In finding that the payment by a corporation of the expenses (tuition, accommodation and travel) for Bob, its sole employee and sole shareholder, to attend an executive MBA (EMBA) program was an eligible capital expenditure rather than a currently deductible expense, CRA stated:
The CRA considers training costs to be current expenses where the costs are incurred to maintain, update or upgrade an existing skill or qualification. Some examples of this are listed below:
- a professional development course required or recommended by a professional association to ensure professional standards are met;
- a tax course taken by a lawyer or accountant who is already qualified to work in the tax field, even if he or she has not been actively involved in tax work;
- a course on building materials, taken by an architect;
- a course on electronic ignition taken by the owner of a car repair shop.
At the same time, training costs constitute capital expenditure if the training provides an enduring benefit to the taxpayer, i.e. where a new skill or qualification is acquired. For example:
- a general practitioner who is upgrading to a specialist;
- a lawyer taking engineering courses not related to the lawyer’s practice;
- a taxpayer taking a university or other course to obtain a degree or other certificate;
- a university professor taking a course during a sabbatical to acquire a new skill needed for a sideline business.
In this case, the facts you have provided indicate that Bob has a strong XXXXXXXXXX background. We have assumed then that the skills Bob has acquired through the EMBA program will be new skills that will provide the corporation with a lasting benefit. We do not believe that the training expense in this case represents a current expense as it does not serve to maintain, update or upgrade improve an existing skill or qualification of Bob.