and in connection therewith incur expenses for which it will be reimbursed by the joint venture. In recognition of the manager’s management services, it will receive a priority distribution out of the surplus revenues.

Rulings that the Priority Distribution and the reimbursements are subject to GST to the extent of the manager’s interest in the joint venture. CRA stated:

The … Priority Distribution is … a payment to [the manager] for performing the day-to-day supervision, management and operation of the Nursing Home [and it] is supplying these services to the participants in the joint venture. …

[The manager] is reimbursed by the joint venture for the wages and salaries it pays to its employees. [The manager] makes a supply to the joint venture of the services of these employees [and] … is supplying these services to its co-participant [the charity]. The reimbursements of the salaries and wages would form part of the consideration for the supply.

A for-profit entity contracts with a hospital to supply various nursing and personal care services. The nursing services, which are rendered to individuals in the hospital, are exempt under section 6. However, the personal care services are taxable. When subsequently, the operator of the hospital makes a supply of those services, such supply is exempt under section 2.

After December 31, 1995 a clinic is considered to make a single supply of an institutional health care service, whereas prior to that it was characterized as making a number of supplies, of which application services, program development, specimen handling and washing and freezing activities were considered to be taxable supplies.

CRA abides by the court's determination [in Angels Of Flight Canada Inc. v. The Queen, 2009 TCC 279], that an ambulance service is not required to be licensed or certified by a province in order to be exempt pursuant to section 4 of Part II of Schedule V.

P-238 discusses fee sharing in the context of a practice involving a principal practitioner and a locum, and involving a principal practitioner and contract associates, and states:

[Where there is a] bona fide arrangement to share fees, the CCRA will not consider the payment by the associate to be in respect of a supply of administrative services made by the principal. The underlying characteristic of this arrangement is an apportionment of the fee for the health care service rendered to the individual between the parties. Thus, for purposes of the ETA, the amounts apportioned between the two parties are not subject to tax.

This seems to suggest that where one person (A) supplies exempt health care services to patients and engages a medical practitioner (B) to render those services to patients, then A’s supply to patients can be exempted (for example, under Sch. V, Pt. II, s. 5), and B’s supply to A can be exempted under s. 5.

a) What is a “bona fide arrangement to share fees”?

b) What is the statutory basis for exempting the apportionment of the fees under a bona fide arrangement to share fees?

c) Are exempt fee-sharing arrangements not limited to principal practitioner-locum and principal practitioner-contract associate arrangements?

d) To be an exempt fee-sharing arrangement, must the person supplying health care services to patients (A in the above description) be a licensed medical practitioner or medicine professional corporation under the applicable provincial law?

CRA responded:

a) According to law dictionaries and jurisprudence, the expression “bona fide” means “in good faith”, honestly, genuinely, without simulation or pretense.

The CRA considers “a bona fide arrangement to share fees” to be the arrangement that best represents the economic reality of the transaction.

b) There is no section in Part IX that specifically addresses the situation. We could consider the application of section 5 of Part II of Schedule V to the Excise Tax Act as a basis to that position in the case of medical practitioner. Where a physician who has patients hires a locum to fulfill their duties during their absence, it could be considered that the physician has subcontracted the care to the locum. The supply of services of the locum to a patient would be exempt under section 5 of Part II of Schedule V and the supply of services to the physician by the locum would also be exempt under section 5 as it is a supply of a consultative, diagnostic, treatment or other health care service that is rendered by a medical practitioner to an individual.

The same approach could be taken in respect of other professional services that can be exempt in Part II of Schedule V where the exemption refers to services rendered to an individual.

c) The CRA is not aware of arrangements that would be of a similar nature. It would be a question of fact.

Considering that health care services legislation is of provincial jurisdiction, the rules applying in the province would have to be considered. For example, fee sharing might be only allowed between professionals regulated by the same regulatory body.

d) In section 5 of Part II of Schedule V, for an exemption of a health care services to apply, the service has to be rendered by a physician who is entitled under the laws of a province to practise the profession of medicine.

The CRA considers that some exemptions can apply twice to the same service as the requirement is that the service be rendered by a medical practitioner or a practitioner as defined in section 1 of Part II of Schedule V.

A professional dentistry corporation (“PC”) agrees with a dentist acting as independent contractor (Mr. D) that all patients treated at PC’s clinic by Mr. D are patients of PC, that PC will do all the invoicing, and that PC will pay to Mr. D 40% of the revenues generated from treatments performed by him (net of specified expenses including the payroll of contributing dental hygienists).

In finding that the 60% retained by the Recipient was not consideration for a taxable supply made by it, CRA stated (TaxInterpretations translation):

The terms of the contract clearly established that during the term of the contract, all patients treated by the [Mr. D] were patients of [PC] and that, consequently, all invoicing was to be done by [PC]. The contract terms did not include any clause for the supply of property or administrative services. Thus, the contract terms do not permit a conclusion that the portion of the net revenues retained by [PC] represented consideration for a supply.

We instead consider that the underlying character of the terms of the contract entailed a division amongst the parties of the [exempt] fees paid for health services rendered to patients.

The Corporation provides medical repatriation services which involve arranging to transport an individual (the patient) from a foreign hospital to a health care facility in the individual’s home country. This would include transport between the medical facilities and airports via ground transportation (ambulance, taxi, or limo), and commercial airline transportation in the company of a medical escort (registered nurses, physicians and advanced cardiac life support trained paramedics). The Corporation charges a daily rate for the medical escort and a fee for the medical equipment required by the patient.

After finding that the repatriation services were a single supply, CRA went on to state:

The activities of monitoring and caring for a patient during transfer would be activities in a health care service rendered to an individual and would fall under the exemption in section 5 when rendered to an individual by a licensed physician. …

There are no provisions … to exempt the supply of paramedical services.

… The fact that a paramedic may perform certain services on the delegated authority of a physician does not change the nature of the supply. …[D]elegated services performed by paramedics are being rendered by the paramedic not the medical practitioner who allowed the delegation.

Will CRA follow Brian Hurd and deny all ITCs to orthodontists instead of allowing them to calim ITCs on 35% of their inputs, and will it permit orthodontists (and dentists implanting artificial teeth) to follow this decision only on a going-forward basis?

CRA indicated that it agreed with the conclusion reached as inter alia being consistent with the single supply doctrine and given that:

The administrative arrangement, which permits dentists to claim ITCs based on a percentage of general operating expenses, is contradictory to the ITC provisions of the … ETA … . Also, the ETA does not provide for a fixed percentage rate to be applied/used in determining the ITCs claimable on GST/HST paid or payable.

CRA nonetheless stated:

The administrative arrangement will continue to apply where a dentist or dental corporation follows the terms of the arrangement: the dentist identified the two separate supplies, for example, the invoice issued to the patient identifies the consideration for the supply of the orthodontic appliance or artificial tooth separately from the consideration for the supply of the dental service, and the ITC claim relates to mixed-use purchases (to make both taxable and exempt supplies) such as overhead and general operating expenses and certain direct expenses or inputs (for example, personal property such as arch wires used exclusively to fabricate orthodontic appliances). The administrative arrangement does not include ITCs for capital property.

Although CRA will be announcing the replacement of the administrative agreement by application of the Hurd decision, “the current administrative arrangement will continue to apply until further notice and stakeholders will be provided with advance notice so they can prepare accordingly.”

On-call agreement of doctor with facility represents a distinct supply of a right

To meet the requirement to have a medical practitioner on call, a facility will generally enter into an agreement with a medical practitioner. These agreements generally provide that the medical practitioner will be paid a set fee for remaining on call during a given period of time. The agreements also generally provide that the medical practitioner will be paid additional amounts for intervening in patient care if and when called upon to do so during their on-call period.

When such an agreement is entered into, the medical practitioner supplies the facility with the right to call upon him or her to render health care services to the facility’s patients during a given period of time. The CRA considers this to be a distinct supply of a right by the medical practitioner that allows the facility to meet an operational requirement. …

Supply is of IPP rather than health service

[T]he nature of the supply of the right to be called upon is not dependent upon, altered, or extinguished, by a future rendering of health care services by the medical practitioner to the facility’s patients. The supply of such a right does not qualify as an exempt health care service, or part of an exempt health care service, under section 5 of Part II of Schedule V, as the supply of a right is not exempt under that section.

Accordingly, the supply of on-call coverage to the facility, whether or not the medical practitioner is contacted, would be a taxable supply of intangible personal property subject to GST/HST....

A hospital wants to retain the services of a medical specialist to treat patients by paying the medical specialist a stipend to keep the medial specialist close to the hospital in order to be available on an on-call basis. Does the GST/HST apply to the “on-call” payment made by the hospital to the medical specialist?

In finding that the on-call fee was not exempted under s. 5 of Part II of Sched. V, and was subject to GST/HST, CRA stated:

… The consideration paid or payable must be directly linked to a supply of a health care service that is in fact rendered by a physician to a particular individual. …

… [T]he hospital acquired a right to call upon the physician to attend the hospital during a given time period. This right has a distinct utility to the hospital and as such…the right is a discrete supply that is separate from any health care services that may be rendered by the physician to patients of the hospital.

…For purposes of the GST/HST, “property” is defined in subsection 123(1) to mean any property, … and includes a right or interest of any kind …. As consideration for a supply of “property”, the hospital on-call fee is not consideration paid or payable for a supply of a service for GST/HST purposes. …

CRA went on to note:

If a physician’s only taxable income is generated from hospital on-call fees and these fees do not exceed the small supplier threshold, the physician would qualify as a small supplier and as such not be required to register and charge GST/HST on this fee.

A medical doctor residing in the U.S. who is registered for GST purposes would, at the request of insurance companies, interview and physically examine a patient in Ontario in an office usually provided by it or other interested parties and then, in the doctor’s home office, review medical documentation, and dictate and edit the report to the insurance company. Billing and other office duties also were performed in the home office. The doctor also, at the request of lawyers for victims of motor vehicle accidents, and slips and falls, would examine and interview the patient in a rented office room in Ontario, and prepare in the home office a report regarding the patient’s diagnosis, restrictions and limitations, and recommendations for treatment. Are the charges for these independent medical evaluations (IMEs) exempt from the GST/HST?

