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: Would tuition fees paid for by an employer be considered non-taxable based on the Department's position as described in Technical News #13?
Position: Yes.
Reasons: The program of study meets the conditions of "Specific Employer-Related Training" per Technical News #13.
2000-002174
XXXXXXXXXX Karen Power, CA
(613) 957-8953
July 13, 2000
Dear XXXXXXXXXX:
Re: Employer-Paid Educational Costs
We are writing in reply to your letter of April 19, 2000, concerning the taxation of employer-paid educational costs as a result of the Income Tax Technical News #13 which was released by the Canada Customs and Revenue Agency on May 7, 1998.
You have indicated that you are currently a program director (XXXXXXXXXX), and a member of the Faculty Association at the XXXXXXXXXX In addition to your program director duties, you teach a cross-cultural communications course. You have recently been accepted into a doctoral program in "XXXXXXXXXX", beginning this summer, and as a benefit of being a member of XXXXXXXXXX Faculty Association, the university will pay your tuition for the doctoral courses. It is your opinion that your situation fits within the "Specific Employer-Related Training" category which will not result in a taxable benefit pursuant to paragraph 6(1)(a) of the Income Tax Act (the "Act").
As explained in Information Circular 70-6R3, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. However, we are prepared to offer the following general comments which may be of some assistance to you.
Tuition fees are addressed in paragraphs 18 and 19 of Interpretation Bulletin IT-470R, Employee's Fringe Benefits, which discusses employment benefits under paragraph 6(1)(a) of the Income Tax Act (the "Act"). Paragraph 18 of IT-470R states that where an employer has paid tuition fees on behalf of an employee or has reimbursed an employee, in whole or in part, for tuition fees paid by the employee personally, the amount paid should be included in income for the year in which the payment was made. Paragraph 19 of IT-470R provides an exception when the course is taken primarily for the benefit of the employer.
Technical News #13 announced new guidelines that assist in the determination of whether employer-paid educational costs are to be considered a taxable benefit. The new guidelines are effective as of May 7, 1998 and will apply to all future assessments and reassessments in an arm's length employee-employer relationship.
The new guidelines consider three broad categories of training. Only training and educational costs which fall within the third category will be considered of primary benefit to the employee and thus remain taxable. All other training which falls into the first or second category will generally be considered to primarily benefit the employer and, therefore, be non-taxable.
Courses which are taken for maintenance or upgrading of employer-related skills, when it is reasonable to assume that the employee will resume his or her employment for a reasonable period of time after completion of the course. Whether or not the course leads to a degree, certificate or diploma, and when the course is taken will not affect the taxation of the training.
Other business-related courses, although not directly related to the employer's business. Examples of this category would include stress or time management, employment equity, first-aid and language skills.
Category 3: Personal Interest Training - Taxable
Employer-paid courses for personal interest or technical skills that are not related to the employer's business; for example, fees paid for a self-interest carpentry course.
As you have indicated, the newsletter states that "Courses which are taken for maintenance or upgrading of employer-related skills, when it is reasonable to assume that the employee will resume his or her employment for a reasonable period of time after completion of the courses, will generally be considered to primarily benefit the employer and therefore be non-taxable. For example, fees and other associated costs such as meals, travel and accommodation which are paid for courses leading to a degree, diploma or certificate in a field related to the employee's current or potential future responsibilities in the employer's business will not result in a taxable benefit."
It is the employer's responsibility to determine whether on a case by case basis the reimbursed educational costs should be treated as non-taxable. Once the employer determines that training is considered non-taxable under the new guidelines, no reporting of these costs will be required. Relevant documentation which has helped in the determination that the employer-paid training is non-taxable should be kept. The new guidelines do not necessarily apply in non-arm's length relationships or in specific examples which evidence that the benefit was in fact primarily for the employee. This will be the case, for example, if the employee and the employer have entered into an agreement under which the remuneration ordinarily paid to the employee is reduced in recognition of training costs incurred by the employer.
Based strictly on the information you have presented, it would appear that your situation would fall in the category of "Specific Employer-Related Training" and, as a result, course fees, covered by XXXXXXXXXX will not result in a taxable benefit. However, as indicated above, it is your employer's responsibility to determine whether the employer-paid educational costs should be treated as non-taxable.
We trust our comments will be of assistance to you.
John Oulton
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
- 3 -
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2000
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2000
Email this Content