Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Does a distance learning programme MBA taken by a Canadian resident student offered by a foreign university qualify for the tuition tax credit?
Position TAKEN:
No,
Reasons FOR POSITION TAKEN:
118.5(1)(b) full-time attendance at a university outside Canada
Prior decisions
May 15, 2000
International Tax Directorate HEADQUARTERS
Part I Withholding Section C. Tremblay
Attention: Eric Hammond
A/Manager
2000-000800
Tuition fees - XXXXXXXXXX
This is in reply to your memorandum of February 14, 2000, wherein you ask for our comments on whether distance learning courses such as those offered by XXXXXXXXXX should be accepted for tuition tax credit purposes.
XXXXXXXXXX
Students with entry credentials below those required for the MBA programme may study the main functional aspects of business management. Students can study the program in its own right or use it to gain admission to the MBA programme. In our view, in addition to our comments regarding "full-time attendance" below, since this diploma course does not appear to satisfy the words of paragraph 118.5(1)(b) of the Income Tax Act (the "Act") "..in a course leading to a degree..", such tuition fees would not qualify for the tuition tax credit.
XXXXXXXXXX
The Distance Learning MBA ("DLMBA") programme offered by XXXXXXXXXX allows international students the flexibility of learning while maintaining one's occupation.
XXXXXXXXXX
Further, you advise us that XXXXXXXXXX, indicated that XXXXXXXXXX considers students enrolled in the DLMBA programme either with the XXXXXXXXXX or XXXXXXXXXX to be in full-time attendance.
Upon review of the information submitted, we agree that XXXXXXXXXX is an accredited educational institution and that the DLMBA programme leads to a degree at its successful completion. However, we draw your attention to paragraph 118.5(1)(b) of the Act which requires that the student be in full-time attendance at a university outside Canada. The question of whether an individual is in full-time attendance is the fundamental question which must be determined. Further to paragraph 10 of Interpretation Bulletin, IT-516R2, where a University or college considers that the students enrolled in their programs are in full-time attendance, they are generally considered to have met the full-time attendance requirement. However, a student is not considered to be in full-time attendance at a university outside Canada where the courses are taken only by correspondence, or where the student is carrying only a minor course load and is devoting much of his or her time to money earning activities. Generally, if there is no physical presence at the foreign university, the students cannot claim the tuition tax credit. In our review of the XXXXXXXXXX, the students are enrolled with XXXXXXXXXX and not with the XXXXXXXXXX and therefore paragraph 118.5(1)(a) of the Act is not applicable (i.e. the students are not considered enrolled at an educational institution in Canada). The XXXXXXXXXX are not authorized to issue XXXXXXXXXX MBA's and thus the issue remains paragraph 118.5(1)(b) of the Act and the requirement that the student be in full-time attendance at a university outside Canada.
The definition of full-time was interpreted in the case Reddam v. M.N.R. (64 DTC 382) where it was stated that full-time means all the time. Attendance was interpreted in E.A. Hunt v M.N.R. (77 DTC 79) and in Frank Albert Ritchie v. M.N.R. (70 DTC 1407). as "... being present when necessary for the purpose of instruction and should not be stretched to mean physically and permanently present at all times, but only to the extent of enabling the candidate to pursue studies...". Thus we accept that full-time attendance does not automatically require day-to-day physical attendance. However, it should be noted that the court cases have generally been in the context of whether a full-time employee can, at the same time, be considered to be in "full-time attendance". These court cases have not, in our opinion, established a precedence that physical presence at the foreign university is not necessary where the programme is a distance learning programme. In this regard, recent amendments to subsection 118.6(2) of the Act removed the requirement that an individual be in full-time attendance at a designated educational institution to benefit from the education tax credit. The purpose of that amendment was to ensure that the credit was available to full-time post-secondary students enrolled in distance education programs or correspondence courses. In our view, had the Department of Finance wanted foreign university distance learning education programs to qualify for the tuition credit they could easily have made the amendment to paragraph 118.5(1)(b) of the Act at the same time.
Although a student holding a full-time job is not precluded from being considered a student in full-time attendance, in our view, the student should be taking a major course load. It is a question of fact whether a particular student devotes sufficient time to his studies in relation to his demands from his employment duties to be considered a student in full-time attendance. The students enrolled in XXXXXXXXXX DLMBA programme are generally senior employees or executives with their firms spending most of their time on income earning activities whereas the suggested study time to dedicate to the DLMBA programme is XXXXXXXXXX. The students are also only required to submit an assignment every XXXXXXXXXX months. Accordingly it is arguable whether a student who is under such enormous employment demands can bring himself within the parameters of a student in full-time attendance.
In summary, since study time and assignment requirements are low, physical attendance requirements in the XXXXXXXXXX is non-existent and minimal in the XXXXXXXXXX (generally less than XXXXXXXXXX) and the fact that students are generally senior employees and executives devoting much of their time to money earning activities, it is our opinion that the students are not in full-time attendance at a university outside Canada. Moreover, it is difficult to interpret the words in paragraph 118.5(1)(b) of the Act "... in full-time attendance at a university outside Canada ..." to not require a significant physical presence. We note however that students enrolled in the XXXXXXXXXX would appear to meet the full-time attendance at a university outside Canada requirement.
Accordingly, in our view, both options of the DLMBA programmes are not eligible for the tuition tax credit. It would require a legislative amendment to paragraph 118.5(1)(b) of the Act from the Department of Finance to render distance learning courses similar to that of the DLMBA taken by Canadian residents from foreign universities, eligible for the tuition tax credit.
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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