Before going on to note that in the case of supplies of IMEs made after March 21, 2013, s. 1.2 of Part II of Sched. V was added to exclude supplies whose purpose was not patient care or treatment, so that this amendment rendered IMEs taxable, CRA noted that respecting such supplies made before that date:

A supply rendered by a medical practitioner of examining an individual is a health care service rendered to an individual for purposes of section 5 of Part II of Schedule V. The element of a health care service is present in an IME when the medical practitioner applies his or her medical expertise and makes a decision regarding this information on the individual's requirement for ongoing or future medical treatment. … Accordingly, the supply of an IME by a medical practitioner is exempt under section 5… .

What is cosmetic dentistry? CRA responded:

A dental procedure that is performed solely to improve the appearance of a person's teeth, gums or bite (and have no underlying medical or reconstructive purpose) would be considered a cosmetic service supply. Examples of cosmetic service supplies could include teeth whitening, gum depigmentation, gum lifts, bonding procedures and porcelain veneers (laminates) if these supplies have no medical or reconstructive purpose.

...[U]nless there is no medical or reconstructive purpose, most prosthodontic and orthodontic procedures would be covered by one or more of the exempting provisions of Part II of Schedule V:…

Individuals with a potential insurance claim for an injury or illness are sent to a clinic for diagnosis. A medical practitioner diagnoses the individual (at the clinic, the practitioner's office or the individual's home) under a subcontract with clinic and bills the clinic, which in turn bills the individual's insurer.

The supply of the diagnostic services from the clinic to the insurer would be exempt under s. 5.

The Corporation provides medical repatriation services which involve arranging to transport an individual (the patient) from a foreign hospital to a health care facility in the individual’s home country. This would include transport between the medical facilities and airports via ground transportation (ambulance, taxi, or limo), and commercial airline transportation in the company of a medical escort (registered nurses, physicians and advanced cardiac life support trained paramedics). The Corporation charges a daily rate for the medical escort and a fee for the medical equipment required by the patient.

After finding that the repatriation services were a single supply, CRA went on to state:

[N]ursing … includes activities such as providing treatment, assessing the health care needs of […][an individual], analyzing the findings of a health assessment, and determining the appropriate service, treatment or equipment. These are activities that a nurse would be engaged in during the transport of a patient. Therefore, supplies of medical escort services made by the Corporation are exempt supplies pursuant to section 6 of Part II of Schedule V when the service is rendered to an individual by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse.

Where a company supplies nurses to a facility such as a hospital or a long-term care facility, the company's supply must be analyzed separately from any supply made by the operator of the facility. … If the company's responsibility is limited to providing registered or licensed nurses to the facility so that the facility may satisfy its own staffing requirements, and the nurses are subject to the control of the operator of the facility and render services under the direction of the facility in accordance with the facility's responsibility to provide care to a patient or resident of the facility, the company has made a taxable supply of personnel or human resources, and not a supply of exempt nursing services. … However, if the company is responsible for the provision of nursing services to the patients or residents of the facility and is accountable for the quality of nursing care provided, the company may have made an exempt supply of a nursing service rendered by a registered or licensed nurse to an individual, where the service is provided within a nurse-patient relationship.

The provision by a registered nurse, who had received specialized foot care training, of providing foot care services to clients in their homes, was exempt.

A registered nurse who carries on business as a health promotion consultant, including health teaching or health promotion, communicating with individuals, families, groups, communities and populations, collaborating with care providers, directly or indirectly influencing the practice of care providers and/or policy, developing learning resources for nurses or other care providers and collecting health data, is not providing an exempt service. The requirement that exempt services under s. 6 be rendered to an individual within a nurse-patient relationship is interpreted

as meaning nursing services that involve personal interaction between a nurse and an individual who is a patient where there is an established or ongoing relationship between the nurse and the patient and the nurse is a direct care provider of the patient.

Meaning of “acupuncturist”

"Acupuncturist" refers to an individual who is a registered member of a provincial regulatory body for the profession of acupuncture and can legally use the title "Acupuncturist" (R.Ac), "Doctor of Acupuncture" (Dr.Ac), "Traditional Chinese Medicine Practitioner" (R.TCMP), or "Doctor of Traditional Chinese Medicine" (Dr.TCM). An acupuncturist also refers to an individual who practises the profession of acupuncture in an unregulated province or territory and has the qualifications equivalent to the qualifications necessary to be licensed in a regulated province.

Principles applicable to single v. multiple supply of acupuncture supply

[T]o correctly apply the GST/HST, it is necessary to determine whether the different treatment modalities and/or property supplied to a patient constitute a single supply or multiple supplies of a service(s) or property….

[T]he terms of an agreement (that is, the treatment agreed upon and reflected in an invoice) between an acupuncturist and patient establish what the acupuncturist is agreeing to provide and what the patient is expecting to receive for the consideration paid. However, it is important to note that the manner in which the price for a transaction is set out (for example, a single price or separately identified prices on an invoice) does not by itself determine whether there is a single supply or multiple supplies….

If a single supply is being made, then the predominant element of that supply must be established to determine the nature of the supply….

Example of multiple supply of acupuncturist and massage service

Example 2

An acupuncturist in Ontario assesses a patient and determines that the patient requires both acupuncture and massage therapy to treat the patient’s tendonitis. The acupuncturist is also registered with the College of Massage Therapists of Ontario. During the patient’s visit, the patient receives 40 minutes of acupuncture and 20 minutes of massage therapy. The patient is invoiced a separate fee for the acupuncture and massage therapy according to the percentage of time each modality was performed.

Based on the facts above, it is assumed that the acupuncturist is making two separate supplies: one of acupuncture and one of massage therapy….

Professional relationship requirement

For purposes of section 7 of Part II of Schedule V, an acupuncture service rendered to an individual means that there is a professional relationship between the individual receiving the acupuncture service and the acupuncturist for purposes of meeting the individual’s health care needs.

Separate supplies of herbal goods

Sales of products such as dried herbs and herbal goods for medicinal purposes are generally separate supplies made by the acupuncturist and do not form part of an acupuncture service. As such, most sales of these products are subject to the GST/HST. Such products also include botanical medicines, Chinese herbal medicines, and tinctures, ointments, and nutritional supplements, whether or not dispensed by an acupuncturist….

Acupuncture services – need for patient relationship

Only services rendered by a practitioner of acupuncture to an individual within a practitioner-patient relationship are exempt from the GST/HST under the exemption for acupuncturists. This means that the practitioner must be a direct care provider of the patient and a relationship involving personal interaction between the practitioner and the patient must have been established for the exemption to apply. …

Overlapping exemptions (e.g., dentist/acupuncturist)

…[I]n some provinces a dentist may perform acupuncture services within the scope of practice for a dentist. In such a case, the exemption for medical practitioners under section 5 of Part II of Schedule V would apply and not the exemption under section 7 of this Part for an acupuncture service.

Example 8 [nutritionist's services part of naturopathic supply]

A naturopathic doctor enters into a contract with a nutritionist to provide nutritional counselling to a patient of the naturopathic doctor. The nutritional counselling is ordered and supervised by the naturopathic doctor following an assessment of the patient. ... The patient is invoiced by the naturopathic doctor for the nutritional counselling based on an hourly rate.

Although the service is performed by the nutritionist, the service forms part of the overall naturopathic service rendered by the naturopathic doctor. The patient is a patient of the naturopathic doctor and the naturopathic doctor is ultimately liable for the provision of care to his or her patients. ...

Other Charges

...A cancellation fee paid by a patient for a missed or cancelled appointment is treated as payment for the intended supply (i.e., treatment or other naturopathic service).

CRA ruled that the provision by a licensed dietician of “consultant nutrition services” to a registered charity (presumably in connection with a redacted charitable undertaking of assisting needy individuals) qualified for exemption.

After noting that the exemption in s. 14 was applicable to training and support services provided by a for-profit corporation to children with neurological or developmental disorders who required assistance with behavioural difficulties, social skills, verbal and non-verbal communication, personal care and day-to-day functioning, CRA noted that the corporation had a social worker on staff and noted that the exemption in s. 7.2 also potentially was available. It stated:

Section 7.2 applies not only to services rendered to the individual with a disorder or disability, but also to services rendered to an individual who is a relative or caregiver of an individual with a disorder or disability, provided the services fall within the practice of the profession of social work and are rendered within a professional-client relationship. The exemption does not, however, apply to services provided by a social worker to an individual who provides care or supervision to the individual with a disorder or disability in a professional capacity, such as another social worker, a teacher or a personal care aide.

Example 2

A corporation operating a rehabilitation clinic for individuals with minor injuries receives a fixed price from the insurer regardless of the mix of services provided. The corporation also makes supplies of the component types of services to other individuals for an hourly fee. The total fee could be reasonably allocated to the component chiropractic, physiotherapy, acupuncture and massage therapy services based on the respective hours and hourly rates. This produced respective percentages, with the result that 82% of the consideration could be reasonably allocated to the chiropractic, physiotherapy and acupuncture, thereby being exempt under s. 7 if separately supplied, whereas the 18% of the fixed fee allocable to the massage therapy (if separately supplied) would be taxable. Such 82% would not be “substantially all” so that s. 7.4 would not apply. – “the supply of the rehabilitation program would be subject to the GST/HST.”

Example 3

Similar to Example 2 except that only 8% of the consideration could be reasonably attributed to the massage therapy services. As 92% (substantially all) of the consideration can reasonably be attributed to the services that would be included in ss. 5 to 7.3 of Part II of Sch. V if they were supplied separately, the supply is exempt under s. 7.4..

Example 4

Similar to Example 3, respecting rehab services reasonably attributable to social work and OT services (exempt under ss. 7.2 and 7) as to 30% and 35%, respectively, and reasonably attributable to kinesiology and massage therapy services (as to the balance).

The registered Corporation, which operates a medical clinic (the “Clinic”) at which it is authorized by the relevant provincial regulatory body to provide the services at the Clinic, and which leases the office space for the Clinic, rents or owns all of the equipment, provides all of the medical supplies, employs all of the staff including the nurses and technicians, and provides certain drugs, agreed with the Service Providers that it will provide the necessary facilities for the performance of the contracted services and that they will pay XX% of all their billings to the provincial Health Care Plan to the Corporation (which are its only source of revenue). The invoices issued by the Corporation to the Service Providers detail the total Service Provider billings for the time period as per the provincial Health Care Plan, list the medical services and supplies to the Service Provider, and calculate the percentage amount payable to the Corporation. All of the procedures performed on the patients are covered under the Health Care Plan.

