3 July 2007 External T.I. 2007-0228581E5 - Employer-paid tuition as benefit

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: Whether tuition paid by employer is a taxable benefit.

Position: Question of fact.

Reasons: Question of fact whether principally for the benefit of the employer or the employee.

									2007-022858
XXXXXXXXXX 								E. Erskine
(613) 274-3022
July 3, 2007

Dear XXXXXXXXXX :

Re: Tuition Amounts Paid by XXXXXXXXXX (the "Employer")

This is in response to your letter of March 16, 2007, asking us to confirm that amounts paid to an educational institution by the Employer for courses taken by certain employees are not taxable benefits and that, under such circumstances, the employees are not entitled to the tuition tax credit. We also acknowledge our telephone conversation with you of June 26, 2007, on this subject (Erskine/XXXXXXXXXX).

As we explained to you in our telephone conversation, 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 submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office: please see the list on the "Contact Us" page of the Canada Revenue Agency ("CRA") website at www.cra-arc.gc.ca . Although we cannot confirm the tax implications of your specific situation, we are prepared to provide the following general comments, which may be of assistance.

The CRA's current position with respect to employer-paid educational amounts is found in Income Tax Technical News No. 13, dated May 7, 1998. This publication can be found on our website under "Forms and Publications". Please see the area for archived Income Tax Technical News ("ITTN") publications. In ITTN No.13, the general position is stated as follows:

"When the training is taken primarily for the benefit of the employer there is no taxable benefit, whether or not this training leads to a degree, diploma or certificate. A taxable benefit arises when the training is primarily for the benefit of the employee." We also draw your attention to the comments on "Specific Employer-Related Training", which may be applicable in your situation:

"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."

We can confirm that, generally, where tuition is paid by an employer and is not included as a benefit in the income of the employee, the employee cannot claim the tuition tax credit in respect of that tuition. The CRA's general comments in respect of the tuition tax credit are found in Interpretation Bulletin IT-516R2, Tuition Tax Credit, which is available on our website under "Forms and Publications".

As we mentioned to you in our telephone conversation, although this Directorate is unable to provide you with confirmation of the tax implications of your particular fact situation, it may be helpful to you to discuss your situation with the CRA's Trust Accounts Division, which is responsible for reviewing T4 returns for audit purposes. Please direct any such inquiry to:

Trust Accounts Division
Place Vanier, Tower C
25 McArthur Road
Ottawa, ON
Fax: (613) 946-1592

We trust these comments will be of assistance.

Yours truly,

Robin Maley
For Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch