| Employment and Immigration Canada | |
| Program Development and | |
| Design Employment | File No. 5-9307 |
| 140 Promenade do Portage | J.A. Szeszycki |
| Place din Portage, Phase IV | (613) 957-2103 |
| Ottawa, Ontario | |
| KlA 0J9 |
Attention: Georges Latour, Director
January 23, 1990
Dear Sirs:
Re: Tax Treatment of Payments in respect of Training
We are writing to you as a consequence of meetings held between representatives of your Department (EIC) and,Revenue Canada, Taxation on November 6 and December 19, 1989 and, most recently, on January 4, 1990. We have also reviewed the package of information enclosed with your letter of December 2l, 1989. The package contained details of the various EIC employment/training initiatives and the legislation under which they are administered.
It has been, until now, a widely held assumption that all training initiatives sponsored by EIC would be established and administered under the authority of the National Training Act ("NTA") since its enactment in June, 1982. fence all payments in respect of course costs and training allowances had been presumed to be amounts paid under the NTA and subject to treatment under paragraph 56(1)(m) of the Income Tax Act ("ITA"). Our recent discussions have served to clarify that this assumption was incorrect. In addition to the NTA, other legislated spending authorities include the Appropriations Act (Vote 10) and the Unemployment Insurance Act.
Paragraph 56(1)(m) of the ITA requires the inclusion in income of amounts received by an individual as a training allowance paid under the NTA unless they were paid to him as an allowance for personal living expenses while living away from home. The allowances in question are those-referred to in section 5 of the NTA. The NTA makes a.distinction between training allowances and payments in. respect of tuition fees and course costs, which are referred to separately in sections 6 and 7 of the NTA. Payments in respect of tuition costs under section 6 are amounts paid on behalf of the approved participant directly to private organizations or institutions providing appropriate training courses. Payments in respect of course costs are amounts paid directly to the provincial authority under a federal-provincial agreement on training whereby EIC may reserve (a block of) seats at existing courses being offered in public educational facilities or may commission specific courses to be developed to satisfy EIC training requirements. It is now clear, therefore, that the inclusion in income under paragraph 56(l)(m) of the ITA of payments in respect of tuition and course costs was not intended.
Consideration has been given whether any other provision of the ITA has application; for example, employee benefits (paragraph 6(1)(a)) or bursaries, scholarships (paragraph 56(l)(n)). Where tuition costs are paid under the NTA on behalf of an individual, the individual is not considered to have received the benefit by virtue of employment and no employer/employee relationship exists between EIC and the individual. The payment would not be considered a bursary or scholarship since it does not have the required characteristics (a means/needs test or scholastic achievement, respectively). We therefore conclude that such payments are not taxable in the hands of the individual participating in the course. We conclude further that payments under the NTA made to a provincial authority in respect of course costs will not result in a taxable benefit to the individual eventually participating in the course.
It is our understanding that the spending programs funded under the Appropriations Act (Vote 10) mirror those described in sections 6 and 7 of the NTA and payments under these programs are therefore entitled to similar tax treatment.
21(1)(B)
We thank you for your assistance in clarifying the issues raised.
Yours truly,
P.D. Fuocofor DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch
c.c. R.M. Beith Senior Advisor to Deputy Minister D.S. Brown DG Collections and Accounting T.D. Peters Source Deductions Division L. Frenette Legal Services N. O'Donnell Enquiries and Taxpayer Assistance