After ruling that the Corporation was making taxable supplies to the Services Providers, CRA state that “the fact that the Corporation receives a portion of the [Province X Health Care Plan] fees does not mean that [the Province X Health Care Plan] pays the Corporation,” noted that the Service Providers were making exempt supplies to the Province under Sched. V, Pt. II, s. 9, CRA turned to the supplies made by the Corporation and stated:

The […] Agreement indicates that the [Service Providers] agree to provide the services as described in […] through their profession… .

…The terms of the Agreement, the invoices and the marketing material demonstrate that the Corporation is making a single supply of administrative services to the [Service Providers]. Based on the facts presented, it is our view that the percentage of [the Province X Health Care Plan] fees that are paid by the [Service Providers] to the Corporation constitutes consideration for a taxable supply of administrative services.

With respect to a medical clinic that retained physicians to provide services to patients, CCRA indicated that notwithstanding that the billings for the services were made by the clinic, it was reasonable to characterize the arrangement as involving the receipt of proceeds by the physicians, with the share of the clinic in the proceeds representing consideration for the provision by it of taxable administration and operational services. Therefore, the portion of the proceeds belonging to the physicians remained exempt pursuant to section 9.

After noting that the practice of kinesiology is not a regulated health care profession in B.C. and kinesiology services were not covered under the Medical Services Plan of B.C., CRA indicated to a member of the B.C. Association of Kinesiologists, who provided various treatments to patients, that “as kinesiology services are not listed in the Health Care Services (GST/HST) Regulations … they are not exempt from GST/HST under section 10 of Part II of Schedule V.”

The exemption in s. 14 was applicable to training and support services provided by a for-profit corporation to children with neurological or developmental disorders who required assistance with behavioural difficulties, social skills, verbal and non-verbal communication, personal care and day-to-day functioning. The services included the provision of counselling, training or coaching, support and respite services to the parents or other caregivers. The corporation was generally compensated though third-party government funding in which a parent of the child received funding from a provincial Ministry. The majority of the corporation's clients were referred by a paediatrician or a child psychiatrist. Favourable rulings were given respecting other similar activities. CRA stated:

We note that specially designed training does not have to be provided on a one-for-one basis in order to fall within section 14.

Test is based on intent

10. ... Since the wording is “provided primarily for” rather than “provided primarily to”, this condition will be satisfied as long as the course is provided with the intent that primarily elementary or secondary school students will be taking the course.

Exclusion for some kindergarten programs

12. It is important to note that although the government of a province may have established educational standards for kindergarten programs offered within the province, those programs may still not form part of the elementary school program. Where an organization operates a kindergarten independently from an elementary school, the kindergarten program may fall under a provincial early childhood learning program that is not part of the elementary school program. Such programs may, however, be exempt under other provisions of the Act, such as section 1 of Part IV of Schedule V, which exempts a supply of child care services the primary purpose of which is to provide care and supervision to children 14 years of age or under for periods normally less than 24 hours per day.

Exemption can extend to on-line instruction

70. The exempt supplies described under sections 2, 7, 8, 11 and 16 of Part III of Schedule V may also be made where a school authority makes an online supply of a service of instructing individuals in courses via the Internet as opposed to a traditional classroom setting where the conditions of the respective section are met. As well, section 18 of Part V of Schedule VI may also apply to zero-rate an online supply of a service of instructing non‑resident individuals.

71. It can, however, be difficult to determine whether a supply made online is the supply of a service (and thus possibly exempt under section 2, 7, 8, 11 or 16 of Part III of Schedule V or zero‑rated under section 18 of Part V of Schedule VI) or of intangible personal property as this determination is based on a number of factors, as well as the specific facts of the particular case. Refer to GST/HST Technical Information Bulletin B-090, GST/HST and Electronic Commerce, for information on determining whether a supply made online is a supply of a service or of intangible personal property.

Meaning of extra‑curricular activities

14. The Act does not define the term extra‑curricular activity. For purposes of section 3 of Part III of Schedule V, the Canada Revenue Agency (CRA) views extra‑curricular activities to be activities that do not generally take place during regular school hours, are not part of a school curriculum, and are not requirements to complete any course. The CRA does not stipulate the type of activity that qualifies; however, it must be an activity that is organized under the authority and responsibility of the school authority.

15. For purposes of section 3 of Part III of Schedule V, extra‑curricular activities can also include activities that are supplied to students by a student council or a school club, provided the council or club is part of the school authority (that is, it is not a separate legal entity) and the activities can be said to take place subject to the authority and responsibility of the school authority.

16. An extra‑curricular activity is generally considered to take place under the authority and responsibility of the school authority if persons employed by or under contract with the school authority, or volunteers reporting to the school authority, supervise and control the activity.

17. The exemption under section 3 of Part III of Schedule V does not apply to supplies made by third parties to elementary or secondary school students. Although the exemption under section 3 applies to supplies of food and beverages, it does not apply to supplies of other tangible personal property such as class rings and school sweaters. Such supplies would be subject to the GST/HST unless exempt under another provision of the Act.

Example of school-sponsored dance

Example 3

A school authority organizes a school dance primarily for the students of the school. Students are allowed to bring a guest. … The school authority’s principal provides a budget to the student council, which is part of the school authority, to provide decorations and authorizes the student council to sell the tickets to the students during school hours.

Admission … to the dance is exempt under section 3 … .

Example of shop student providing repair services

Example 4

A school authority supplies auto repair services that are performed by students as part of their instruction in an auto‑body course.

As the auto repair services are supplied by a school authority and performed by students in the ordinary course of the instruction of those students, the services are exempt under section 4 of Part III of Schedule V.

Distinction between instruction and admission to a seminar

62. A school authority may offer seminars, activities or other events to its students or members of the general public; however, such events are generally not considered to be a supply of instruction in courses for GST/HST purposes.

63. The supply of instruction in courses is a service for GST/HST purposes and is exempt from the GST/HST if it meets the requirements set out in Part III of Schedule V or zero‑rated if it meets the requirements set out in section 18 of Part V of Schedule VI.

64. By contrast, the supply of an admission to a seminar, activity or event is a supply of intangible personal property for GST/HST purposes and may be subject to the GST/HST. …

68. The following are some of the factors that generally indicate that a given supply is a supply of a service of instruction:

• The activity involves the provision of systematic instruction.
• The supplier monitors or supervises the participant’s progress or learning.
• The supplier assesses the participant’s progress during the course of the activity and provides ongoing support, feedback and guidance to the participant.
• The supplier may be available to assist the participant with the subject matter at a time and location different from the time and place in which the activity occurs.
• The supplier assesses the participant’s competency upon completion of the activity by requiring the participant to formally demonstrate the knowledge acquired. If the competency is not achieved, the activity may have to be repeated.
• The participant is required to invest time and effort outside of the activity in order to complete assignments, read course material, etc.
• The participant may be required to successfully complete verified prerequisites before taking part in the activity.
• The participant may be required to successfully complete the activity before being permitted to participate in another activity.
• The activity is part of a series of activities leading to a formal recognition of skills, such as a diploma, degree or licence.
• The activity may be part of a program that consists of a series of 2 or more related activities.
• The activity occurs at set intervals over an extended period of time (for example, weeks or months).
• The activity does not include the provision of rights or, if there is a provision of rights, they are incidental to or part of the single supply of a service (for example, the right to use a laboratory or a darkroom facility).
• The subject of the activity is broad (for example, writing).
• The supplier advertises or promotes the activity as being intended to instruct participants.
• The activity is promoted together with other activities in a prospectus or calendar prepared by an educational institution.
• The promotional material indicates that the activity is part of a broader program that may lead to a formal recognition of skills, such as a diploma, degree or licence.
• The promotional material is aimed at persons who have the prerequisites required to participate in the activity.

Supply of an admission to a seminar, activity or event

69. The following are some of the factors that generally indicate that a given supply is a supply of an admission to a seminar, activity or event:

• The supplier and the participant engage in minimal individualized interaction.
• The participant need only attend the activity to receive evidence of successful or satisfactory completion of the activity.
• The supplier’s purpose with respect to the activity is principally to provide information to, or to facilitate the exchange of information among, participants.
• The subject of the activity is narrowly‑focused (for example, study skills for first-year students or money management techniques).
• The activity is discrete from other activities offered by the supplier, with no formal prerequisites for attendance.
• The participant is not required to take part in the activity as a prerequisite for participating in another activity.
• The activity is promoted as a stand‑alone activity.
• The activity is promoted to the general public.
• The activity is promoted as a seminar, workshop or similar event.
• The activity occurs during a brief, concentrated period of time (for example, a number of hours, a day or several consecutive days).

Supplies of transportation services to other school authorities may be exempt under Sched. V, Pt. VI, s. 2

20. Supplies of transportation services made by a school authority to another school authority are not exempt under section 5 of Part III of Schedule V. Such supplies are therefore subject to the GST/HST when made by a registrant unless exempt under another provision of the Act. For example, where the school authority making the supply is a public institution as defined in the Act, supplies of transportation services made by the public institution to a school authority are exempt under section 2 of Part VI of Schedule V.

Example of regulatory body requirement not satisfied

Example 5

Corporation A charges a fee for administering an exam and issuing a certificate in a profession that is recognized by several boards in different provinces. Neither Corporation A nor any of these boards are a regulatory body. The certificate in question is not a professional or trade accreditation or designation that is recognized by any regulatory body.

As the certificate is not in respect of an accreditation or designation that is a professional or trade accreditation or designation that is recognized by any regulatory body, the fee charged for administering the exam and issuing a certificate is not exempt under section 6 of Part III of Schedule V.

Example of non-qualifying body

Example 2

An organization was established to develop and administer a national examination for emergency responders. Although the organization is supplying a service of administering an examination in respect of an accreditation or designation, section 6 of Part III of Schedule V does not apply to the organization because the organization is not a professional or trade association, government, vocational school, university, public college or regulatory body. Therefore, the supply made by the organization of the service of administering the examination is not exempt under section 6 of Part III of Schedule V.

