Principal Issues: Does the physical activity have to take place in Canada?
Position: No
Reasons: There is no requirement in the Act that the physical activity take place in Canada.
May 31, 2010
HEAQUARTERS A. Townsend, CMA Newfoundland Tax Services Office (905) 721-5218 Laura Riche 2010-036027
Child Fitness Tax Credit ("CFTC")
I am writing in response to your email dated March 12, 2010, asking if an eligible fitness expense must be incurred in Canada in order to qualify for the CFTC. In your particular situation, the child of a Canadian resident participated in a program in the Philippines that otherwise meets all of the eligibility requirements for the CFTC.
OUR COMMENTS
Subsection 118.03(1) of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended (the "Act") defines an "eligible fitness expense" for the purposes of the CFTC as the amount of a fee paid to a qualifying entity, to the extent that the fee is attributable to the cost of registration or membership of the "qualifying child" in a prescribed program of physical activity. Subsection 118.03(1) of the Act defines a "qualifying entity" as a person or partnership that offers one or more prescribed programs of physical activity.
A "qualifying child" is defined in subsection 118.03(1) of the Act, for the purposes of the CFTC, to mean a child of the individual who is at the beginning of the taxation year under 16 years of age; or in the case where a child qualifies for the disability tax credit, under 18 years of age. The eligibility to claim the CFTC does not depend on whether the child resides in Canada with the parent who is resident of Canada for tax purposes and wants to claim the credit.
The intent of the CFTC is to prevent obesity and promote habits of ongoing, life-long physical activity in children. To ensure this intent is met, regulation 9400 requires that the program must be ongoing, supervised and suitable for children. In addition, substantially all of the activities must include a significant amount of physical activity that contributes to cardio-respiratory endurance plus one or more of muscular strength, muscular endurance, flexibly and balance. The regulation does not require that the physical activity take place in Canada.
Similarly, subsection 118.03(1) of the Act does not require the qualifying entity to be located in Canada or to have any particular licence or other documentation to prove their eligibility. However, the qualifying entity is requested to issue a receipt to the parent that contains the following information:
- Organization's name and address;
- Name of the eligible program or activity;
- Amount received, date received, amount that is eligible for the CFTC;
- Full name of payer;
- Full name of the child, and child's year of birth; and
- Authorized signature.
The CRA's website provides information to assist organizations in determining if their program meets the requirements. It also advices organizations that although CRA administers the CFTC, the organizations are in the best position to determine if the programs they offer qualify.
In conclusion, the Act does not specify that the eligible fitness expense be incurred in Canada or that the qualifying entity be located in Canada. Therefore, provided the program meets all the physical activity requirements and the receipt contains the required information, the expense will qualify for the CFTC.
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