18 September 2009 Internal T.I. 2009-0318451I7 - Language Training - Tuition & Education Tax Credit

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 second language training (French or English) at HRSDC certified educational institutions eligible for the tuition tax credit?

Position: Generally yes, as long as training is taken for the purpose of gaining employment or improving prospects in current employment.

Reasons: French or English language is a requirement for many occupations in Canada. One of the languages is needed in almost every occupation while both are needed in many occupations. The definition of "occupation" can include a person's employment, not just a profession, trade or vocation.

									September 18, 2009

	Validation Policies and Procedures Section	Headquarters
	Individual Returns and Payment			Income Tax Rulings
                  Processing Directorate			P. Burnley
(613) 957-2100
	Attention:  Chris Ibbitson	

									2009-031845

Language Training and Tuition and Education Tax Credits

This is in response to your memorandum of April 20, 2009, asking us to review whether tuition paid for English or French second-language training taken at institutions certified by the Minister of Human Resources and Skills Development Canada ("HRSDC") should qualify for the tuition tax credit described in section 118.5 of the Income Tax Act (the "Act"). You note that to qualify for the tuition tax credit under these circumstances, the student must be enrolled at the particular institution to obtain skills for or to improve the individual's skills in, an occupation (see subparagraph 118.5(1)(a)(ii.2) of the Act). In particular, you would like us to review CRA's previous interpretation of the phrase "skills in an occupation".

In the past, "occupation" has been interpreted by CRA as meaning a profession, vocation or trade, where the skills required for the occupation were "sufficient skills... to enable the student to work at an occupation." In relation to language training, English as a second language ("ESL") has been described as a "life" skill, and consequently not an "occupational" skill. On the basis of this interpretation, CRA has refused to allow the tuition tax credit to individuals enrolled in ESL courses at HRSDC-certified educational institutions.

Based on discussions XXXXXXXXXX and after reviewing the legislative history and modern context of section 118.5 of the Act, we have the following comments:

The common, modern definition of "occupation" is broad enough to mean "employment" as well as profession, vocation or trade. In our view, it would be appropriate to interpret "occupation", for purposes of section 118.5 of the Act, to mean "one's job or main source of employment". However, it would not be appropriate, in this context, to interpret the term "occupation" any more broadly, so as to include a person's "main pursuit" or "pastime" (other possible definitions). In our view, the objective of being employed, in the sense of earning a living - as an employee or as a self-employed person - is critical to the meaning of "occupation" in this provision of the Act. A recreational activity would not be considered an "occupation" for purposes of section 118.5 of the Act.

We still consider "skills in an occupation" to be the specific skills related to the particular occupation toward which the student is studying, or in which the student hopes to advance. However, as a knowledge of English or French is generally necessary to obtain employment in Canada, English or French can be considered a "skill in an occupation", based on the expanded definition of "occupation" described above. Consequently, English or French second-language training can be considered to provide an individual with skills in an occupation.

It is always a question of fact whether a particular individual has enrolled at an institution for the purpose of gaining or improving skills in an occupation. Where an individual takes a course at an HRSDC-certified institution, the course must be undertaken for the purpose of gaining or improving skills in an occupation (actual or anticipated), in order for the individual to qualify for the tuition tax credit. Thus, where an individual studies English or French at an HRSDC-certified institution for personal or recreational purposes, they will not qualify for the tuition tax credit.

In contrast, where courses are taken at a "university, college or other educational institution providing courses at a post-secondary level" (as referred to in subparagraph 118.5(1)(a)(ii.1)), the tuition tax credit is not dependent on the individual's purpose for enrolment. However, the courses taken in this latter case must be at the post-secondary level, which is not required for courses taken at an HRSDC-certified institution.

In conclusion, we are of the view that "occupation" means not only a profession, vocation, or trade, but also "employment", whether as an employee or as a self-employed person. Consequently, English or French is generally a "skill in an occupation" in Canada. However, where an individual is enrolled at an HRSDC-certified institution, the purpose of the individual's enrolment at the institution will determine, in part, whether the individual qualifies for the tuition tax credit.

We trust that these comments will be of assistance. We note that the phrase "skills in an occupation" is also found in subsection 118.6(2) of the Act. Accordingly, our comments above will generally apply with regard to the education tax credit as well.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.

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