Engaging ITC or change-of use rules

11. Where an election has been made under section 6 and/or section 8 of Part III of Schedule V, a GST/HST registrant supplier may be eligible to claim an input tax credit (ITC) for the GST/HST paid or payable by the registrant on property or a service based on the extent to which the property or service is acquired by the registrant for consumption, use or supply in the course of the registrant’s commercial activities, where all of the conditions for claiming an ITC are met. Where the GST/HST registrant supplier has made the election, it may be required to apply the change-in-use rules for capital personal property and capital real property.

12. If a supplier revokes a previously made election, it … may be required to apply the change-in-use rules for capital personal property and capital real property.

Election not filed

14. There is no need to submit the election form to the CRA, but it must be retained in the supplier’s books and records while an election is in effect and for 6 years from the end of the year to which an election relates.

Election must be made under both sections if both apply, but single form used

16. If a particular supply meets the requirements for exemption under both section 6 and section 8 of Part III of Schedule V, the supplier must make an election under both sections to ensure that the supply will not be exempt under either of these sections. Although a single form may be used to make the elections, the Act is clear that these are 2 separate exempting provisions that have different criteria and different persons who may elect. Where the criteria of both exempting provisions are met, a person must make both elections so that neither exempting provision will apply.

Other exemptions override election

17. Even where an election is made under section 6 and/or section 8 of Part III of Schedule V, the supply will remain exempt if it meets the requirements of another section of Schedule V. For example, section 7 of Part III of Schedule V exempts “a supply made by a school authority, public college or university of a service of instructing individuals in, or administering examinations in respect of, courses for which credit may be obtained toward a diploma or degree”, and section 1 of Part V.1 of Schedule V provides for a general exemption for supplies made by charities except for those supplies listed in that section.

Accreditation requirement/exemption application to all students

18. An accreditation or designation is an official authorization that attests to the fact that an individual has met certain pre-determined standards set forth by a regulatory body. Examples include trade accreditations, such as welding tickets, and professional designations, such as P.Eng (Professional Engineer).

19. The supply of a certificate or of a service of instruction or of administering an examination that is exempt under section 6 of Part III of Schedule V is exempt for all students in the course, including those who are not taking the course to obtain, maintain or upgrade an accreditation or designation.

20. Section 6 of Part III of Schedule V does not exempt the supply of a service of instruction or of administering an examination in a course that is not required for accreditation or designation but simply broadens one’s knowledge in a field. In addition, section 6 does not exempt the supply of a service of instruction or of administering an examination in a course that may be occupationally related and required for accreditation or designation by a professional association if there is no regulatory body.

A non-profit professional association developed (and authorized the instructors for) continuing education for-credit courses that are offered at certain post-secondary institutions. Individuals may apply to the association to be authorized to use a particular professional designation after completing a series of the courses. The association offers Exam Y which is not recognized by any regulatory body and issues Certificate Y to individuals who pass the exam.

In finding that the supply of the exam was not exempted, CRA stated:

…[A]n organization which has not been empowered by a legislative statute to regulate a particular profession or trade will not be considered to be a regulatory body for the purposes of section 6 of Part III.

As there is no federal or provincial statute that constitutes or empowers [the Association] to regulate a particular profession or trade, and [the Association] is not empowered to bestow a particular professional or trade accreditation or designation, [the Association] is not a "regulatory body" as defined in section 1 of Part III of Schedule V.

In order for a supply of a certificate or an examination to be exempt under section 6 of Part III of Schedule V, the supply must be made by a professional or trade association, government, vocational school, university, public college or a regulatory body, and it must be in respect of a course, or in respect of an accreditation or designation that leads to or maintains or upgrades a professional or trade accreditation or designation recognized by a regulatory body. …

… Based on the information provided, we are unable to determine whether [the Association] is a professional or trade association.

However, even if [the Association] were a professional or trade association, … neither the [Designation X] certification nor the …[Certification Y] is recognized by any regulatory body. Therefore, section 6 of Part III of Schedule V would not apply to the service of supplying a certificate authorizing the use of [Designation X] or administering the [Certificate Y] examination. As such, both of these services provided by [the Association] will be subject to the GST/HST, unless exempt under some other provision of the ETA.

Old policy on “university”

Under the CRA’s previous policy, educational institutions were required to grant degrees at the bachelor’s level or higher to be a “recognized degree granting institution” within the definition of university under the Excise Tax Act, thereby excluding institutions, such as a college, that grant two-year associate degrees. The only way for an organization that operates a college to be a university for GST/HST purposes was for the college to be affiliated with a degree-granting institution.

New policy on “university”

As a result of … Alexander College … a “recognized degree-granting institution” will now include a college or similar organization that is authorized by a province under provincial legislation or a governmental body in a foreign entity’s home jurisdiction to grant a degree where degree is defined in the applicable legislation to include an academic achievement at the associate level or higher. Therefore, while the academic level of achievement must still be a degree, the CRA no longer requires the degree to be at the baccalaureate level or higher.

Accordingly, where a college or similar organization meets the requirements to be a recognized degree-granting institution explained below, the college or similar organization will be a university for GST/HST purposes ... .

Example of exempted course taken by non-diploma student

Example 5

Public College P offers a variety of courses to the general public through its Continuing Education Department. Among the courses offered is an intermediate accounting course that is the same credit course offered by Public College P to students enrolled in its accounting program and that must be completed in order to earn a diploma. An individual who wishes to upgrade their accounting skills for employment purposes registers for the intermediate accounting course.

Although the individual is not enrolled in a diploma program at Public College P, the accounting course is a course for which credit may be obtained toward a diploma. As such, Public College P’s supply of instructing the individual in the course is exempt from the GST/HST

Example of enrolment for personal reasons not tainting exemption

Example 5

University F allows members of the public who meet certain minimum criteria to enroll in courses at the University for reasons that include personal interest and professional development. Among the courses offered is a Canadian literature course that students in University F’s Bachelor of Arts program must complete in order to earn a degree. An individual who is not enrolled in a degree program and who has a personal interest in Canadian literature registers for this course.

Although the individual is not enrolled in a degree program at University F, the Canadian literature course is a course for which credit may be obtained toward a degree. As such, University F’s supply of instructing the individual in the course is exempt from the GST/HST.

Application of single-supply doctrine

39. If the service of instruction and course materials form part of a single supply of a service of instruction and the supply of the service of instruction is an exempt supply, the course materials included in the single supply will not be subject to the GST/HST.

Distinction between instruction and admission to event (before listing of 27 distinguishing factors)

57. The supply of instruction in courses is a service for GST/HST purposes and is exempt from the GST/HST if it meets the requirements set out in Part III of Schedule V or zero-rated if it meets the requirements set out in section 18 of Part V of Schedule VI.

58. By contrast, the supply of an admission to a seminar, activity or event is a supply of intangible personal property for GST/HST purposes and may be subject to the GST/HST.

Students may not necessarily be taking the courses as part of a diploma program

23. The supply of a service of instructing in credit courses made by a school authority is exempt even if the supply is made to students who are not enrolled in a diploma program. Consequently, the exemption applies to supplies of instruction in courses for which credit toward a diploma may be obtained where those courses are offered by a school authority, either at night as part of a continuing education program or during the day, even if some students are not taking the courses as part of a diploma program.

Examples: student union counselling services fees

25. Examples of the supplies referred to in section 7.1 of Part III of Schedule V include supplies of student union memberships and counselling services where the consideration for these supplies must be paid by students because they receive a supply that is exempt under section 7 of Part III of Schedule V.

Can apply to student club memberships or 3^rd-party suppliers

25. Examples of the supplies referred to in section 7.1 of Part III of Schedule V include supplies of various student club memberships where the consideration for these supplies must be paid by students because they receive a supply that is exempt under section 7 of Part III of Schedule V.

26. There is no requirement that the supplies under section 7.1 and section 7 of Part III of Schedule V be made by the same supplier. As is the case with the exemption under section 7, the exemption under section 7.1 applies even if the supply is made to students who are not enrolled in a diploma program.

27. The exemption under section 7.1 of Part III of Schedule V does not apply to mandatory fees in respect of a supply of tangible personal property, such as a musical instrument or lab equipment, that is required for use in a course. Such supplies may, however, be exempt under another section of the Act.

Example of requirement for testing and attestation

Example 6

A vocational school offers a diploma program in computer programming, which is offered on a pass/fail basis, determined by the students’ performance on tests, quizzes, assignments and projects. The program leads to a diploma that attests to the competence of individuals to practise or perform the trade or vocation of software developer. …

In addition to the diploma program, the school offers 3 courses:

• “Enhancing Your Webpage with Java”, which is also a credit course in the diploma program [exempt]
• “Programming in C++”, which is offered as an upgrade program and for which students are graded on a mid term assignment and final exam [exempt]
• “Supporting and Implementing Windows”, which is not offered as part of the diploma program and for which students are evaluated based on class attendance and participation

Certificates are issued to students upon completion of each of the courses. …

… [T]he supply of instruction in “Supporting and Implementing Windows” is not exempt under section 8 of Part III of Schedule V, regardless of the fact that a certificate is issued upon successful completion of the course. This course is not offered as a credit in a diploma program nor is it evaluated on a pass/fail basis, based on the students’ performance on tests, graded materials or projects. As the successful completion of this course is based solely on attendance and class participation, the certificate issued at the end does not attest to the competence of individuals to practise a trade or vocation.

Supply of solo and dual flight time above the Canadian Aviation minimum is taxable

51. The CRA has classified the federally required flight time into the following categories:

• dual flight time
• solo flight time
• build-up flight time

52. The CRA considers an individual to be under instruction and direct supervision while amassing dual and solo flight time hours.

53. Build-up flight time refers to additional flight time that must be completed by an individual, over and above dual and solo flight time, in order to obtain a pilot licence, a rating in respect of that licence, or a flight instructor rating or associated class. The CRA does not consider an individual to be under instruction and direct supervision while amassing build-up flight time hours. …

55. Where a student purchases hours of dual or solo flight time over and above the minimum time requirements in the federal legislation, the supply of the additional hours is not exempt under section 8 … .

56. The supply of build-up flight time relating to any of the above licences or ratings is also not an exempt supply for purposes of section 8 of Part III of Schedule V because students are not under instruction or direct supervision during this time.

Points made include:

• Making the election results in the body having a commercial activity and may generate input tax credits, and may also cause the change-of-use rules to apply, thereby generating further credit.
• However, the change-of-use rules could generate a tax liability if the election subsequently is revoked.
• There is no need to submit the election form to CRA.
• If a particular supply otherwise would be exempted both under ss. 6 and 8, the supplier must elect under both sections to ensure that the supply will not be exempt. However, a single election form may be used.
• If other exemptions apply to the supply (e.g., under Sched. V. Pt. III, s. 7 or Sched. V. Pt. V.1, s. 1,) their exempt status will apply to effectively override the election.

As discussed more generally in TIB B-090, CRA has developed an informal list of factors that are generally present when an on-line supply is of a “service of instructing” as per Sched. V, Pt. III, s. 8 versus a supply of “intangible personal property.”

Factors generally indicative of a service of instructing include:

• the provision of systematic instruction, monitoring or supervision, and assessment of progress including feedback as well as assessment of competency upon completion (with the potential of failure),
• a requirement for the participant to invest time (e.g., homework) outside of the activity,
• a requirement for successful completion of verified prerequisites before taking a higher level course,
• the occurrence of the activity over an extended period (e.g., weeks or months), and
• the promotion of the activity being together with other activities in a calendar prepared by an educational institution and indicating that the activity is part of a broader program which may lead to a formal recognition of skills

Factors generally indicative of a supply of intangible personal property (e.g., admission to a workshop or seminar) include:

• little individualized interaction with the participant;
• mere attendance is sufficient for the participant to receive evidence of successful completion of the activity;
• the activity’s purpose is principally to provide information to, or to facilitate the exchange of information amongst, participants, it is narrowly focused and discrete;
• there is no formal prerequisites for attendance nor is it a prerequisite for participation in another activity; and
• it occurs during a brief period such as a few hours or a few consecutive days.

An internationally-recognized language test provided to the students of a program training them to teach English as a second language would not qualify as an exempt supply of a course as the "test provides a competency rating but it is not linked to a certificate, diploma, licence or similar document required by an individual to perform a trade or vocation."

In the course of a general discussion of the tax status of dance lessons, CRA stated:

For the purposes of this income test, income from non-vocational dance courses (e.g. courses taken for general interest, fitness or recreation) cannot be included in the amount of revenue derived from courses that develop or enhance a student's occupational skills, even if the dance school uses this source of added income as a means to defray the costs of providing courses which are vocational in nature.... For instruction in dance to meet the requirements of section 8 the instruction would generally be part of a full time program which provides an individual with the competence to practise or perform the vocation of a professional dancer or dance instructor. This instruction must further be attested to by a certificate, diploma, licence or similar document.

Examples of exempt provincial government supplies

16. … [A] number of provisions listed in Part VI of Schedule V to the Act that exempt certain supplies by public sector bodies apply to such supplies when made by a government, such as section 10 of Part VI of Schedule V to the Act, which exempts a supply made by a government of property, like a brochure, or services, such as training, where at least 90% of the brochures or training are provided for free.

Post-secondary excluded

6. … The exemption under section 9 of Part III of Schedule V does not apply to services of tutoring or instructing individuals in courses offered at the post-secondary level (for example, college-level courses).

Recipient can be other than individual instructed

7. In order for the exemption in section 9 of Part III of Schedule V to apply, a supply of a service of tutoring or instructing must be rendered to an individual, but the recipient of the supply need not be that individual. … For example, the recipient of the supply may be the parent of the individual (the student) being tutored.

Requirement for direct connection between instruction and school credit, or curriculum-designed, course

9. Courses that are approved for credit by a school authority are generally courses offered at the secondary school level. Courses that follow a curriculum designated by a school authority refers to courses for which credits may not be given but where there is a curriculum designated by a school authority. These courses are generally offered at the elementary school level. For example, reading, writing, spelling and math instruction are generally part of a school curriculum for lower grades. Tutoring or instruction in effective reading, writing, spelling and math for the purpose of assisting children in meeting the requirements of their school curriculum will generally meet the requirements of paragraph 9(a) of Part III of Schedule V.

10. The service of tutoring or instructing an individual need not be limited to material contained in a course approved for credit by, or that follows a curriculum designated by, a school authority. The tutoring or instructing of an individual could also include general concepts dealing with the relevant subject matter, or material from lower grades, in order to assist the individual in understanding the material contained in a course approved for credit by, or that follows a curriculum designated by, a school authority. For example, where an individual receives a service of tutoring or instruction in general math concepts to assist with material in a course that follows the provincial math curriculum, that service of tutoring or instruction is exempt under paragraph 9(a) of Part III of Schedule V. In order for the exemption to apply, it must be evident that there is some direct connection between the supply of the service of tutoring or instructing in question and the course approved for credit by, or the curriculum designated by, a school authority.

[CRA then provided examples of general reading proficiency instruction qualifying, but general study skills course not qualifying]

Requirement for customized student interactions

12. Common characteristics of supplies that are not exempt under paragraph 9(a) of Part III of Schedule V include:

• supplies where the tutor has negligible interaction with the student because the tutoring method is based on self-learning exercises or activities (for example, games) that strengthen a variety of cognitive skills
• supplies where a program of tutoring provides a series of levels of attainment that every student must complete without consideration of the specific needs of the student in respect of any provincially recognized course offered by a school authority or a curriculum designated by a school authority

[CRA then provided an example of a private corporation (“Corporation A”) providing a course that involved children working through a progression of non-customized math workbooks at their own pace as not qualifying given that there was little assistance from the instructor and there was “no evidence of a relationship between the supply being made by Corporation A and a course approved for credit by, or that follows a curriculum designated by, a school authority.”]

Example of private driving school providing for-credit courses

Example 4

The Ministry of Education of the particular province has authorized school authorities to give 2 credits towards a secondary school certificate of graduation to students who take driving instruction from driving schools approved by the particular province.

Driving School A has been [so] approved … .

Driving School A provides driving instruction to individuals enrolled in a secondary school in the particular province and to individuals who are not enrolled in a secondary school in the particular province. The service of driving instruction provided to the individuals who are eligible to receive the 2 credits towards a certificate of graduation is exempt under paragraph 9(a) of Part III of Schedule V. The service of driving instruction provided to the individuals who are not enrolled in a secondary school in the particular province and who are not eligible to receive 2 credits towards a certificate of graduation is not exempt … .

[CRA provided a similar example (Example 3) respecting a High School authorizing jazz dance classes at a private Dance Academy.]

S. 9(c) - Example 7

[Example 7 involved a three-level ballet course, with only the third level recognized by a private school for a physical education credit, so that level 2 would qualify because it is a prerequisite to entering level 3, but level 1 would not qualify because it is merely a prerequisite to entering a prerequisite course (level 2).]

Limited to English/French as 2^nd languages

3. … The exemption does not apply to other courses relating to English or French, such as courses intended to help students improve their command of English or French when it is their first language, nor does it apply to the supply of instruction in languages other than French or English.

Meaning of “program”

6. For the purposes of the exemption under section 11 of Part III of Schedule V, the term program is generally understood to refer to a particular series of courses that:

• follow a logical sequence
• fit together in a coherent way

7. The courses that form part of a program generally have a common subject matter or purpose, and the program itself should also have the purpose to develop students’ skills in English or French as a second language.

8. While a program generally consists of a series of courses, it is not necessary that an individual take all of the courses offered as part of that program for the exemption in section 11 of Part III of Schedule V to apply.

[In Example 2, this requirement was satisfied where a continuing education program of a public college provides course in four languages including French, and provides for three levels of French language instruction.]

Established test

22. To determine if a business of a person was established primarily to provide instruction in languages, the CRA will examine the facts surrounding that business to determine the purpose for which the business was established. The CRA will consider factors such as the business’s ongoing activities and operations, as well as its promotional materials (brochures, advertisements, course guides, etc.), which may provide evidence of the purpose for its establishment.

Operated test

23. … The CRA will consider a business to be operated primarily to provide instruction in languages if more than 50% of its total annual revenues are derived from fees/tuition for, or can be attributed to instruction in, language courses. …

26. … [I]f the portion of the business’s total annual revenues that is derived from language course fees/tuition or that can be attributed to instruction in these courses falls to 50% or less during the following fiscal year, the business would no longer be considered to be operated primarily to provide instruction in languages in the next fiscal year.

Separate supply of course materials not exempted under s. 11

44. If the supply of course materials is a separate supply from the exempt supply of a service of instruction, the supply of the course materials would not be exempt under Part III of Schedule V, and would be taxable unless another exempting provision of the Act applies to the supply.

The Corporation (which is not a school authority) supplies services of instruction in a preparation course to prepare individuals to write the International English Language Testing System (IELTS) test.

In finding that the preparation courses were not exempted under Sched. V, Pt. III, s. 11, CRA stated:

IELTS preparation courses generally focus on preparing the individual to write the IELTS test. Generally, the preparation course does not qualify as a language course and the service of instruction is not instruction in a second-language. Therefore, the service of instructing individuals in the preparation course for the IELTS test is not a language course that forms part of a program of second-language instruction.

“Primarily to students”

3. The phrase “primarily to students” means that where a school cafeteria supplies food and beverages (other than supplies of prescribed food or beverages or food or beverages supplied through a vending machine) to both students and non‑students, more than 50% of the supplies must be to students of the particular school in order for the exemption to apply. If the supply of food and beverages in the cafeteria is made primarily to students of the school, all supplies of food and beverages made in the cafeteria are exempt except for food or beverages that are prescribed, supplied through a vending machine or supplied for a private party, reception, meeting or similar private event.

“Cafeteria”

4. In elementary or secondary schools that do not have cafeterias, food and beverages may be provided to the students in classrooms, gymnasiums or other designated areas. For the purposes of section 12 of Part III of Schedule V, such spaces are considered to be cafeterias.

Example of “private” meeting - home and school meeting

Example 2

A secondary school’s parent association holds monthly meetings at the school to discuss various school-related topics. The company that supplies lunches to the students of the school also makes lunches available to those attending the parent association’s meetings, which are private meetings. Private meetings are excluded … .

Fast food chain could supply the school cafeteria lunches

5. At some elementary and secondary schools, a supplier, such as a fast‑food chain or a private company, supplies lunches directly to students within the school. The exemption under section 12 … applies to the supplies of such lunches, provided that the supplies are made primarily to students in a location determined to be a school cafeteria.

