15 January 2004 Internal T.I. 2003-0026827 - Non-resident & Tuition & Educations credits

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: Whether a non-resident with no Canadian source income is entitled to claim a tuition and education tax credit?

Position: No

Reasons: Based on Oceanspan Carriers Limited v. The Queen 87 DTC 5102, there is no need to utilize the tax credits because the individual does not compute Part I tax.

			January 15, 2004

	ASSESSMENT & COLLECTIONS BRANCH	HEADQUARTERS
	Individual Returns & Payment Processing 	Income Tax Rulings
	Directorate	Directorate
S. E. Thomson
	Attn:	Sheila Barnard	(613) 957-2122

			2003-00002682

		Tuition and education credits for non-resident

We are writing in response to your e-mail of June 26, 2003 in which you ask for our comments on the scenario as described below. We apologize for the delay in responding to your query.

YOUR QUESTION

The case that has been referred to you is as follows:

A Canadian-resident father is claiming tuition and education tax credits transferred from his daughter under section 118.9 of the Income Tax Act (the "Act"). The daughter has been living with her mother in the U.S. since her parents divorced in 1995. The daughter attends university in the U.S. She has no income from a source in Canada and is not required to file a Canadian income tax return. (We assume that the daughter is not a resident or deemed resident of Canada for purposes of the Act.) You would like to know if the father is entitled to claim the tuition and education tax credits.

You refer to our technical interpretation 9800225 in which we indicated that a Canadian resident parent would be entitled to the education tax credit transferred from his child, where the child was not resident in Canada and had no income whatsoever. You question whether it is appropriate to calculate a tuition or education tax credit for a non-resident who has no requirement to pay income tax under the Act.

OUR COMMENTS

Pursuant to sections 118.5 and 118.6 of the Act, an individual who otherwise meets the criteria therein may deduct tuition and education tax credits in computing his tax payable under Part I of the Act for a taxation year. Based on the line of reasoning in Oceanspan Carriers Limited v. The Queen 87 DTC 5102, and other cases, it is our view that an individual who is not resident in Canada and who has no Canadian source income would not be entitled to the tuition and education tax credits. The individual is not liable to pay tax in Canada, and therefore has no need to utilize the provisions permitting the tax credits. In the case you have outlined above, the daughter would not be entitled to the tuition and education tax credits, consequently, there would be no amounts available for transfer to her father under the provisions of sections 118.81 and 118.9.

If the daughter was required to compute tax payable under Part I of the Act, then we agree that she would be entitled to the tuition tax credit under section 118.5 of the Act, assuming she otherwise qualified. Furthermore, pursuant to sections 118.6 and 118.94 of the Act, she would be entitled to the education tax credit (again, assuming she otherwise qualified) if all or substantially all of her income for the year is included in computing her taxable income earned in Canada for the year. These credits, then, would be eligible for transfer to her father under the rules in sections 118.81 and 118.9.

Please note that document 9800225 no longer reflects our position on this issue.

We trust that our comments have been helpful.

Yours truly,

Olli Laurikainen, Manager
for Director
International and Trusts Division
Income Tax Rulings Directorate
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