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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Is a student/employee entitled to claim the tuition tax credit under section 118.5 where the employer pays the tuition fees but the student/employee subsequently reimburses the employer for these fees?
Position: Yes.
Reasons: The student has in effect paid the tuition fees.
May 2, 2003
HEADQUARTERS HEADQUARTERS
Special Processing Division Income Tax Rulings
Validation Section Directorate
G. Kauppinen
Attention: Ann-Marie Johnson 957-8971
2003-000959
Tuition Tax Credit and Repayment of Employer Paid Tuition
This is in reply to your E-mail dated March 21, 2003 regarding the repayment of employer paid tuition fees.
Facts
The employer, XXXXXXXXXX offers on-site accounting courses to its employees. The classes are run by XXXXXXXXXX with a XXXXXXXXXX instructor and course curriculum. The classes are offered on-site as a matter of convenience to its employees XXXXXXXXXX The tuition fees and text books are paid for by XXXXXXXXXX in advance on the condition that if the student withdraws from the course or doesn't pass the course, the cost of the tuition and text books is reimbursed by the employee to XXXXXXXXXX.
There are no receipts issued to the students for tuition fees as they are paid directly by XXXXXXXXXX and the education amount cannot be claimed.
Your Query
You have asked if the students who withdraw from the XXXXXXXXXX accounting course, or do not pass the course, and therefore must reimburse XXXXXXXXXX for the tuition fees and books relating to the course should be entitled to the tuition tax credit.
In our view, there is nothing in the Income Tax Act ("Act") which requires a course to be physically taught on the premises of the educational institution for the tuition fees to be eligible for the tuition tax credit provided the requirements of section 118.5 of the Act are otherwise satisfied.
The student will be eligible for the tuition credit for tuition fees he or she incurs in excess of $100 under section 118.5 of the Act if:
(a) the educational institution is a college, university or other educational institution providing courses at a post-secondary level (118.5(a)(i)), or
(b) the institution is certified by the Minister of Human Resources Development to be an educational institution providing courses, other than courses designed for university credit, that furnish a person with skills for, or improve a person's skills in, an occupation (118.5(a)(ii)).
As stated in paragraph 8 of Interpretation Bulletin IT-516R2 entitled Tuition Tax Credit, to qualify under subparagraph 118.5(a)(i) of the Act, the course(s) for which the tuition fees are paid must actually be at a post-secondary level. In this regard, paragraph 8 of IT-516R2 states that the course should provide credit towards a degree, diploma or certificate and a pre-requisite for taking the course should be the completion of secondary school.
As further stated in paragraph 8 of IT-516R2, to qualify under subparagraph 118.5(a)(ii) of the Act the student must be at least 16 years old at the end of the year in which the course is taken and the student must be enrolled in the educational institution to obtain skills for, or improve the student's skill in, an occupation. The meaning of the phrase "to obtain skills for an occupation" is discussed in detail in paragraph 8 of IT-516R2.
Assuming that the accounting courses in question satisfy the requirements of either subparagraph 118.5(a)(i) or 118.5(a)(ii) of the Act, the students who reimburse XXXXXXXXXX for the tuition fees related to such courses are entitled to a receipt for income tax purposes from the XXXXXXXXXX for such tuition fees and they are entitled to the tuition tax credit under section 118.5 of the Act.
It should be possible for XXXXXXXXXX to identify students who have reimbursed them for the cost of the tuition fees and it should also be possible for XXXXXXXXXX to instruct the XXXXXXXXXX to issue such students an official receipt for income tax purposes in respect of such tuition fees.
It should be noted that the cost of text books required for a course would not normally be considered a part of the tuition fees eligible for the tuition fee tax credit. See paragraph 28 of IT-516R2 in this regard.
We trust that these comments will be of assistance.
Mickey Sarazin, CA
Manager
Aboriginal and Non-Profit Section
Financial Industries Division
Income Tax Ruling Directorate
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