Taxes can be confusing in Canada, especially with certain types of taxes applying to transactions in some situations and not applying in others. Consumers and businesses alike are affected by the tax regime in Canada. Universities must be aware of their own special tax treatment, such as the fact that most undergraduate or associate degree tuition fees are GST exempt in Canada. If you would like more information about the taxable nature of various university or college programs, consider contacting Jeremy Scott Law first by calling (902) 403-7201. A knowledgeable lawyer can advise you of the rules that apply in your particular situation.
GST and HST in Canada
The Government of Canada requires certain types of businesses to register for Goods and Services Tax (GST) and/or Harmonized Sales Tax (HST). Goods and Services Tax is currently set at 5% in Canada. Harmonized sales tax combines the national GST and a sales tax that is specific to a province. Most transactions within Canada are subject to GST or HST if made within a harmonized province. If GST or HST is due, the vendor is obligated to register for GST/HST, charge and collect the tax, complete a return, and remit the tax to the government.
Do Universities Collect GST/HST in Canada?
For the most part, Canadian university tuition is not subject to GST/HST in Canada. Canada tax law defines a university as an institution that grants degrees and that are established by legislation as such and colleges or similar organizations that are authorized by a relevant authority to grant a degree. A degree is “a level of academic achievement, such as the associate level or higher” but is defined by the relevant authority.
Are Tuition Fees Subject to HST?
In a recent case that examined these legal issues, the Canada Revenue Agency argued that a particular college was not a “recognized degree-granting institution,” and the Tax Court of Canada upheld the reassessment of the college. However, the Federal Court of Appeal overturned the lower court’s decision because it found that the college was a recognized degree-granting institution, and it did not need to include “university” in the name of the institution to be recognized as such.
Because British Columbia had authorized the institute to grant associate degrees, the college met the definition of university, and the tuition fees were exempt from GST/HST. The court recognized the public policy to exempt educational services from GST or HST.
Programs Exempt from GST and HST
A number of program charges may be exempt from GST and HST, including:
Supply of Educational Services
Generally, the supply of educational services is exempted from GST and HST where certain conditions are met. This includes services in instructing students in courses leading to any of the following:
- Maintaining a professional or trade accreditation or designation recognized by a regulatory body
- Upgrading a professional or trade accreditation or designation recognized by a regulatory body
- A certificate of accreditation or designation recognized by a regulatory body
- A degree from a university
- Diplomas, licenses, or similar documents that attest the competence of individual to practice or perform a particular trade or vocation
This includes costs of tuition, as well as other costs associated with instructing students or administering examinations to students for these purposes. This exemption extends to distance learning where the university provides instruction over the internet instead of in a traditional classroom setting.
Student Union Memberships and Counselling Services
Student union memberships and counselling services paid to a university are generally exempted from GST/HST if they are mandatory charges levied by the university.
Second Language Instruction
Supplies from universities in instructing students in a second language or administering exams in a second language (either English or French) as part of a second-language instruction program are also exempt from GST and HST.
Meals provided to students by a university at an on-campus restaurant or cafeteria at a university are exempt from GST/HST if students pay a single fee to obtain at least ten meals each week and the plan period is for at least one month.
Expenses That Might be Subject to GST/HST
Not all university-related charges will qualify for exemption from GST or HST. A tax lawyer from Jeremy Scott Law can advise you whether any of the following expenses may incur GST or HST:
Just because universities offer an abundance of courses does not necessarily mean that all courses are exempt from GST/HST. Each course has to be evaluated separately to determine whether the supply of the course qualifies for the exemption. For example, one program of study may include courses that have different tax statuses, some of which are exempt from GST/HST and some of which are not. Musical instruments or lab equipment may be exempt in some circumstances but not in others. Furthermore, if a course is offered primarily for recreational purposes, it is likely not exempt from GST/HST.
Meals may be subject to GST/HST they are sold individually or are not otherwise part of a plan which provides a student with at least 10 meals during a particular period.
Contact an Experienced Tax Lawyer Today
If you are confused about why associate degree tuition fees are tax exempt and would like a customized review of your particular tax situation, you may want to contact an experienced tax lawyer. The legal team at Jeremy Scott Law is here to help you understand your tax rights, responsibilities, and exemptions. You can schedule a confidential consultation by calling (902) 403-7201.