Principal Issues: [TaxInterpretations translation] An educational institution asks us whether the fees referred to in the request are eligible tuition fees for the tuition tax credit.
Position: It depends on the fees
Reasons: Application of the law and Interpretation Bulletin IT-516R2.
XXXXXXXXXX 2005-011732
Michel Lambert, CA, M. Fisc.
July 4, 2005
Dear Sir:
Subject: Eligible tuition fees
This is in response to your letters of February 15 and 16, 2005. You asked whether certain fees charged by your institution are tuition fees for the purposes of the tuition tax credit under subsection 118.5(1).
Unless otherwise indicated, all statutory references herein are to the provisions of the Income Tax Act (the "Act"). In addition, the term "eligible expenses" is used herein to refer to tuition fees that are eligible for a tuition tax credit pursuant to subsection 118.5(1).
As stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, it our practice not to issue a written opinion regarding proposed transactions otherwise than through advance rulings. Furthermore, when it comes to determining whether a completed transaction has received appropriate tax treatment, that determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments which we hope you will find helpful. These comments may not, however, apply to your particular circumstances in certain circumstances.
The Act
Subsection 118.5(1) provides a deduction to an individual in computing the individual's tax payable under Part I in respect of tuition fees under the conditions set out in the subsection. The Act does not specifically define tuition fees. The term must be given its ordinary meaning in light of the provisions of subsection 118.5(3), which sets out some specific rules. The latter subsection is written in two parts. The first part sets out specific rules applicable to tuition fees. The second part provides that certain fees are not considered tuition fees.
With respect to tuition fees, paragraphs 118.5(3)(a) and (b) state that, for the purposes of section 118.5, an individual's tuition fees include ancillary fees and charges paid to an educational institution referred to in subparagraph 118.5(1)(a)(i) [which includes a CEGEP] in respect of the individual's enrolment at the institution in a program at the post-secondary school level.
Section 118.5(3)(c) excludes from tuition any fee or charge to the extent that it is levied in respect of the following:
(i) a student association
(ii) property to be acquired by the student
(iii) services that are not normally provided at educational institutions in Canada that offer courses at the post-secondary level
(iv) the provision of financial assistance, subject to certain conditions
(v) the construction, renovation or maintenance of any building or facility, except to the extent that it is owned by the institution and is used to provide courses at a post-secondary school level or services described in paragraph 118.5(3)(c)(v)(B).
Paragraph 118.5(3)(d) also excludes from eligible fees any fee or charge that is not required to be paid by
(i) all of the institution’s full-time students, where the individual is a full-time student at the institution, and
(ii) all of the institution’s part-time students, where the individual is a part-time student at the institution,
to the extent that the total for the year of all such fees and charges paid in respect of the individual’s enrolment at the institution exceeds $250.
The fees referred to in your request
Admission fees
You included as admission fees the fees for application, application analysis, program changes, profile changes and changing streams. You also asked about fees for admission after the set date, fees for recognition of experience for admission purposes and analysis of an international student application.
In our opinion, those fees are eligible tuition fees subject to the following.
Paragraph (e) of paragraph 26 of IT-516R2 states that an application fee is an eligible tuition fee but only if the student subsequently enrols at the educational institution. Therefore, it is our view that a fee charged to a student for opening and analyzing his or her file as part of an application for admission is an eligible fee only if the student subsequently enrols at the institution.
Paragraph 27(g) of IT-516R2 states that penalties paid when a student withdraws from an educational program or institution are not considered eligible tuition fees.
General registration fees
According to your request, the registration fee covers the following items:
cancellation of courses within the prescribed time limits,
proof of attendance required by law,
proof of attendance required for admission to a higher education institution,
report cards or transcripts,
placement tests when required by a program,
changes in course selection or schedule for reasons determined by regulation,
official receipts for tax purposes,
grade reviews.
We understand that these are fees for the enrolment of a full-time student which are paid by all full-time students or for the enrolment of a part-time student which are paid by all part-time students.
In our view, these fees are eligible tuition fees.
Specific registration fees
You are referring here to specific fees required for each of these cases:
registration after the set date,
rescheduling outside the scheduled period,
enrolment in a sport-study program,
a work-study course,
changing a timetable online.
We are of the view that those fees are ancillary charges that are paid as part of the registration. Since these fees are not paid by
(i) all of the institution’s full-time students, where the individual is a full-time student at the institution, and
(ii) all of the institution’s part-time students, where the individual is a part-time student at the institution,
we are of the view that section 118.5(3)(d) applies to those fees.
While sports tuition fees may be eligible tuition fees, fees for extracurricular activities of a sporting nature are not eligible fees as indicated in paragraph 27(a) of IT-515R2. When distinguishing between tuition fees for a sports-study program and fees for extracurricular activities of a sports nature, all relevant facts must be considered.
College tuition fees
You include under this heading the fees relating to the following services:
guidance services and the school information centre,
success support,
learning support,
student projects,
issuing of the student card,
replacement of the student card.
We understand that those are fees relating to a student's enrolment in a session (full-time student) or a course (part-time student).
Subject to the following paragraph, we are of the view that those fees are ancillary fees that are paid on account of the registration. Those fees are therefore subject to the application of paragraph 118.5(3)(d) referred to in our above discussion of the Act.
However, those fees are not eligible tuition fees if they are paid for services that are not ordinarily provided at educational institutions in Canada that offer courses at the post-secondary level.
Special fees
We understand this to mean the fees charged for a student's enrolment in extracurricular courses. In our view, those fees are tuition fees within the general meaning of the term in the Act.
Fees payable
Under this heading you included charges for the following services:
orientation and integration activities,
social and community activities,
socio-cultural activities,
sports activities,
psychological services,
health services,
job placement services,
financial assistance services,
information technology,
student mobility.
We understand that those are fees relating to a student's enrolment in a session (full-time student) or a course (part-time student).
Subject to the following paragraphs, we are of the view that those fees are ancillary to the registration fee. Those fees are therefore subject to the application of paragraph 118.5(3)(d) referred to in our section above on the Act.
However, those fees are not eligible tuition fees if they are paid for services that are not ordinarily provided at educational institutions in Canada that offer courses at the post-secondary level.
As stated in paragraph 27(a) of Interpretation Bulletin IT-516R2, fees for extracurricular activities, whether social or athletic in nature, are not eligible tuition fees, whether identified separately or included as course or subject fees
With respect to health care expenses, paragraph 27(b) of Interpretation Bulletin IT-516R2 states that medical care or health services expenses are not considered eligible tuition fees.
Paragraph 26(i) of Interpretation Bulletin IT-516R2 states that mandatory computer service fees are eligible fees where they relate to a particular program (whether identified separately or included as course or subject fees).
You also refer to Omnivox services. We are not familiar with such services and are not commenting on them.
Student association fee
Subparagraph 118.5(3)(c)(i) states that fees of any kind charged in connection with a student association are not eligible tuition fees.
Fees for issuing a diploma
Paragraph 26(g) of Interpretation Bulletin IT-516R2 states that the cost of issuing a certificate, diploma or degree is an eligible expense when it relates to a particular program (whether identified separately or included as course or subject fees). We are of the view that the cost of issuing a certificate, diploma or degree includes the cost of sending the related document by registered mail.
Student outside Quebec
The rules we have just outlined apply in the same way to fees that a student outside Quebec must pay to a CEGEP, whether that student lives elsewhere in Canada or in another country. The tuition fees charged to them because of belonging to one of those two groups are subject to the same rules as if they were tuition fees charged to students who reside in Quebec.
As stated in Information Circular 70-6R5, this opinion is not an advance income tax ruling and is not binding. Furthermore, this opinion is based on our understanding of the facts as of the date hereof.
Best regards,
Manager
Financial Sector and Exempt Entities Section
Income Tax Rulings Directorate
Directorate General for Policy and Planning