15 September 2003 External T.I. 2003-0036885 - FOREIGN UNIVERSITY TUITION 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:

Can a taxpayer claim the tuition tax credit
1. for courses taken through a foreign university via the internet

2. for courses taken from a Canadian subsidiary of a foreign university that is registered and complies with provincial legislation via the internet ?

3. Can the taxpayer claim the education credit

Position:

1. No
2. Yes,
3. Yes

Reasons:

1. 118.5(1)(b) requires full-time attendance at a university outside Canada
2. 118.5(1)(a) applies - only needs to be enrolled
3. 118.6(2)

2003-003688
XXXXXXXXXX C. Tremblay, CMA
957-2139
September 15, 2003

Dear XXXXXXXXXX:

Re: Foreign university - tuition and education credits

This is in reply to your memorandum of September 3, 2003, wherein you seek our opinion on whether tuition fees paid to a foreign university via distance learning are eligible for the tuition and education credits. In the situation you describe, one of your clients will decide on an institution for an MBA program based on the tax credits available. The two choices that he is considering are both foreign universities via distance learning (Internet). One is a UK university that is given through the KIT elearning program and the other is a Canadian subsidiary of the University of XXXXXXXXXX that requires physical attendance at a XXXXXXXXXX campus one day per week.

Our comments:

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Customs and Revenue Agency ("CCRA").

To claim a tuition credit for tuition fees paid to a foreign university, paragraph 118.5(1)(b) of the Act 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 at a university is the fundamental question that 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 taken are less than 13 consecutive weeks duration, are only by correspondence or by via distance learning (Internet), 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 because he or she is not in full-time attendance.

However, a student only needs to be enrolled at an educational institution in Canada described in paragraph 118.5(1)(a) of the Act to claim a tuition credit for any tuition fees paid for the year to that educational institution, as long as the total of such fees exceeds $100. Courses from a Canadian university taken via the Internet will generally qualify for the tuition tax credit. Further, where an educational institution has registered and complies with the relevant provincial legislation to set up a university, college or other educational institution offering courses at a post-secondary level in Canada and where provincial legislation contemplates the use of a Canadian subsidiary by a foreign university to teach courses at a post secondary level, the tuition paid will qualify as tuition fees deductible under paragraph 118.5(1)(a) of the Act. For example, in British Columbia, a university will qualify as an educational institution in Canada for the purposes of paragraph 118.5(1)(a) of the Act if the university becomes a registered educational institution pursuant to the Private Post-Secondary Education Act (British Columbia).

A student taking courses via distance learning (Internet) from a foreign university may however claim an education credit. To qualify for the part-time education credit under paragraph (b) of variable B of subsection 118.6(2) of the Act, a student must be enrolled at a designated educational institution in a "specified educational program" that provides that each student in the program spend not less than 12 hours in the month on courses in the program.

We trust that our comments are of assistance.

Yours truly,

Steve Tevlin
For Director
Financial Industries Division
Income Tax Rulings Directorate
Legislation and Policy Branch

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