15 January 2009 External T.I. 2008-0295831E5 - Exam fees paid to a Professional Association

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: 1. Do the fees paid for exams mandated by a regulatory body for licensing purposes qualify for the tuition tax credit?

2. If not, can they be deducted as business expenses?

Position: 1. No.

2. No. May qualify as an ECE.

Reasons: 1. The regulatory body is not an educational institution as defined in s. 118.5 because it does not appear to provide courses at a post-secondary level. The student was not enrolled in a program of study at the regulatory body.

2. The exam fees are not incurred as business expenses, but since they can be considered to have a lasting benefit to the student, they may be considered as capital in nature if they are incurred for the purpose of earning income from a business.

XXXXXXXXXX 								2008-029583
P. Burnley
(613) 957-3498
January 15, 2009

Dear XXXXXXXXXX :

Re: Exam Fees for XXXXXXXXXX

This is in response to your email of October 7, 2008 inquiring whether exam fees paid to the XXXXXXXXXX can be claimed as a tuition tax credit, and if they are not tuition, if they can be claimed as business expenses.

The situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. 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 advanced income tax ruling request submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings". This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views.

Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance. You may also wish to refer to Interpretation Bulletin IT-516R2, "Tuition Tax Credit". This document is available on our website. Subsection 118.5(1) of the Income Tax Act (the "Act"), provides that a tuition tax credit is available "where an individual was during the year a student enrolled at an educational institution in Canada that is

(i) a university, college or other educational institution providing courses at a post-secondary school level, or

(ii) certified by the Minister of Human Resources and Skills 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 skill in, an occupation,..."

The tax credit is available with respect to "any fees for the individual's tuition paid in respect of the year to the educational institution if the total of those fees exceeds $100."

Therefore, in order to be eligible for the tuition tax credit, the exam fees must be paid to an educational institution as described above and the student must be enrolled in a course of study at that educational institution. Based on the limited information we have, the XXXXXXXXXX does not appear to be an educational institution offering courses at the post-secondary school level. Consequently, fees paid to the XXXXXXXXXX for examinations would not qualify for the tuition tax credit.

For an expense to be deductible as a business expense, it must be reasonable and incurred for the purpose of producing income from a business, and it cannot be an outlay on account of capital. Interpretation Bulletin IT-357R2, "Expenses of Training", available on the CRA website, indicates that certain training costs that provide an enduring benefit to a taxpayer may be considered an eligible capital expenditure as defined in subsection 14(5) of the Act. Training costs may be considered to provide an enduring benefit to a taxpayer where they are incurred to obtain a new skill or qualification. If the exam fees qualify as an eligible capital expenditure, a portion may be deducted each year in computing the income from the business pursuant to paragraph 20(1)(b) of the Act. Information on eligible capital expenditures can be found in Interpretation Bulletin IT-143R3, "Meaning of Eligible Capital Expenditure", and on the CRA website under "Eligible Capital Expenditures."

We trust that these comments will be of assistance.

Yours truly,

Eliza Erskine
A/Manager
Non-Profit Organizations and Aboriginal Issues Section
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch