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: What amount should be shown as tuition on the T2202A where a large reduction in tuition is received as a result of a scholarship?
Position: The full amount of tuition can generally be recorded on the T2202A where the institution has been paid the tuition from a scholarship and the scholarship is included in income pursuant to 56(1)(n).
Reasons: A reduction in tuition is generally viewed as a scholarship unless it is connected to employment of the student or of a supporting person's employment.
2009-030820
XXXXXXXXXX . P. Burnley
(613) 957-3498
April 6, 2009
Dear XXXXXXXXXX :
Re: Tuition and the T2202A
This in reply to your letter of January 21, 2009, asking what amount should be included on a T2202A as tuition when a student receives a significant reduction in tuition due to receiving a scholarship.
The situation outlined in your letter appears to relate to a factual one, involving specific taxpayers. 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". This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. Although we cannot comment on your specific situation, we are able to provide the following general comments, which may be of assistance.
Paragraph 16 of Interpretation Bulletin IT-516R2, "Tuition Tax Credit", available on our website, states that
"generally, a recipient of tuition provided at no charge by an educational institution is not entitled to claim a tuition tax credit for the value of the tuition since no fees are paid to the educational institution. However, if the value of "free" tuition has been included in the income of the student or a member of the student's family as a benefit from employment, a tuition tax credit for the value of the tuition may be claimed."
Paragraph 17 of the interpretation bulletin states that "tuition fees for which a tax credit is claimed can include fees paid out of prizes, scholarships, fellowships or bursaries."
Paragraph 56(1)(n) of the Income Tax Act (the "Act") requires that students include in income all amounts received and the value of all benefits received to enable them to pursue their education. This would generally include, but not be limited to, items such as scholarships, bursaries, prizes, and the provision of free tuition, meals and lodging. Information on the taxation of scholarships and bursaries can be found in Interpretation Bulletin IT-75R4, "Scholarships, Fellowships, Bursaries, Prizes and Research Grants". Even though a student may be eligible for a full exemption pursuant to subsection 56(3), the payer is required, pursuant to paragraph 200(2)(a) of the Income Tax Regulations, to file a T4A information return and provide the student with a T4A slip.
In general, a tuition reduction may be viewed as a scholarship unless it is connected to employment of the student or a supporting person. Therefore, if the reduction in tuition is the result of a scholarship, the full amount of the tuition would be reported on the T2202A, providing it otherwise qualifies as tuition according to subsection 118.5(1) of the Act. The full amount of the scholarship would be reported on a T4A. If the reduction in tuition is not as a result of a scholarship, bursary or prize, or as a result of the student's or family member's employment and included in income as a taxable benefit, only the actual amount paid to the institution for tuition (i.e., the reduced amount), would be included on the T2202A.
We trust that these comments will be of assistance.
Yours truly,
Eliza Erskine
A/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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