10 March 1993 Internal T.I. 9305187 F - Tuition Fees

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.

March 10, 1993

Tuition Fees

This is in reply to the facsimile dated February 17, 1993 submitted by Ms D. Quevillon (T1 Assessments Programs Section) and the subsequent submission received on February 26, 1993 in which we were requested to provide our views on whether certain amounts described in the letter that was enclosed (as amended by the second submission) could be regarded as tuition for the purposes of subsection 118.5(1) of the Income Tax Act (the Act).

Pursuant to the letter from XXXXXXXXXX (the "College"), we have been asked to submit our views on three situations which are set out below:

(a)     Students apply the College with respect to an educational program and pay $50 towards their tuition fee in circumstances where the balance must be paid by July 15. If they do not pay the balance by July 15, the $50 is retained by the College as a penalty.

(b)     Students actually register and pay the full fees with respect to a program but withdraw within a certain refund period. In these circumstances, the amount paid by the student is refunded other than the amount of $50 which is retained by the College as a withdrawal penalty.

(c)     A student has registered and paid the full amount with respect to a program and is either automatically registered or actively registers and then withdraws after a certain refund period has expired. The student does not receive any refund of his tuition fees paid to the College.

With respect to (a) and (b) above, it has also been indicated that a particular student in either of the above circumstances which relate to a day course could proceed to register for a Continuing Education course at night. Therefore, if the $50 was considered to be tuition for the purposes of paragraph 118.5(1)(a) of the Act, this amount and the amount paid in respect of the night course would satisfy the requirement that the aggregate of tuition fees paid to an educational institution exceed $100.

We also wish to note that we obtained some additional information with respect to the above situations. In this regard, it was indicated to us in a telephone conversation on March 3, 1993 (M. Eisner/XXXXXXXXXX) that a penalty in (a) or (b) above relates to an administrative charge. In conjunction with (b), it was also indicated to us that the refund period involves a 10-day refund policy that was set by the Ministry of Colleges and Universities and expires 10 days after a term commences (at the end of August or early in September) on the basis that if a student withdraws, a replacement student would pay the full tuition with respect to the program in question. On the other hand, if a student withdraws subsequent to the expiration of the 10-day refund period, it is presumed that a replacement student will not register with the College.

Our Comments:

In the above situations, the information provided to us indicates that the issue is whether a penalty of $50 can regarded as being "fees for his tuition paid ... to the educational institution" (emphasis added) for the purposes of paragraph 118.5(1)(a) of the Act.

Since the phrase "fees for his tuition" is not defined in the Income Tax Act, its ordinary meaning must be used in determining whether a penalty can be regarded as being tuition. In this regard, it is the Department's view that this phrase can be defined as "fees for instruction".

In relating situation (a) to this definition, it is our view that a penalty of $50, which we understand to be in the nature of an administrative charge, cannot be regarded as being fees for instruction since that amount cannot be regarded as having been applied towards the student's tuition. Accordingly, the penalty should not be regarded as being "fees for tuition" for the purposes of paragraph 118.5(1)(a) of the Act.

As a further comment in respect of situation (a), paragraph 118.5(1)(a) requires a student to be "enrolled" at the educational institution in addition to paying fees for his or her tuition. In relation to these two requirements, it is our general view that a student needs to be enrolled in connection with the course or program in respect of which tuition has been paid. As it is our understanding that the student in (a) above has not enrolled with respect to the program to which an application relates, this requirement has also not been satisfied.

In the case of (b) above, the student receives a full refund other than the amount of $50 which is in the nature of an administrative charge (withdrawal penalty). As indicated above, the student receives the refund on the basis that a replacement student will be enrolled. In such circumstances, it is our view that the amount of $50 is in the nature of a withdrawal charge that cannot be considered to relate to any instruction the student may have received. It is, accordingly, our view that the amount of $50 does not represent fees for his tuition.

In the case of (c) above, the student has paid amounts with respect to a program and is entitled to instruction although he or she can no longer obtain a refund if he or she withdraws following the expiration of the 10-day time frame. In other words, once the 10-day period expires, the College is obligated to provide instruction with respect to the program in which the student is registered unless the student subsequently withdraws from the program. In these circumstances, it is our view that the amount paid with respect to the program that can be regarded as being for his or her instruction qualifies as tuition for the purposes of paragraph 118.5(1)(a) even though the student unilaterally decides not to avail himself or herself of the instruction. As a further comment, this situation is not relevant for the purposes of determining whether a penalty referred to in (a) or (b) above qualifies as tuition for the purposes of paragraph 118.5(1)(a) because no penalty is involved and the student paid an amount with respect to instruction relating to an educational program. In the case of (a) and (b) above, it is our view that no amount was paid for instruction.

If you require further technical assistance, we would be pleased to provide our views.

B.W. Dath Director Business and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch