Educational Services Made to a Non-resident

GST/HST Memorandum 20-8
December 2019

In this publication, all legislative references to the “Act” are to the Excise Tax Act, unless otherwise specified. The information in this publication does not replace the law found in the Act and its regulations.

If this information does not completely address your particular situation, you may wish to refer to the Act or relevant regulation, or call GST/HST Rulings at 1-800-959-8287 for additional information. If you require certainty with respect to any particular GST/HST matter, you may request a ruling. GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, explains how to obtain a ruling or an interpretation and lists the GST/HST rulings centres.

If you are located in Quebec and wish to request a ruling related to the GST/HST, please call Revenu Québec at 1‑800‑567‑4692. You may also visit the Revenu Québec website at revenuquebec.ca to obtain general information.

For listed financial institutions that are selected listed financial institutions (SLFIs) for GST/HST or Quebec sales tax (QST) purposes or both, whether or not they are located in Quebec, the CRA administers the GST/HST and the QST. If you wish to make a technical GST/HST or QST enquiry related to SLFIs, please call 1‑855‑666‑5166.

GST/HST rates

Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, see GST/HST Technical Information Bulletin B‑103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province.

Table of Contents

• Definitions
• Instructing or administering examinations
  • Vocational courses offered by educational institutions and governments
• Input tax credits

Definitions

1. Subsection 123(1) defines the following:

• individual means “a natural person”
• non-resident means “not resident in Canada”
• person means “an individual, a partnership, a corporation, the estate of a deceased individual, a trust, or a body that is a society, union, club, association, commission or other organization of any kind”

Instructing or administering examinations

2. Section 18 of Part V of Schedule VI zero-rates “a supply made to a non-resident person, other than an individual, who is not registered under Subdivision d of Division V of Part IX of the Act of a service of instructing non-resident individuals in, or administering examinations in respect of, courses leading to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licences, that attest to the competence of the individuals to whom the service is rendered or the examination is administered to practise or perform a trade or vocation”.

3. To be zero-rated under section 18 of Part V of Schedule VI, a supply must be made to a non‑resident person who is not an individual and who is not registered for GST/HST purposes. This may include, but is not limited to, certain non-resident corporations or foreign governments. The supply must consist of a service of instructing non-resident individuals in, or administering examinations in respect of, certain courses. These courses must lead to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licences, that attest to the competence of the individuals to practise or perform a trade or vocation.

4. The CRA will consider a course to provide individuals with the competence to practise or perform a trade or vocation if the course has a direct link to skills that are recognized by the CRA as relating to an individual’s ability to gain or retain employment. Generally, the CRA does not consider as relating to a trade or vocation courses that are designed for personal interest or that focus on subjects such as sports, games, hobbies and other recreational or cultural pursuits. It is a question of fact whether a course provides skills that are recognized as relating to the ability to gain or retain employment. In making this determination, the CRA will consider, among other factors, the curriculum and promotional material of the supplier. The intention of the person enrolling in the course is not taken into account in determining whether a course relates to a trade or vocation.

5. Generally, courses for which students are not issued some form of documentation at their conclusion do not satisfy the “certificate, diploma, licence or similar document” criterion and are therefore not zero-rated under section 18 of Part V of Schedule VI. The CRA accepts, as meeting the documentary requirements, any document that demonstrates that the student has successfully completed a course of study and attests to the competence of the individual to practise or perform a trade or vocation.

6. To qualify for zero-rating under section 18 of Part V of Schedule VI, the course or courses leading to the certificate, diploma, licence or similar document must have a pass/fail element based on the evaluation of an individual’s performance on one or more tests, graded materials and/or projects. If a course is part of a series of courses making up a program, the individual’s performance may be evaluated on the program as a whole. Where, upon completion of a course, documentation is provided that does not attest to the competence of an individual to practise or perform a trade or vocation but merely states that the individual has taken and passed the course, the course will not qualify for zero-rating under section 18 of Part V of Schedule VI. Further, courses whose successful completion is based solely on the individual’s attendance, class participation or a combination of both are not considered to attest to the individual’s competence to perform a trade or vocation and do not qualify for zero-rating under section 18 of Part V of Schedule VI.

Vocational courses offered by educational institutions and governments

7. The wording in section 18 of Part V of Schedule VI is similar to the wording in section 8 of Part III of Schedule V. Section 8 of Part III of Schedule V exempts “a supply, other than a zero-rated supply, made by a government, a school authority, a vocational school, a public college, or a university of a service of instructing individuals in, or administering examinations in respect of, courses leading to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licences, that attest to the competence of individuals to practise or perform a trade or vocation, except where the supplier has made an election under this section in prescribed form containing prescribed information”.

8. Unlike section 8 of Part III of Schedule V, there is no requirement under section 18 of Part V of Schedule VI that the supplier be a specific type of entity. Where all of the conditions outlined in section 18 of Part V of Schedule VI are satisfied, the supply will be zero-rated regardless of the type of person supplying the service. Zero-rated supplies made under section 18 of Part V of Schedule VI cannot be exempt under section 8 of Part III of Schedule V as section 8 specifically excludes zero-rated supplies.

9. For further information regarding vocational courses offered by educational institutions and governments, refer to GST/HST Memorandum 20-4, Vocational Schools and Courses.

Input tax credits

10. A commercial activity of a person is defined in subsection 123(1) to include “a business carried on by the person (other than a business carried on without a reasonable expectation of profit by an individual, a personal trust or a partnership, all of the members of which are individuals), except to the extent to which the business involves the making of exempt supplies by the person”.

11. Under subsection 169(1), a GST/HST registrant is generally 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. Subsections 141.01(2) and (3) clarify subsection 169(1). For example, under subsection 141.01(2), to the extent that a registrant acquires property or a service to make taxable (including zero-rated) supplies for consideration, the registrant is deemed to have acquired the property or service for consumption or use in the course of the registrant’s commercial activities for purposes of subsection 169(1).

12. A registrant that makes supplies of a service of instructing or administering examinations that are zero-rated under section 18 of Part V of Schedule VI may therefore be eligible to claim ITCs for the GST/HST paid or payable on property and services to the extent that the registrant acquires them to make those zero-rated supplies, where all other conditions for claiming ITCs are met.

13. For further information regarding the rules for claiming ITCs, refer to GST/HST Memorandum 8-1, General Eligibility Rules.

Further information