5-903159
Dear Mr. Jones:
Re: Tuition Credit and the Goods and Service Tax
This is in reply to your recent letter concerning the deductibility of the Goods and Services Tax ("GST") portion of tuition fees.
We understand that there are tuition fees which, although eligible for computing the tuition tax credit or income tax purposes, do not fall within the exemptions from GST.
In setting out what is eligible for computing the tuition tax credit, paragraph 118.5(a) of the Income Tax Act (the "Act") refers to "the amount of any fees for his tuition paid in respect of the year to the educational institution". In contrast, in other areas of the Act, the terms "cost" or "capital cost" are used when referring to qualifying amounts. Neither of these terms is defined in the Act. However, the Department has generally interpreted "capital cost" to mean the full cost to the taxpayer of acquiring property and whether an expenditure qualifies as part of "cost" depends on sound business and commercial principles. Therefore, the cost of property would include costs like legal, accounting, engineering and other fees and also such expenses as commissions, brokers' fees and sales tax incurred in order to acquire the property. Use of the phrase "the amount of any fees paid" in paragraph 118.5(a) suggests that it is not the cost of attending an educational institution which qualifies but rather the actual tuition fees paid. The Act also does not contain a specific definition of tuition fees; however the Department has set out in paragraph 26 of
Interpretation Bulletin IT-516 items which are considered eligible tuition fees. It is our position that the GST would not be eligible for the purpose of computing the tuition tax credit because the GST would be a tax on fees rather than an additional tuition fee and the GST is not similar to any of those types of items which are considered eligible.
Also, paragraph 118.5(a) of the Act requires that, to be eligible, fees must be paid to an educational institution. The institution would actually be collecting the GST as agent for the Crown.
We trust these comments will prove helpful.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch