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.
Principal Issues: 1. Are students who attend classes at a Canadian campus of a foreign institution "enrolled at an educational institution in Canada" for purposes of 118.5(1)(a) of the Act?
2. Do students who are taking distance education courses (internet) from a foreign university with a Canadian campus rely on 118.5(1)(a) or 118.5(1)(b) for the tuition tax credit?
Position: 1. Question of fact, but possibly yes.
2. Question of fact - depends on connection between student's courses and the Canadian campus.
Reasons: 1. If the foreign institution has a permanent location in Canada, has complied with the relevant provincial legislation, and is recognized and authorized to offer degrees or courses at the post-secondary school level, then the Canadian campus may be considered to be an educational institution in Canada for the purposes of 118.5(1)(a).
2. In our view, there should be some indication that the student is taking courses through the Canadian branch and not merely with the foreign institution.
January 14, 2010
Validation Policies and Procedures Section Headquarters
Individual Returns and Payment Income Tax Rulings
Processing Directorate
P. Burnley
Attention: XXXXXXXXXX (613) 957-2100
2008-028986
Tuition Tax Credits - Universities Outside Canada With Canadian Campuses
This is in reply to your Directorate's informal discussion paper of August 2008. Among other things, you requested our comments on whether students who take classes offered by XXXXXXXXXX (a foreign university), which has physical campuses in Canada, are enrolled at an educational institution in Canada for purposes of the tuition tax credit as described in paragraph 118.5(1)(a) of the Income Tax Act (the "Act").
Issues:
1. Are students who attend classes at XXXXXXXXXX Canadian campus of XXXXXXXXXX "enrolled at an educational institution in Canada that is a university, college or other educational institution providing courses at a post-secondary school level" for purposes of subparagraph 118.5(1)(a)(i) of the Act?
2. If Canadian students take online courses offered by XXXXXXXXXX , are they "enrolled at an educational institution in Canada" for purposes of paragraph 118.5(1)(a) of the Act? In other words, when taking courses offered by XXXXXXXXXX over the internet, are the students enrolled at an "educational institution in Canada" or are they enrolled at a "university outside Canada" as described in paragraph 118.5(1)(b) of the Act?
Discussion:
Paragraph 118.5(1)(a) of the Act sets out the criteria that must be met for an individual to qualify for a tuition tax credit for courses taken at an educational institution in Canada. The individual must have been enrolled at an "educational institution" that is "in Canada", and taking courses at the "post-secondary school level" (unless the educational institution is certified by Human Resources and Skills Development Canada ("HRSDC")); also, the fees paid must have exceeded $100. The "educational institution" must be a "university, college, or other educational institution providing courses at a post-secondary school level". These criteria are less stringent than for an individual attending an institution outside Canada (paragraph 118.5(1)(b) of the Act).
Paragraph 118.5(1)(b) of the Act stipulates that to qualify for a tuition tax credit at an institution outside Canada, the institution must be a university, the course must be at least 13 weeks in length, the course must lead to a degree, and the student must be in full-time attendance. Thus, it is easier to qualify for a tuition tax credit if the school offering the courses can be considered an "educational institution in Canada".
The terms "educational institution in Canada" and "educational institution providing courses at a post-secondary school level" are not defined in the Act. The Canada Revenue Agency ("CRA") does not have an all-inclusive list of universities, colleges and other educational institutions in Canada providing courses at a post-secondary school level.
The CRA will generally accept that an institution is a university or college if the applicable province or territory in which the university or college is located considers it to be a university or college. This means that for a foreign institution to be considered a university or college in Canada, it should be recognized and authorized by the province or territory to grant academic credentials and be complying with provincial education legislation with respect to the courses it offers.
The Canadian Information Centre for International Credentials (the "CICIC") is a unit of the Council of Ministers of Education, Canada, an intergovernmental body made up of the provincial and territorial ministers of education. The CICIC has compiled a searchable list of public and private recognized and authorized post-secondary institutions across Canada that have received "consent" from the province or territory where the institution is located to grant academic credentials. This list may be used as a guide to assist in identifying institutions that may be considered universities and colleges.
If an institution is not on this list, however, it does not mean that the institution is not an "educational institution" for purposes of paragraph 118.5(1)(a) of the Act. Reference should be made to the ordinary usage of the words "educational" and "institution". In Hillman v. The Queen, 2006 TCC 578, the Tax Court of Canada referred to the Oxford English Dictionary which defined education as
"the systematic instruction, schooling or training given to the young in preparation for the work of life; by extension similar instruction or training obtained in adult age..."
and institution as
"an establishment, organization, or association instituted for the promotion of some object, esp. one of public or general utility, religious, charitable, educational etc..."
As these are broad definitions, it is possible for a student to be enrolled at an educational institution without the institution being recognized and authorized by the province in which it is located. A further review of the facts must be undertaken.
As previously indicated, unless the institution is otherwise certified by HRSDC, it must also be determined whether the institution is providing courses at the "post-secondary school level". Generally, a course would be at the post-secondary school level if a student is required to have a high school diploma to take the course, or the credit given for the course is included towards earning a university or college degree or diploma.
Finally, a student needs to be enrolled at an educational institution "in Canada" to claim a tuition tax credit under paragraph 118.5(1)(a) of the Act. In our view, in order for a foreign educational institution to be considered to be "in Canada", the foreign institution must have permanent premises situated in Canada and must offer its courses, along with support to students, in a manner similar to Canadian educational institutions. To further support that a foreign institution is "in Canada", we would expect it to be registered with the province and be complying with provincial education legislation with respect to the courses it offers.
Where a foreign institution has been determined to be an educational institution in Canada because it has a Canadian campus (a permanent physical location in Canada) and is registered with the province and complying with provincial education legislation with respect to the courses it offers at a post-secondary school level, CRA generally acknowledges that a student in physical attendance at classes at the campus is entitled to rely on paragraph 118.5(1)(a) of the Act in claiming the tuition tax credit. However, when a student is taking courses over the internet from the foreign institution, it is not clear if the student is enrolled at an institution in Canada or only with the foreign institution. If it is determined that the student is enrolled only with the foreign institution, all of the criteria of paragraph 118.5(1)(b) of the Act must be met in order for the student to claim the tuition tax credit.
With respect to courses taken over the internet, it is our view that there must a connection between the internet courses taken and the Canadian campus in order for a student to be considered to be "enrolled at an educational institution in Canada". Connections would include technical support for any software associated with the courses being provided by the Canadian campus, marking of exams or papers being done by staff at the Canadian campus, and questions regarding course material being answered by employees or contractors working for the Canadian campus; in other words, local administrative support, Canadian faculty, options to attend classes at the Canadian campus, and so on. If there are connections to the Canadian campus, then we would consider the student to be enrolled at an educational institution in Canada. Alternatively, if all support for the internet courses is provided by the foreign institution from a location outside Canada, including marking, technical support and educational support, then we would consider the student to be enrolled only with the foreign institution.
We trust that these comments will be of assistance.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
Yours truly,
Eliza Erskine
Manager
Non-Profit Organizations and Aboriginal Issues
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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