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:
1)Taxability of course costs paid on behalf of students under the "Opportunities Fund for Persons with disabilities."
2)Amount of benefit to be taxed to student when HRDC pays for full course cost.
3)Whether there is any required withholding at source on amount of benefit.
3)Whether the tuition tax credit is available.
Position:
1)Taxable under 56(1)(n)
2)Fair market value; rates regularly charged to the public.
3)No, but T4A to be completed.
4)Not prevented by subparagraph 118.5(1)(a)(iii.1).
Reasons:
1)Position taken in similar files (see E9633496)
2)Position taken in file E9707727.
3)See E9418267
4)Since included in income under 56(1)(n) tuition fees credit is not prevented by subparagraph 118.5(1)(a)(iii.1).
Human Resources Development Canada
Special Initiatives
Policy and Design Division
140 Promenade du Portage 971322
Place du Portage, Phase IV Roxane Brazeau-LeBlond, CA
Hull, Québec
K1A 0J9
Attention: Mr. Bob Thomas
October 31, 1997
Dear Sir:
Re: Taxability of Course Costs and Tuition Costs
This is in response to your letter concerning the treatment of assistance provided to individuals under the "Opportunities Fund for Persons with Disabilities" (the "OFPD") announced in the February 1997 budget.
The OFPD is designed to assist Canadians with disabilities to prepare for, find and keep jobs. There is no legislative base for the OFPD. This program will be funded through the Consolidated Revenue Fund. We understand that, under the OFPD, Human Resources Development Canada ("HRDC") may pay for course costs for a particular individual either directly to the institution providing the course or program, to a province where the course or program is given by a public authority of the province, or to a third party who is providing the course or program. HRDC may also pay the assistance directly to the individual.
You have requested our views on whether the amounts of course costs paid for an individual are to be included in the individual's income for tax purposes and, if so, whether taxes have to be withheld at source. You also enquired about the individual's ability to claim a tuition tax credit or an education tax credit. You were particularly concerned with the individual's ability to claim the tuition tax credit in cases where the HRDC has paid the full cost of the course directly to the institution, with the result that the individual would not obtain a tuition receipt.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R3 dated December 30, 1996. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments which are of a general nature and are not binding on the Department.
Paragraph 56(1)(n) of the Income Tax Act (the "Act") generally includes in income all but the first $500 of the total of all amounts received in the year as or on account of scholarships, fellowships, bursaries, or certain prizes. Scholarships and bursaries are amounts paid or benefits given to students to enable them to pursue their education. A bursary is defined in Webster's Third New International Dictionary as "a sum of varying amount given or granted to a needy student." In our view, the definition of bursary is broad enough to encompass almost any form of financial assistance paid to a student to enable the student to pursue his or her education, including a payment based on means or needs of the student.
Scholarships and bursaries usually apply to education at a post-secondary level or beyond, such as at a university, college, technical institute or other educational institution. However, there are circumstances where scholarships or bursaries are awarded for education below the post-secondary school level. Scholarships and bursaries normally assist the student in proceeding towards a degree, diploma, or other certificate of graduation. Scholarships and bursaries may apply to any field of study, including an academic discipline (such as the arts or sciences), a professional program (such as law or medicine) or a trade or skill (such as plumbing or carpentry). Normally, a student is not expected to do specific work for the payer in exchange for a scholarship or bursary.
It will be a question of fact to be determined based on a review of all surrounding circumstances as to whether a particular individual has received a scholarship or bursary that is to be included into the individual's income under paragraph 56(1)(n). However, based on our understanding of the OFPD, since the primary purpose of the payment of course costs appear to be to provide financial assistance to students in need to further their education, the value of the benefit the student received will be considered to be a bursary.
The value of the benefit to be included in the student's income would be the fair market value of the applicable course or program as is determined by reference to the rates regularly charged to the public for enrolment in the applicable course or program. In addition, if a scholarship or bursary program provides allowances or reimbursements to pay for specific educational costs, such as those for lodging, personal travel, tools, books or equipment, those amounts are generally also included in income under paragraph 56(1)(n) of the Act. Paragraph 56(1)(n) of the Act can also apply to the value of benefits in kind, such as free accommodation or equipment.
A person who pays an amount as a scholarship, or bursary is required to report that amount on a T4-T4A Summary and related T4A Supplementaries. Income tax, employment insurance contributions, and Canada pension plan contributions are not required to be withheld from such amounts.
Under subparagraph 118.5(1)(a)(iii.1) of the Act, an individual may be prevented from claiming a tuition tax credit for tuition fees in respect of which the individual was entitled to receive a reimbursement or any form of assistance under a program of Her Majesty in right of Canada or a province designed to facilitate the entry or re-entry of workers into the labour force. However, this is not the case if the reimbursement or assistance is included in the individual's income, as in this situation.
As regards the issuance of receipts when the tuition fees are paid on behalf of a student, Form T2200 should be issued to students who are enrolled in a qualifying program, whether or not it is actually the student who paid the tuition.
We trust that these comments will be of assistance.
Yours truly,
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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