Employee

You may provide an employee, or former employee, with a scholarship or bursary on the condition that the employee returns to employment with you on completing the course. In this situation, the amount of the scholarship or bursary is considered to be employment income for the employee or former employee.

You have to report on a T4 slip any scholarships, fellowships, or bursaries you gave to an employee if they primarily benefit the employee. If you get any questions from your employee about the income, you can refer them to Scholarships, bursaries, tuition, and training.

Specific employment-related training

The CRA generally considers that courses taken to maintain or upgrade employment-related skills are mainly for your benefit when it is reasonable to assume that the employee will resume their employment for a reasonable period of time after they finish the course.

For example, tuition fees and other associated costs such as books, meals, travel, and accommodation that you pay for courses leading to a degree, diploma, or certificate in a field related to your employee's current or future responsibilities in your business are not a taxable benefit.

General employment-related training

The CRA generally considers that other business-related courses, although not directly related to your own business, are taken mainly for your benefit.

For example, fees you pay for stress management, employment equity, first aid, and language courses are not a taxable benefit.

Personal interest training

The CRA considers that courses for personal interest or technical skills not related to your business are taken mainly for the employee's benefit and, therefore, are a taxable benefit.

Scholarship and tuition fees

If you paid for, or reimbursed, your employee's tuition fees and there is no taxable benefit according to these guidelines, the tuition fees will not qualify for the tuition tax credit. You should inform your employee of this.

If you paid for, or reimbursed, education amounts that are reported on either a T4 or T4A slip, these amounts may be eligible for the scholarship exemption. The individual may be able to fully exclude from their income tuition fees, scholarships, fellowships, and bursaries they received from you.

Family members

If you offer a program that provides free or reduced tuition fees to the family members of your employees, do not include the value of any benefit the employee's family member receives in your employee's income unless:

• the benefit is provided as a substitute for salary, wages or other remuneration
• you do not deal with the employee at arm's length

Instead, report the FMV of the scholarship or bursary on a T4A slip for the family member. If a family member meets certain criteria, they may not have to include the amount in income on their income tax and benefit return.

The same applies if you are an educational institution offering free or discounted tuition to your employees' family members.

If you get any questions, you can refer them to the Federal Income Tax and Benefit Guide.

For more information on scholarships or bursaries provided in employment situations, see Income Tax Folio S1-F2-C3, Scholarships, Research Grants and Other Education Assistance.

GST/HST, payroll deductions, and reporting

Certain tuition fees may be subject to GST/HST. If paying tuition fees results in a taxable benefit for an employee and the fees are subject to GST/HST, include GST/HST in the value of the benefit.

Payroll deductions

If the benefit is taxable, it is also pensionable. Deduct income tax and CPP contributions. If the taxable benefit is paid in cash, it is insurable. Deduct EI premiums. If it is a non-cash benefit, it is not insurable. Do not deduct EI premiums.

Reporting the benefit

If the tuition fees, scholarship or bursary is taxable, report the employee's benefit in box 14 "Employment income" and in the "Other information" area under code 40 at the bottom of the T4 slip. For more information, see T4 – Information for employers.

If you are reporting tuition fees, scholarships, or bursaries for the family member of your employee, report its fair market value on a T4A slip for the family member in the "Other information" area under code 105. For more information, see T4A – Information for payers.