19 October 1995 External T.I. 9521155 - TUITION FEE REIMBURSEMENT

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether the reimbursement by an employer of tuition fees incurred by the employee for MBA courses is a taxable benefit. If a taxable benefit, could employee deduct amount included as taxable benefit for purposes of the tuition tax credit. Finally would the reimbursement be a deductible business expense.

Position TAKEN:

Yes, to all three issues based on the information provided.

Reasons FOR POSITION TAKEN:

Department's position that when courses are taken primarily to obtain a particular degree, whether undergraduate or post graduate, the reimbursement or payment of the corresponding tuition fees is a taxable benefit because the degree itself is a personal asset of the student and not of the employer, albeit the employer may also derive some secondary benefit. If included in employee's income will be eligible to deduct for tuition tax credit assuming they otherwise meet the criteria outlined in IT-516R. Previous correspondence.

		952115

XXXXXXXXXX D. Zion

Attention: XXXXXXXXXX

October 19, 1995

Dear Sirs:

Re: Tuition Fee Reimbursement

We are writing in reply to your letter of August 3, 1995 in which you request our opinion regarding the taxability of a tuition fee reimbursement by an employer to an employee pursuant to paragraph 6(1)(a) of the Income Tax Act (the "Act").

The specific issues which you have raised in your request appear to relate to a factual situation involving specific taxpayers. The tax implications inherent in such transactions can be determined only by reviewing all the relevant facts and documentation. Such a review is normally made by the local Revenue Canada Tax Services office and, accordingly, the following comments are more general in nature.

Our Comments

Generally, pursuant to paragraph 6(1)(a) of the Act, the value of benefits received in respect of, in the course of, or by virtue of an office or employment are included as income unless specifically excepted. The Department's position regarding tuition fees is outlined in paragraphs 18 to 22 of IT-470R, "Employee Fringe Benefits". Generally, where an employer has paid tuition fees on behalf of an employee or has reimbursed an employee, in whole or in part, for tuition fees paid by the employee personally, the amount paid should be reported as income of the employee for the year in which the payment was made. Paragraph 19 discusses a possible exception to this inclusion in income. It is a question of fact as to whether the employer or employee is the primary beneficiary of the course taken. However, when the courses are taken primarily to obtain a particular degree, whether undergraduate or post graduate, it is the Department's position that the reimbursement or payment of the corresponding tuition fees is a taxable benefit because the degree itself is a personal asset of the student and not of the employer, albeit the employer may also derive some secondary benefit.

The tuition fees reimbursed by the employer, in addition to any unreimbursed tuition fees, could be used in the computation of the tuition tax credit, if they otherwise qualify for the credit. The fees should meet the criteria described in Interpretation Bulletin IT-516R "Tuition Tax Credit". Paragraph 14 of this bulletin appears particularly applicable to your enquiry.

The amount of tuition fees reimbursed by the employer may be a deductible expense. We would direct you to IT-352R2, "Expenses of Training", for more details in this regard.

We trust our comments will be of assistance to you.

Yours truly,

P.D. Fuoco
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch