2019-0802711E5 Reduced Tuition, Scholarship, and Foreign exchange

Principal Issues: The amount to be reported on Form TL11A for tuition fees paid in a foreign currency by a student to a University outside Canada.

Position: The full amount of tuition paid in the country’s currency or in Canadian dollars based on the exchange rate in effect at the time the fees were paid.

Reasons: See response.

Author: Underhill, Cynthia
Section: ITA: 56(1)(n); 56(3); 118.5(1)(b); 220(2.1); Regulation 200(2)(a).

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                                                                                                  C. Underhill

August 8, 2019

Dear XXXXXXXXXX:

Re: Reduced tuition and reporting

This is in reply to your email dated March 8, 2019, regarding tuition fees paid for a Canadian student’s enrollment in a University outside Canada. More specifically, you have asked about the amount of tuition fees that should be reported on Form TL11A, Tuition and Enrollment Certificate – University Outside Canada (Form TL11A), where the student received a reduction in tuition fees due to a scholarship.

This technical interpretation provides general comments about the provisions of the Income Tax Act (the Act) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R9, Advance Income Tax Rulings and Technical Interpretations.

When a student receives a reduction in tuition as a result of applying a scholarship to their tuition fees, the amount of the reduction is generally viewed as a scholarship unless it is connected to the employment of the student or a supporting person. Income Tax Folio S1-F2-C2, Tuition Tax Credit (the Folio), provides information in paragraphs 2.23 to 2.27 that is relevant to students who have received a scholarship and certain other types of awards in respect of their tuition. The folio is available on the Government of Canada website at Canada.ca.

In order to claim a tuition tax credit, a student requires a certificate completed and certified, in part, by the educational institution. As you are aware, the certificate to be completed and certified by a University Outside Canada (University) is Form TL11A.

In the case of a student who received a reduction in tuition fees due to a scholarship, the amount of tuition fees reported on the tuition certificate that will be eligible for the tuition tax credit will be the full pre-determined tuition fee established by the educational institution for the course(s), prior to any reduction as a result of the scholarship, providing it otherwise qualifies as tuition according to subsection 118.5(1). For greater certainty, although the student may receive a reduction in tuition due to a scholarship, the full amount of the eligible tuition fees would be reported on Form TL11A.

RC190, Information for Educational Institutions Outside Canada reiterates this concept:

Eligible tuition fees generally include the portion of eligible fees paid by scholarships, fellowships, bursaries, and prizes. This differs from the tax treatment required under the Internal Revenue Service code in the United States.”[emphasis added]

The University is to enter the eligible tuition fees for the amount paid either in the foreign currency or in Canadian dollars based on the exchange rates in effect at the time the fees were paid on the blank line in Part 1- Educational institution’s certification on Form TL11A.

The Bank of Canada website, which is available at bankofcanada.ca, lists official foreign exchange rates and a calculator for converting many currencies to Canadian dollars. If amounts were paid throughout the calendar year, you can use the annual average exchange rate.

The following example may provide some assistance in understanding the legislation and reporting the reduced tuition amount in a foreign currency:

*     a student who is a resident of Canada is awarded a scholarship in the amount of US$17,209;

*     eligible tuition fees paid to a University, including the portion paid by scholarships, equal US$16,740;

*     the exchange rate for converting American dollars to Canadian dollars according to the Bank of Canada website is 0.7462 US dollar at the time the fees were paid; and

*     the reduction in tuition is not as a result of the student’s or family member’s employment.

In this example, the University is to enter the amount paid for eligible tuition fees in either US currency (i.e., US$16,740.00) or in Canadian dollars (i.e., CAN $22,433.27) on the blank line in Part 1- Educational institution’s certification on Form TL11A. The amount in Canadian dollars is based on the exchange rate in effect at the time the fees were paid. The educational institution identifies the currency using the three digit international currency code.

Information regarding the reporting requirements for payers and recipients of scholarships is provided in Income Tax Folio S1-F2-C3, Scholarships, Research Grants and Other Education Assistance at paragraphs 3.106 to 3.112. This folio may also be accessed on Canada.ca.

We trust our comments will be of assistance to you.

Yours truly,

Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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