19 August 2010 External T.I. 2010-0371151E5 - Grants and Awards

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: Tax treatment and reporting requirements of payments under the XXXXXXXXXX

Position: Given the requirements of the program, the amounts are likely scholarship

Reasons: Amounts appear to be awarded to undergraduate students to assist them in proceeding towards a university degree.

XXXXXXXXXX
									2010-037115
									Ann Townsend
August 19, 2010

Dear XXXXXXXXXX :

Re: Income Tax Treatment of Payments under the XXXXXXXXXX

I am writing in response to your facsimile dated June 15, 2010 asking if payments received by students under the XXXXXXXXXX are scholarship income and consequently whether withholding tax is required at source.

Based on the documentation that you have provided, the XXXXXXXXXX is available to undergraduate students enrolled at Canadian universities. It provides an opportunity for the student to study and learn the techniques of XXXXXXXXXX on a full time basis for three months during the summer. The studentship is funded by a stipend to a maximum of $XXXXXXXXXX and the payments are made to the university where the student is registered. Students are later paid by the university in accordance with the university's distribution policy.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. We are, however, prepared to offer the following general comments, which may be of assistance.

All statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended (the "Act").

Scholarships are required to be included in a student's income under subparagraph 56(1)(n)(i). Scholarships are broadly defined and include amounts paid or benefits given to undergraduate students to enable them to pursue their education and assist them in proceeding towards a degree, diploma, or other certificate of graduation. Given the purpose of a payment under the XXXXXXXXXX (and provided the amount is not received in connection with employment), we are of the view that the payment could be viewed as scholarship income of the recipient.

It should be noted that a student may be able to claim a scholarship exemption under subsection 56(3) for the full amount of a scholarship provided it was received in connection with the student's enrolment in an educational program that entitles the student to the Education Tax Credit.

Even though a particular scholarship may be eligible for a full exemption under 56(3), this determination is made based on the student's particular circumstances and consequently, the payer is still required to report the amount on a T4A in accordance with subsection 200(2) of the Income Tax Regulations. However, income tax does not have to be withheld at source from amounts that are included in calculating the recipient's income under paragraph 56(1)(n) as a scholarship.

We trust these comments are helpful.

Yours truly,

Randy Hewlett
Manager
for Acting Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch