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.
Principal Issues: Is a reduction in tuition fees offered to all students by a college taxable to the students under 56(1)(n) or should the reduction be considered a reimbursement of fees in the circumstances?
Position: Taxable as a bursary under 56(1)(n) in the particular circumstances
Reasons: The definition of bursary is broad enough to encompass any form of financial assistance to enable a student to pursue his or her education.
July 18, 2005
Re: Tuition assistance offered to all students
This is in response to your letter of March 22, 2005 inquiring about the proper T4A and T2202 reporting of tuition assistance awarded to each student of XXXXXXXXXX (the "College") for the 2005/2006 school year. Specifically, the College has decided to award each student a "XXXXXXXXXX bursary" equal to the otherwise planned tuition increase for this academic year so their students would not be subject to the increase in tuition rates for the year. We apologize for the delay in our response.
The situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. It is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advanced income tax ruling. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.
Paragraph 56(1)(n) of the Income Tax Act (the "Act") generally includes in income amounts received in the year as, or on account of, a scholarship, fellowship or bursary. The Canada Revenue Agency's general views regarding the taxation of scholarships, bursaries and similar benefits are contained in Interpretation Bulletin IT-75R4, "Scholarships, Fellowships, Bursaries, Prizes and Research Grants". All CRA publications can be accessed on the internet at http://www.cra-arc.gc.ca.
It has been our long-standing position that the definition of bursary is broad enough to encompass any form of financial assistance to enable a student to pursue his or her education. In our view, the planned reduction in tuition fees offered in the form of a "XXXXXXXXXX bursary" to each student of the College for the 2005/2006 academic year can be considered financial assistance in the pursuit of the student's education. Accordingly, the difference between the predetermined tuition fee established by the College and the amount actually paid by the student (assuming no employer/employee relationship) can be viewed as a bursary under the circumstances and will, subject to the scholarship exemption, be taxable in the hands of the student pursuant to paragraph 56(1)(n) of the Act.
As you are no doubt aware, the rules with respect to the tuition and education tax credits are discussed in detail in Interpretation Bulletins IT-516R2 and IT-515R2 entitled "Tuition Tax Credit" and Education Tax Credit" respectively. Paragraph 17 of IT-516R2 dealing with the tuition tax credit indicates that tuition fees can include fees paid out of prizes, scholarships, fellowships and bursaries as these amounts are required to be included in the student's income. Accordingly, to the extent the College awards each student a bursary for the 2005/2006 academic year, the amount of tuition fees reported on the T2202 that will be eligible for the tuition tax credit will include the full amount of the tuition fees, notwithstanding any reduction in the tuition fees for the bursary awarded in the year.
Similarly, the education tax credit in subsection 118.6(2) of the Act is available to certain students who are enrolled in a "qualifying educational program" or a "specified educational program". These terms are defined in subsection 118.6(1) of the Act and provide, among other things, that a program is not eligible for the education tax credit if the student receives, from a person with whom the student is dealing at arm's length, any allowance, benefit, grant or reimbursement for expenses other than certain benefits including scholarship, fellowship or bursary amounts. Therefore, the bursary offered to the students of the College in the form of reduced tuition fees will not impede on their ability to qualify for the education tax credit.
We trust that these comments will be of assistance.
Roxane Brazeau-LeBlond, C.A.
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Policy and Planning Branch
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