Translation disclaimer
This translation was prepared by Tax Interpretations Inc. The CRA did not issue this document in the language in which it now appears, and is not responsible for any errors in its translation that might impact a reader’s understanding of it or the position(s) taken therein. See also the general Disclaimer below.
Principal Issues: [TaxInterpretations translation] Briefly, by virtue of proposed subparagraph 6(1)(a)(vi), will a benefit granted under a program offered by an employer on or after October 31, 2011 in relation to the pursuit of studies of an individual other than one of its employees be considered a scholarship for that particular individual, whether that benefit relates to elementary, secondary or postsecondary education?
Position: Yes.
Reasons: Analysis of the proposed provision.
XXXXXXXXXX I. Landry, M. Fisc.
2011-043158
February 8, 2012
Dear Sir,
Subject: Proposed subparagraph 6(1)(a)(vi)
This is in response to your concerns regarding proposed subparagraph 6(1)(a)(vi) of the Legislative Proposals Relating to Income Tax and Sales and Excise Taxes of October 31, 2011 ("Proposed Legislation"). You are asking us more specifically the following questions regarding the proposed legislation:
1) When does the Canada Revenue Agency ("CRA") intend to implement this proposed legislation?
2) Does the proposed legislation apply to elementary, secondary, and post-secondary studies?
3) Can amounts paid by an employer as tuition reimbursements or as bursaries also be part of a "program" within the meaning of the proposed legislation?
4) Does an employer have to issue a T4A slip, Statement of Pension, Retirement, Annuity, and Other Income ("T4A slip"), on behalf of the individual who receives or enjoys the benefit and includes the amount or amounts paid to the individual under a "program" within the meaning of the proposed legislation as a scholarship?
Unless otherwise indicated, all statutory references below are to the provisions of the Income Tax Act, R.S.C. 1985 (5th Supplement), c.1, as amended (the “Act”).
Proposed legislation
Proposed paragraph 6(1)(a) provides that the value of board, lodging and other benefits of any kind whatever received or enjoyed by a taxpayer in the year in respect of, in the course of, or by virtue of an office or employment, are to be included in computing the income of the taxpayer for a taxation year as income from that office or employment, except for certain benefits.
The Proposed Legislation provides for the addition of the following exception to paragraph 6(1)(a):
(vi) [Benefits] … received or enjoyed by an individual other than the taxpayer under a program provided by the taxpayer’s employer that is designed to assist individuals to further their education, if the taxpayer deals with the employer at arm’s length and it is reasonable to conclude that the benefit is not a substitute for salary, wages or other remuneration of the taxpayer;
Under subsection 1(4) of the Proposed Legislation, this addition to the Act applies to benefits received or enjoyed by a person on or after the date of publication of the proposed legislation, that is to say in this case on or after October 31, 2011.
Our comments assume that the proposed legislation will be enacted and sanctioned substantially as currently proposed.
With respect to your first question, we indicated in question 16 of the CRA Roundtable at the 2009 Annual Conference of the Canadian Tax Foundation, that according to its well-established practice, the CRA generally allows taxpayers to file their tax return by virtue of proposed legislation. However, if a taxpayer files a tax return under existing legislation and later requests an adjustment to the tax return to reduce the tax payable based on proposed legislation to amend the Act, the CRA will not agree to issue a reassessment if the first assessment was legally correct. It is therefore recommended that taxpayers in that situation waive the normal reassessment period to protect their rights until the proposed legislation is sanctioned.
In the event that the government announces that it will not adopt a particular amendment, it is expected that a taxpayer who filed its income tax return on a proposed amendment will take immediate steps to settle its affairs and, if applicable, pay all taxes due. Where taxpayers have acted reasonably in the circumstances, have taken immediate action to settle their affairs and have paid the tax due, the CRA will waive the penalties and / or interest, if applicable.
With respect to your second question, we are of the view that the generic term "studies" used in the proposed legislation refers to elementary, secondary and postsecondary studies.
Regarding your third question, we are of the view that payments such as tuition reimbursements, bursaries or scholarships paid by an employer to help individuals continue their education can be part of a "program" within the meaning of the Proposed Legislation.
The questions of whether an employer offers a program within the meaning of the Proposed Legislation and whether it is reasonable to conclude that the benefit is not granted as a substitute for salary, wages or other remuneration are however, questions of fact on which we cannot make a determination without a complete examination of all the particular facts of a particular situation.
With respect to your last question, where an employer applies the Proposed Legislation, the employer must include the value of that amount on a T4A slip in the name of the individual who received or enjoyed the benefit as a scholarship.
Best regards,
Michel Lambert, CA, M. Fisc.
for the Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and
Regulatory Affairs Branch
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