Scholarships, bursaries, tuition, and training
You may provide an employee, or former employee, with a scholarship or bursary on the condition that the employee returns to employment with you on completing the course. In this situation, the amount of the scholarship or bursary is considered to be employment income for the employee or former employee.
You have to report on a T4 slip any scholarships, fellowships, or bursaries you gave to an employee if they primarily benefit the employee. If you get any questions from your employee about the income, you can refer him or her to Income Tax Folio S1-F2-C3: Scholarships, Research Grants and Other Education Assistance or to Guide 5000-G, General Income Tax and Benefit Guide.
Specific employment-related training
We generally consider that courses taken to maintain or upgrade employment-related skills are mainly for your benefit when it is reasonable to assume that the employee will resume his or her employment for a reasonable period of time after he or she finishes the course.
For example, tuition fees and other associated costs such as books, meals, travel, and accommodation that you pay for courses leading to a degree, diploma, or certificate in a field related to your employee's current or future responsibilities in your business are not a taxable benefit.
General employment-related training
We generally consider that other business-related courses, although not directly related to your own business, are taken mainly for your benefit.
For example, fees you pay for stress management, employment equity, first aid, and language courses are not a taxable benefit.
Personal interest training
We consider that courses for personal interest or technical skills not related to your business are taken mainly for the employee's benefit and, therefore, are a taxable benefit.
Scholarship exemption, and tuition, education and textbook amounts
If you paid or reimbursed tuition fees to your employees and there is no taxable benefit according to these guidelines, the employees are not eligible to claim the scholarship exemption, tuition, textbook, or education tax credits on their individual returns. You should inform them of this.
If you paid or reimbursed education amounts that are reported on either a T4 or T4A slip, the individual may be eligible to claim the scholarship exemption, or tuition, textbook, and/or education tax credits on his or her individual return. The individual may be able to fully exclude from his or her income tuition fees, scholarships, fellowships, and bursaries he or she received from you.
If you offer a program that provides free or reduced tuition fees to the family members of your employees, do not include the value of any benefit the employee’s family member receives in your employee’s income unless:
- the benefit is provided as a substitute for salary, wages or other remuneration; or
- you do not deal with the employee at arm’s length.
Instead, report the FMV of the scholarship or bursary on a T4A slip for the family member.
If a family member meets certain criteria, he or she may not have to include the amount in income on his or her income tax and benefit return.
The same applies if you are an educational institution offering free or discounted tuition to your employees’ family members.
If you get any questions, you can refer them to the General Income Tax and Benefit Guide.
For more information, see Income Tax Folio S1-F2-C3: Scholarships, Research Grants and Other Education Assistance.
GST/HST, payroll deductions, and reporting
Certain tuition fees may be subject to GST/HST. If paying tuition fees results in a taxable benefit for an employee and the fees are subject to GST/HST, include GST/HST in the value of the benefit.
If the benefit is taxable, it is also pensionable. Deduct income tax and CPP contributions. If the taxable benefit is paid in cash, it is insurable. Deduct EI premiums. If it is a non-cash benefit, it is not insurable. Do not deduct EI premiums.
Reporting the benefit
If the tuition fees, scholarship or bursary is taxable, report the employee's benefit in box 14 "Employment income" and in the "Other information" area under code 40 at the bottom of the T4 slip. For more information, see T4 – Information for employers.
If you are reporting tuition fees, scholarships, or bursaries for the family member of your employee, report its fair market value on a T4A slip for the family member in the "Other information" area under code 105. For more information, see T4A – Information for payers.
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