Example of exempt supply to university

Example 4

University ABC offers a qualifying meal plan that provides students with lunch and dinner every day for a 3‑month semester in the university’s cafeteria. Under a contract with a third party, the university pays the third party to provide the food and beverages under the qualifying meal plan to the students of the university. The supply made to the university by the third party is exempt under section 14 of Part III of Schedule V.

Catering exemption

33. Section 14 of Part III of Schedule V includes supplies of catering services made to a school authority, university or public college under a contract to provide food or beverages. The Act does not define catering. However, the CRA considers a caterer to be a person who, at the direction of the customer, supplies prepared meals (including buffet style) or other food or beverages and delivers the order to the premises designated by the customer where the food may be arranged, heated or served by the supplier.

Determination of 10-meals weekly test using average retail meal price

19. The calculation of whether the amount payable for a meal plan is enough for 10 meals a week is a question of fact and is based on the average retail price of a meal at the university’s or public college’s on‑campus cafeterias or restaurants.

20. The CRA considers the average retail price of a meal to mean the average retail price of a meal available to students at the on‑campus restaurants and cafeterias at which the meal plan may be used.

Topping-up option permitted

26. A topping-up option is often offered to students who purchase a qualifying meal plan. The CRA considers top‑ups or the addition of funds to a qualifying meal plan to be additional consideration for the same supply. As such, the tax status of meals under a qualifying meal plan is not impacted by top‑ups or the addition of funds to the qualifying meal plan.

Declining balance cards permitted

27. Some universities or public colleges administer their meal plans through the use of declining balance cards or similar means. A student may access one or more accounts through the card, such as an on‑campus meal plan account, an off‑campus meal plan account, or a mini‑mart or non‑food account used for laundry or bookstore purchases.

28. A meal provided under a meal plan, for which an amount is deducted from a declining balance card account is exempt under section 13 of Part III of Schedule V provided both of the following conditions are met:

• the plan is a qualifying meal plan
• the university or public college maintains a separate account for the qualifying meal plan on the declining balance card and advertises its terms and conditions separately

29. Cards issued by a university or public college to students for a qualifying meal plan are not considered to be gift cards ... .

Example of declining-balance card used for three accounts, one of them, exempt

Example 3

Students enrolled at a university pay an amount of $2,800 to the university. The students are issued a declining balance card through which 3 separate accounts can be accessed: an on‑campus qualifying meal plan account of $2,500, an off‑campus meal account of $150 and a mini‑mart account of $150. Each of these accounts is a separate plan.

The on‑campus meal plan account meets all of the requirements to be a qualifying meal plan. The meals are provided to students of the university at on‑campus eating establishments under a meal plan throughout the period of the plan, which is the 34‑week academic year. The university determined that the average retail price of a meal at the university is $7.25. Based on the average retail price per meal at the university, the single amount paid by a student is sufficient to provide the student with at least 10 meals each week for the period of the plan ($7.25 × 10 meals × 34 weeks = $2,465).

The university maintains separate accounts for the 3 separate plans and also advertises the terms and conditions of the 3 plans separately. The university is therefore not required to collect tax in respect of the meals provided under the qualifying meal plan. In addition, the university determines that the off‑campus meal plan and mini‑mart accounts are gift cards. As such, no tax is payable to the university at the time of issuance of the gift card.

Tax status determined at initial time

30. The tax status of meals under a qualifying meal plan is determined at the time the student initially enters into the agreement with the supplier. If unused funds are returned to the student at the end of the term or carried over for use in the future, the tax status of the meals previously provided under the qualifying meal plan will not be impacted.

Single consideration

Where a student enters into an agreement for meals to be provided under a meal plan and the agreement specifies that there is a single consideration, but the payment for that consideration may be made on an instalment basis, the CRA accepts that this type of arrangement meets the requirement of "single consideration".

Top-ups

In addition, the CRA considers "top-ups", or the addition of funds to a qualifying meal plan, to be additional consideration for the same supply for GST/HST purposes. As such, the tax status of meals provided under a qualifying meal plan is not impacted by "top-ups" or the addition of funds to the qualifying meal plan.

Refund of balance

The tax status of a supply for GST/HST purposes is to be determined at the time the student initially enters into the agreement with the supplier and will not be affected if, at the end of the plan period, unused funds are refunded or carried over for use in the future.

Example of recreational course exclusion

Example 7

Public College A offers a program consisting of 3 courses in model train building. These courses do not qualify as exempt supplies under any other section of Part III of Schedule V. The program is subject to review and approval by the board of the public college that was established by the college for the purposes of reviewing its course offerings.

Although there are more than 2 courses and the courses are subject to review by the board of the public college, the courses are not exempt under section 16 of Part III of Schedule V. The courses in this example are specifically excluded from the exemption in section 16 because they fall into the category of “sports, games, hobbies or other recreational pursuits that are designed to be taken primarily for recreational purposes”.

Meaning of program

46. For the purposes of the exemption under section 16 of Part III of Schedule V, a program is understood to be a particular set of 2 or more courses that is:

• offered by a university
• identified as such by that university
• reviewed and approved by a council, board or committee of that university

47. Workshops, conferences, retreats and seminars are generally not considered to be courses.

Exclusion for recreational pursuits

53. In determining whether a course is recreational in nature, it is important to consider the design of the course being offered rather than the intention of the individual taking the course. Other factors that may be examined include the course’s objectives and subject matter; how the course is marketed; the methods of teaching, evaluating and monitoring course participants; and the instructors’ qualifications.

54. Examples of recreational courses include non-credit courses in subjects such as dancing, skating, cooking or sailing.

55. While a course may not have been designed primarily for recreational purposes, it must still satisfy the other conditions set out in section 16 of Part III of Schedule V, as noted above. That is, in order for the supply of a service of instructing individuals in, or administering examinations in respect of, a course to be exempt, all of the following conditions must be met:

• the course must be 1 of at least 2 courses that make up a program offered by a university
• the program must be subject to review and approval by a council, board or committee of the university
• the council, board or committee that reviews and approves the program must have been established by the university for the purpose of reviewing its course offerings

Meaning of program

54. A program is more than a miscellaneous collection of courses that relate to a given topic or area or that have been grouped under a particular heading. Rather, a program must consist of 2 or more courses that usually have a common subject matter or purpose and that fit together in a coherent way or in a logical sequence.

55. It is not necessary that all of the courses in a program be offered every year or semester, as long as the program includes 2 or more courses that are available on a periodic basis. It is also not necessary that a program be a recurring program. Provided it is made up of 2 or more courses, a program could, for example, be created to meet a need for a single year.

56. In addition, it is not necessary that an individual take all the courses in a program for the exemption to apply as the exempting provision is for the supply of instruction in a particular set of courses within a program offered by a school authority, not the planned course or program of studies of an individual.

57. The exemption under section 16 of Part III of Schedule V does not necessarily extend to all courses under a program, and each course must be separately evaluated to determine whether the supply of the course meets the conditions set out in this section. In some cases, courses in a program may have different tax statuses as the program may include a combination of qualifying courses and courses designed to be taken primarily for recreational purposes, the supply of which is specifically excluded under section 16.

Exclusion for recreation

58. For the purposes of the exemption under section 16 of Part III of Schedule V, an activity designed to be taken primarily for recreational purposes is understood to be an activity designed to be an enjoyable diversion or pastime. A recreational course may be informative but is mainly directed at satisfying the participant’s interest or desire for enjoyment or at enhancing the participant’s social activities. …

60. Examples of recreational courses include non-credit courses in subjects such as dancing, skating, cooking or sailing.

Examples of scope of child care

3. Child care services could include services provided by:

• a babysitter
• a day care centre
• a pre-school or nursery school
• a day camp
• an educational institution for the purpose of providing before and after school care

Example of instructional or recreational aspect not detracting from “child care”

Example 6

A 7-year old boy participates in a 5 day summer dance camp for children aged 7 to 10 provided by a for-profit company. The camp runs from 8 am to 4 pm Monday to Friday. During the camp, the child is introduced to a number of different dance styles, has scheduled time for outdoor free-play and other activities each day, and is provided with a boxed lunch. The company’s staff supervises the campers and also provides the dance instruction.

The company is supplying child care services. Although the day camp involves dance instruction and other recreational activities, the primary purpose of the supply is to provide care and supervision to children 14 years of age and under for periods normally less than 24 hours per day. Therefore, the company is making an exempt supply under section 1 of Part IV of Schedule V.

Enrichment with sporting activities may not detract from “child care”

4. … With respect to any particular program, a degree of basic care and supervision is normally provided although the program may also involve activities and instruction which enrich the program. In determining whether a particular program is child care, some factors that would be considered are the age of the participating children, the qualifications of the individuals operating the program, the extent that progress is measured and goal-orientation is involved, and the time devoted to the program. For example, sports day camps for young children are generally not of an ongoing nature and it is generally recognized that there is a sufficient degree of child care even though the program is enriched by sporting activities with instruction. On the other hand, children, particularly those who are older, may participate in a sports program that is ongoing for a lengthy period of time, the instructors have qualifications or experience in a particular field, progress is regularly monitored and is goal-oriented, and sophisticated training methods are used. In this type of scenario, it is the CRA’s general view that the service provided is one of instruction as opposed to child care.

Example of exempt supervised visitation

Example 12

A court ordered that a parent should only be allowed access to their 2 children, aged 6 and 9, when a non-related person is present. A corporation provides a service where its employee supervises the children during their 4 hour visit with their parent. The employee’s role is to ensure the safety of the children during the visit. Where necessary, the employee can end the visit if it becomes uncomfortable or distressing to the children.

The corporation is making supplies of child care services. The primary purpose of the supply is to provide care and supervision to children 14 years of age or under for periods normally less than 24 hours per day. Therefore, the corporation is making exempt supplies under section 1 of Part IV of Schedule V.

Example of application of single-supply doctrine where single client (cf. various clients)

Example 13

An individual arrives at 6:45 pm to babysit children aged 7, 10, and 15 until midnight while their parents are away from the home.

Although one of the children is not 14 years of age or under, the individual is making a single supply of child care services, the primary purpose of which is to provide care and supervision to children 14 years of age or under for a period of less than 24 hours per day. Therefore, the babysitter is making an exempt supply under section 1 of Part IV of Schedule V.

Example 14

A for-profit company offers an after school program in which it provides child care services. The parents of a 7-year old, the parents of a 10-year old, and the parents of a 15-year old each enrol their child in the program.

