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: Would all educational costs paid under the company's educational policy be considered non-taxable based on the Department’s position as described in Technical News #13?
Position: No.
Reasons: The educational policy is very broad and could include courses which fall into the general interest category. The employer will have to determine the taxation of educational costs on a case by case basis.
XXXXXXXXXX 5-982111
Karen Power, CA
Attention: XXXXXXXXXX
October 13, 1998
Dear Sirs:
Re: Employer-Paid Educational Costs
We are writing in reply to your letter of August 14, 1998, concerning the taxation of employer-paid educational costs for employees of XXXXXXXXXX (a copy which was provided for our information) as a result of the Income Tax Technical News #13 which was released by Revenue Canada on May 7, 1998.
In your opinion, all employer-paid educational costs pursuant to XXXXXXXXXX clearly fall within either categories of “specific employer-related training” or “general employment-related training”. You are requesting confirmation that all educational costs paid by XXXXXXXXXX pursuant to its Educational Policy fall within the non-taxable categories.
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.
Technical News #13 announced new guidelines that assist in the determination of whether employer-paid educational costs are to be considered a taxable benefit. The new guidelines are effective as of May 7, 1998 and will apply to all future assessments and reassessments in an arm’s length employee-employer relationship. This means that these guidelines will generally apply to:
(i) all assessments and reassessments of the 1997 and subsequent taxation years, and
(ii) all future reassessments resulting from an objection or appeal, or from a waiver filed prior to the date of this release.
The new guidelines consider three broad categories of training. Only training and educational costs which fall within the third category will be considered of primary benefit to the employee and thus remain taxable. All other training which falls into the first or second category will generally be considered to primarily benefit the employer and, therefore, be non-taxable.
Courses which are taken for maintenance or upgrading of employer-related skills, when it is reasonable to assume that the employee will resume his or her employment for a reasonable period of time after completion of the course. Whether or not the course leads to a degree, certificate or diploma, and when the course is taken will not affect the taxation of the training.
Other business-related courses, although not directly related to the employer’s business. Examples of this category would include stress or time management, employment equity, first-aid and language skills.
Category 3: Personal Interest Training - Taxable
Employer-paid courses for personal interest or technical skills that are not related to the employer’s business; for example, fees paid for a self-interest carpentry course.
We have reviewed XXXXXXXXXX which states that XXXXXXXXXX will pay 100% of tuition and administration fees for continuing education courses successfully completed. Eligible courses include: secondary or college level courses approved by the Ministry of Education of any province in Canada which advances the academic standing of the employee and courses from a regular program and leading to a bachelor, master, doctorate degree (with or without regard to the employee’s current job assignment or even XXXXXXXXXX current business) from a recognized Canadian university.
In our view, becauseXXXXXXXXXX is so broad, our Department cannot confirm that all educational costs paid pursuant to this policy will fall within the non-taxable categories of Technical News #13. It is the employer’s responsibility to determine whether on a case by case basis the reimbursed educational costs should be treated as non-taxable.
The new guidelines will apply to individuals who received a taxable benefit in 1997, to determine whether the training is still considered taxable. If the employer determines that tuition fees reimbursed during 1997 fall within the Specific Employer-Related Training or General Employment-Related Training categories, the employer should prepare amended T4 Supplementary Slips and an amended T4 Summary form to reduce the employment income in Box 14 and the amount reported as a taxable benefit in Box 40. A footnote on the T4 Supplementary slip should be included to indicate that a tuition benefit has been deleted. Employees should be provided with a letter outlining the benefit that is deleted and the educational institutions to which they pertain. XXXXXXXXXX should contact their local Tax Centre to determine whether this procedure may be facilitated.
For 1998 and future taxation years, once an employer determines that the employer-paid training is considered non-taxable under the new guidelines, no reporting of these costs will be required. Relevant documentation which has helped in the determination that the employer-paid training is non-taxable should be kept.
We have noted your comments concerning the taxation of awards and incentives provided to employees in recognition of academic achievement, however, as you have noted, these amounts will continue to remain taxable.
We trust our comments will be of assistance to you.
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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