Principal Issues: Whether employer-paid educational costs are benefits to employee and deductible to employer.
Position: Question of fact.
Reasons: Income Tax Technical News, No. 13.
XXXXXXXXXX 2006-016953
May 3, 2006
Dear XXXXXXXXXX:
Re: Employer-Paid Educational Costs
This is to confirm the outcome of our telephone conversation of April 28, 2006 regarding your questions about the tax treatment of employer-paid educational costs. As we discussed, the answer in these cases depends on the facts of the situation.
Employer-paid educational costs fall into three broad categories: specific employer-related training, general employment-related training, and personal interest training. Under the guidelines on employer-paid educational costs relating to employment benefits taxed under paragraph 6(1)(a) of the Income Tax Act, employer-paid courses that are either specifically employer-related or generally employment-related are not treated as a taxable benefit. Employer-paid courses for personal interest training, on the other hand, would result in a taxable benefit to the employee.
As far as the expensing of costs is concerned, this too is fact driven. Where the courses taken lead to a person obtaining a degree or professional designation with the result that the person can then perform work that is directly related to the employer's line of work, the cost might be treated as a capital expense. In your particular case, the cost of the human resource management courses, which you are taking, would likely not involve a capital expenditure.
As agreed, I am attaching a copy of the Income Tax Technical News, No. 13, which outlines the Canada Revenue Agency's technical interpretation on employer-paid educational costs. I trust your questions have been addressed to your satisfaction.
Yours truly,
B.J. Skulski
Manager
Business Incentives and
Capital Transactions Section
Income Tax Rulings Directorate