The supply to the parents of each child is a separate supply. … The supply of child care services to the parents of the 15-year old is not exempt … .

Example of exempt double-supply of child care service

Example 22

A non-profit organization is a liaison between parents and in-home child care providers. The organization contracts with child care providers who provide child care services. The organization provides various administrative services to the child care providers in exchange for a commission. There is no employment or agency relationship between the organization and the child care providers.

A parent needing child care contacts the organization who finds an appropriate spot with a child care provider. The parent and the organization enter into a separate agreement for the supply of child care services which will be rendered by one of the in-home child care providers. The parents pay all child care services fees to the organization. From the fees paid to it, the organization keeps a 5% commission for the administrative services it provides and pays the remaining amount to the child care provider as consideration for the child care services that the organization acquires.

The supply of child care services from the in-home child care provider to the organization is exempt under section 1 of Part IV of Schedule V. The supply of child care services from the organization to the parents is also exempt under section 1 of Part IV of Schedule V. The supply of the administrative services from the organization to the child care providers provided for the 5% commission is taxable as no exempting provision applies.

The Corporation, a GST/HST registrant, provides summer day camps and after-school programs (the “children’s programs”) at the Corporation’s martial arts centre for children under 14. The summer camp hours are from 7:30 a.m. to 6:00 p.m. daily. The day is broken up by free time and fun, organized activities, with lunch and two snack times. Various camp options are provided.

Under the after-school program provided during the school year, the children, who are picked up from their schools in the Corporation’s buses, are provided with programming including arts and crafts, sports activities and homework assistance and other daily activities and free time before being picked up by their parents by 6:00 p.m.

After ruling that these two activities were exempt supplies, CRA stated:

The Corporation provides child care services under the [children’s programs]. Although the [children’s programs] are enriched by recreational and athletic activities … the primary purpose of the programs is to provide care and supervision to children 14 years of age and under. Therefore, the Corporation’s supplies made under the […] summer day camps and after-school programs are exempt from GST/HST.

• “Underprivileged” generally “refers to an individual who, being unable to provide for their own or their dependants’ basic requirements (including food, shelter, clothing, fuel, utilities, household supplies, and special personal needs), is in need of assistance … .
• “Disability” generally refers to “a long‑term impairment that restricts an individual in carrying out their activities of daily living” and does not extend to merely being elderly or frail person, or temporarily disabled or incapacitated (e.g., from surgery).
• An establishment is “operated” by a supplier when it has “management and control of the establishment on a day‑to‑day basis” - as to which indicative factors would be, for instance, authority over making operational decisions in the establishment, control of day‑to‑day operations and physical presence.
• Premises leased or licensed to the supplier under an agreement can qualify; and “an establishment staffed by employees of a supplier would generally also be considered to be an establishment operated by the supplier.”
• A supply of a service of arranging for a third party to supply the indicated items would not qualify, e.g., a provincial government contracts with a corporation to provide care, supervision, and a place of residence to a young adult with a disability and that corporation, in turn, arranges for a third party to provide the services.
• Individuals’ provision of foster care is not considered to be a commercial activity and, thus, is not subject to GST/HST.
• Supplies of services such as assessment, placement, and monitoring services regarding residential foster care are not exempt under Sched. V, Pt. IV, s. 2.
• A person operating a long‑term residential care facility for residents with a disability who provides care, supervision, a place of residence, social worker services, activities (for example, arts and crafts), and meals will be considered to be making a single supply of a service whose dominant elements are those described in Sched. V, Pt. IV, s. 2, i.e., the provision of care, supervision, and the place of residence.
• Where tenants under leases of residential units in a residential complex may acquire optional services for additional fees, such as personal grooming, laundry, and cleaning services, there will be considered to be multiple supplies, i.e., of real property and e.g. laundry services.

Lodging can be provided

2. An exempt supply of a service of providing care and supervision to an individual with limited physical or mental capacity for self-supervision and self-care due to an infirmity or disability can include lodging at an establishment of the supplier.

Meaning of limited physical or mental capacity for self-supervision and self-care due to an infirmity or disability

3. An individual with limited physical or mental capacity for self-supervision and self-care is an individual who, because of their physical or mental health care needs (for example, chronic diseases or functional disabilities), does not have the ability to independently take care of themselves. The reference to self-care must be read together with self-supervision since an individual’s capacity for self-care is influenced by their capacity for self-supervision. For example, the fact that an individual requires assistance with meal preparation and basic activities of daily living alone is not indicative of the individual having limited physical or mental capacity for self-supervision and self-care.

4. The term infirmity is generally understood to mean physical weakness, especially due to age or disease.

5. For purposes of the GST/HST, disability generally refers to a long-term impairment that restricts an individual in carrying out their activities of daily living. The individual’s disability may be congenital or the result of an injury, a neuromuscular disorder (such as muscular dystrophy or multiple sclerosis), or another condition (such as cerebral palsy, paraplegia, amputation, pulmonary disease, heart disease, arthritis, diabetes, or a back disorder).

Supply of a service rendered principally at an establishment of the supplier

6. A supply of a service of providing care and supervision to individuals with limited physical or mental capacity for self-supervision and self-care due to an infirmity or disability must be rendered principally at an establishment of the supplier … . [P]rincipally means primarily. The CRA has defined primarily to mean more than 50%.

7. … The following factors … may be used to determine whether a premises is an establishment of a supplier:

• who has authority over making operational decisions in the establishment
• who has control of day-to-day operations of the establishment
• who has presence in the establishment
• the types of activities and routine carried on in the establishment …

Example 3: attendance of such an individual at a day program of ABC

… In addition to rendering care and supervision at its establishment Monday to Friday from 9 am to 3 pm, ABC includes day trips twice weekly to places such as museums, bowling alleys, and movie theatres. Since the service of providing care and supervision is rendered principally at ABC’s establishment, the supply made by ABC is an exempt supply under section 3 … .

Example 7: application of single-supply doctrine to care at establishment

A person operates an establishment where individuals with limited physical or mental capacity for self-supervision and self-care due to a disability spend each day between 10 am and 4 pm. An agreement is entered into where the person agrees to provide, primarily at the establishment, care, supervision, lunch, art supplies, and transportation to and from different activities. Throughout the day, healthy snacks are offered to the individuals at no extra cost.

… The provision of care and supervision is the dominant element of the supply … [and] the transaction … constitutes a single supply of a service.

Training services provided by a registered charity to apprentices and supplied to employers or sponsors were exempted under Sched. V, Pt, V.1, s. 1.

In order for seminars and workshops to qualify as being for "fund raising" it is not sufficient that one of their purposes be to raise money. Their "underlying purpose" must be to raise money to support the activities of the charity. It was not clear that this test was satisfied and, in any event, the seminars and workshops in question were to be held on a regular basis in the year.

Where a charity sells admission tickets to professional performances that take place over a four day period, with the tickets being sold on a regular and continuous period for 11 months prior to the performances through a professional ticket agency, this 11-month time frame is long enough to exclude the charity from the fund-raising exemption found in s. 3 of Part V.1 of Sched. V:

Where admissions to a performance are sold in advance, we view the period over which the admissions are sold as the critical period in applying section 3 of Part V.1, rather than the period of the performances.

The provision of temporary accommodation at a boarding home for individuals requiring medical treatment off-site represented the single supply of a right to stay at the home which, to the extent that the individuals stayed for more that one month at the home, was exempted under s. 6(a) of Part I of Schedule V.

Camps for underprivileged

Supplies by PSBs of camps involving supervision in recreational or athletic activities that are intended to be provided primarily to individuals who are underprivileged or who have a disability are exempt from the GST/HST. The supplies of these camps are exempt even if the camps include overnight supervision and regardless of the age of the individuals attending.

All the conditions for exemption of an organization’s memberships under both ss. 17 and 18 of Sched. V, Pt. VI of Schedule VI are met.

1. If both Forms GST23 and GST24, are not completed but the organization acts as though it had made the elections and charges GST/HST on its memberships, will the CRA accept the elections as having been made?
2. If the organization completes only one of the GST23 and the GST24 forms, will CRA accept both elections as having been made, so that the organization should charge GST/HST and can claim ITCs?
3. Both the GST23 and the GST24 purport to allow the election to be revoked, without apparent legislative basis. Can a revocation be legally valid?

CRA responded:

(a) … In general, the CRA would accept that an election was made under section 17 or 18 even though the organization did not complete the required form, if the organization has always acted as though it had made the election in question.

(b) … If a particular supply meets the requirements of both sections 17 and 18, the supplier must make an election under both sections to ensure that the supply will not be exempt under either of these sections.

… [However] sections 17 and 18 are generally mutually exclusive and would not apply to the same supply of a membership. The benefits typically conferred by a professional membership that is exempt under section 18, such as the right to use a certain title or the right to practice certain otherwise restricted acts, would not be allowable benefits under section 17.

(c) … It would be unwieldy to require a supplier to complete a separate form in respect of every supply. Therefore, the Minister has approved a form that will allow a supplier to make an election indefinitely, until the supplier chooses that it no longer wants the election to apply … [by] complet[ing] Section D of the relevant form. … On completion of Section D, the supplier is no longer considered to have made an election in respect of any supplies of memberships as of the effective date of the revocation.

As such, the CRA considers a revocation to be legally valid if Section D on Form GST23 or Form GST24 is duly completed, signed by a person authorized to sign on behalf of the organization, and kept in the organization’s files for six years from the end of the year to which the election relates.

Before finding that supplies of memberships in a non-share not-for -profit corporation did not qualify for exemption in light of the benefits received by members (in light of facts which were heavily redacted), CRA stated (respecting s. 17(a) of Part VI of Sched. V):

Benefits that are meant to accrue only to members by reason of their membership are generally direct benefits. Generally, activities carried out by a non-profit organization on behalf of a broad public sector so that both members and non-members alike benefit in a roundabout or secondary manner will be considered to be an indirect benefit. On the other hand, where the activities are directly aimed at benefiting only the members of a particular organization, then the activities will generally be considered a direct benefit.

Regarding the elections under Sched. V, Pt. VI, ss. 18 and 17 for those exemptions not to apply, CRA stated:

In general, the CRA would accept that an election was made under section 17 or 18 even though the organization did not complete the required form, if the organization has always acted as though it had made the election in question.

Unsurprisingly, CRA stated that a fresh election is not required for each membership supply, and explained that the signed election is regarded as having a continuing effect respecting all future supplies until the election is revoked by completing Part D of the form.

The Association is a non-profit organization that was founded to advance and promote Profession A. Members pay dues and have voting and other rights. The by-laws of the Society reference the concept of a District, meaning a provincial or territorial association of Profession A recognized by the Society as a class of membership. A portion of the Association’s total revenues was remitted to the Society by the Association.

In finding that the supply of memberships by the Association was not exempt under Sched. V, Pt VI, s. 18, CRA noted that it had not been provided, and was unable to find, any evidence that membership in the Association is required to maintain a professional status recognized by statute, noting that a “person may offer or provide services similar to those offered or provided by [Profession A in Province X] even though they are not a member of the Association.”

The Association, in turn, paid fees to the Society. Although these fees appeared to be stated in the Society by-laws to be paid “on behalf of” Society members, CRA found that the fees did not represent Society membership fees that the Association was collecting as agent for the Society given that “the bylaws of the [Society] provide no liability to the individual members to pay membership dues to [Society].”

Legislative framework

An “other body established by a government” may make certain supplies of a regulatory or administrative nature on an exempt basis pursuant to section 20 of Part VI of Schedule V and section 189.1 of the ETA. It is also deemed, for greater certainty, to make specific supplies in the course of a commercial activity under section 146 of the Act.

The term “other body established by a government” is also found in other provisions … .

Summary of position

It is the CRA’s position that, to qualify as an “other body established by a government”, a body must fall within one of the following three categories:

Category 1 – A body created by a government in legislation;

Category 2 – A body incorporated by a government; and

Category 3 – A body that meets all the following criteria:

1. A government has taken action relating to the body
   1. There is evidence that a government has been involved in the set up of the body; and
   2. The purpose of the body and the activity/function delegated to the body are provided through legislative authority.
2. The purpose for which the body is set up is to undertake a public service function that the government usually undertakes
   1. The purpose of the body is to carry out the public service activity/function delegated to it by the government; and
   2. The body is established and operated other than for profit.
3. The government retains the overall authority for the regulatory program and the body remains accountable to the government
   1. The government retains the overall legislative authority and the overall policy making authority for the regulatory program in issue; and
   2. The body is required to demonstrate accountability to government in respect of the delegated activity.
      This paper will discuss each of these three categories and the criteria listed in category 3.

Discussion of Category 1

An “other body established by a government” includes a body that a government creates in legislation (i.e., through statute and subordinate legislation such as regulations and Orders-in-Council) … [e.g.] the Ontario Energy Board was created under the Ontario Energy Board Act … .

It should be noted that this category does not include a body that is incorporated pursuant to -the authority of a statute that provides the legal basis for and a scheme for incorporation e.g., … the Canada Corporations Act … .

Discussion of Category 3

The ordinary meaning of the term “established” when considered in the context of the words “other body established by a government” in the Act includes more than a body that is created by a government. The common definition of “establish” as reflected in Black’s Law Dictionary (7^th Ed.) includes “to bring about or into existence” and “to settle, make or fix firmly”. Consequently, a body will be “established by a government” if it meets the criteria set out in a) to c) below:

(a) A government has taken action relating to the body.

i. There is evidence that a government has been involved in the set up of the body.

In addition to bodies that are created directly by a government, “other body established by a government” will also include a body in respect of which the government has been involved in setting it up in its current state for the purpose of undertaking the activity/function intended.

To meet this criterion, the government must have acted in such a way as to be instrumental in setting up the body or bringing it into being in its current state to perform the function intended. For example, the government may have designated the body for a specific purpose and/or delegated specific authority to the entity so that it can fulfill a specific purpose.

The actions of the government may be such that the government “establishes” an entity that was already created (e.g., a non-profit entity originally incorporated by individuals other than a government). Where the government has been involved in the setting up of the body for a specific purpose such that its actions indicate a clear intention to set up a “new body” that did not exist in that capacity before, that body might be considered “established” by a government. Effectively, the government’s actions have resulted in the establishment of the body for a specific purpose.

ii. The purpose of the body and activity/function delegated to it are provided through legislative authority.

The government has delegated the purpose and key activity/function to the body in legislation (i.e., in statute or subordinate legislation such as by regulation or Order-in-Council). This provides the legal basis and authority for the body to fulfill the purpose and undertake the activity/function. In addition, the government always retains the power to revoke a delegation of authority. …

(b) The purpose for which the body is set up is to undertake a public service function/activity that a government usually undertakes.

i. The purpose of the body is to carry out the public service function/activity delegated to it by the government.

The body’s function/activity is of the type that the government would normally undertake itself (e.g., administrative function or day-to-day regulatory activity of a government). The body is undertaking a public service-type function/activity as opposed to an activity/function of a commercial nature.

The purpose for which the body is set up is to undertake the function/activity that the government delegates to it in legislation. …

ii. The body is established and operated other than for profit. ...

…

(c) The government retains the overall authority for the regulatory program and the body remains accountable to the government.

i. The government retains the overall legislative authority and the overall policy-making authority for the regulatory program in issue.

Where the body is “established by a government”, the government continues to retain its responsibility for rulemaking (i.e., retaining the overall legislating power in respect of the regulatory program in issue) and setting the overall policy of the regulatory program. The government does not delegate to the body the broad legislative authority nor the authority to make policy in respect of the overall public service regulatory program but rather, it delegates an authority to undertake administrative and/or regulatory activities under the program on a day-to-day basis. …

ii. The body is required to demonstrate accountability to government in respect of the delegated activities.

The body is also obligated to account to the government in respect of the authority delegated to it. For instance, the body may be required to file an annual report to government for tabling in Parliament or a Legislature; it may be subject to on-going monitoring by government and/or it may be subject to government audit.

Example of Category 3 body

• A government passed consumer safety legislation which accorded it the authority to delegate the administration of that legislation e SCA to an incorporated non-profit company. Previously, the government itself had been issuing licences to businesses in the specific industry pursuant to previous legislation.
• Following discussions with the government, four industry members incorporated NPO Corp. with the stated objects of administering a safety regulatory program for the industry, including issuing licences.. The government then designated NPO Corp. to be the corporation that administers the SCA and delegated to NPO Corp. the authority to administer the SCA, including the power to issue licences to industry businesses, the power to perform safey inspections and related administrative functions. The SCA also provided that NPO Corp. was required to file an annual report with the government for tabling in the legislature.
• Pursuant to the new legislation, the government retained the responsibility for legislating the overall regulatory framework for the specific industry and setting overall policy for the regulatory program.

Examples of exempt provincial government supplies

17. …[S] ection 20 of Part VI of Schedule V lists a number of supplies of an administrative or regulatory nature that are exempt supplies when made by, among others, a government or a body established by a government. Such supplies by a provincial or territorial government would include the supply of a driver’s licence or a birth certificate or the registration of a mortgage in a property registration system.

The issuance by a municipality of overweight load permits respecting vehicles that exceeded a prescribed weight (whose movement on roadways otherwise would be prohibited under the Highway Traffic Act (Saskatchewan)) was an exempt supply under s. 20(c) of Part VI of Schedule V.

A developer who applies for a development permit or subdivision approval may be required by the municipality to pay a levy, or construct or pay for the construction of municipal improvements (which potentially may be in excess of those required to support the particular contemplated development), with such improvements becoming municipal property. In the excess capacity situation, fees collected from subsequent developers generally are used by the municipaliy to reimburse this developer's costs. Such a levy would generally be considered to be for an exempt supply under Sched. V, Part VI, s. 20(c) by the municipality of a permit or similar right. The amount payable by a developer to the municipality as its proportionate share of the improvement costs also would generally be regarded as consideration for an exempt supply under s. 20(c).

The final building or service permit to a land developer is issued by the local municipality, but in many situations the permit cannot be issued without the approval of the land development agreement by the regional municipality. In finding that the supplies made by the regional municipality are not exempted under Pt VI, s. 21, CRA stated:

A key condition of section 21… is that the service is "one which the owner or occupant has no option but to receive". We interpret this condition as meaning (in part) standard municipal services that are provided collectively to all owners or occupants of real property… .

… [T]he requirements of land owners to comply with laws and regulations pertaining to land development, and the responsibilities of municipalities to review, examine and inspect land development agreements are not indicative of municipalities making a supply of a municipal service for which owners or occupants of real property have no option but to receive for purposes of section 21 of Part VI of Schedule V.

Two registered municipalities (the City and XYZ) agreed that each will charge the other for the receipt and treatment of the other municipality’s wastewater at their respective treatment facilities. CRA first noted that City of Brandon had found that the wording of s. 22 “is broad enough to include the ‘operation’ of a water distribution, sewerage or drainage system.” However, before going on to rule that such supplies made by the City were not exempted under s. 22, CRA stated:

[T]he agreement between the City and [XYZ] is for the acceptance, treatment and disposal of [XYZ’s] wastewater at the City’s municipal wastewater treatment facilities. The City is not supplying to [XYZ] a service of operating a wastewater treatment facility.

Examples of transit authority not satisfying the substantially all test (para. 35)

Example 5

A transit authority sells transit passes to another transit authority for the purpose of resale. Each transit pass exclusively entitles an individual to use municipal transit services provided by the first transit authority. The supplies made by the first transit authority to the second transit authority would not be exempt under section 24, as section 24 does not apply to supplies made to transit authorities. However, the supplies would be exempt under paragraph 24.1(a), as all of the conditions for the exemption to apply have been satisfied.

Example 6

A local transit authority regularly provides municipal transit services. It also provides charter services to schools for special field trips, and transportation services to tour companies for sightseeing tours of the city. The supply of a charter service or a service that is part of a tour is specifically excluded from the definition of municipal transit service. Therefore, the supply to schools and tour companies of the services described above would not be exempt under section 24 even though the supply is made by a transit authority.

A non-profit organization which provided daily pre-booked door-to-door transportation services to members of the rural public within a municipality for fares was ruled to be providing a GST/HST exempt municipal transit services under Sched. V, Pt. VI, s. 1 given inter alia that it received funding from the Province and the Municipality to support the supply of public passenger transportation services, and all or substantially all of the its supplies were supplies of “public passenger transportation services” (not a defined term) provided within the Municipality and its environs. However, its contract or charter service where it provided a driver and vehicle for events, usually weddings, was taxable.