16 June 2010 Ministerial Correspondence 2009-0308991M4 - Taxation of Postdoctoral Fellowships

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: 1. Whether a postdoctoral fellowship is exempt from income tax (the scholarship exemption s.56(3)). 2. Whether the changes made to the scholarship exemption in the 2010 federal budget should be retroactive to 2006.

Position: 1. Generally no. 2. The amendments announced in the 2010 federal budget did indicate a change in tax policy or interpretation but were made to clarify the intent of the legislation.

Reasons: See discussion in letter.

Signed June 16, 2010

XXXXXXXXXX

Dear XXXXXXXXXX :

The office of the Right Honourable Stephen Harper, Prime Minister of Canada, forwarded to my predecessor, the Honourable Jean-Pierre Blackburn, a copy of your correspondence concerning the tax treatment of amounts received by post-doctoral fellows. I apologize for the lengthy delay in responding.

Canada's income tax system is broad-based and, as a general principle, all income an individual receives, regardless of the source, is included in income for tax purposes. The system does, however, provide some exemptions to recognize specific taxpayer circumstances.

The 2006 federal budget exempted post-secondary scholarship, fellowship, and bursary income from tax if the student receives the scholarship, fellowship, or bursary in connection with his or her enrolment in a program for which he or she can claim the education tax credit. For more information about the education tax credit, please see Interpretation Bulletin IT-515R2, Education Tax Credit, and Pamphlet P105, Students and Income Tax, both of which are available on the Canada Revenue Agency (CRA) Web site at www.cra.gc.ca/forms.

For the purpose of the Income Tax Act, the CRA has consistently viewed post-doctoral fellows as being similar to other individuals who are required to undertake a period of paid training after completing their studies but prior to pursuing an independent professional career. As with the compensation received by these other professionals (for example, doctors, lawyers, and accountants), the compensation received by post-doctoral fellows is generally taxable. The amendments announced in the 2010 federal budget regarding the scholarship exemption clarified the intent of the legislation and confirmed the CRA's existing position. These amendments did not indicate a change in tax policy or interpretation.

This government is committed to supporting post-secondary education and to building on the significant investments made since 2006. The 2010 budget commits $45 million over five years to establish a post-doctoral fellowship program that will attract talent from around the world. This program will be designed to be internationally competitive and, at maturity, will fund 140 fellowships annually, each with a value of $70,000.

I trust that the information I have provided clarifies the CRA's position on this matter.

Yours sincerely,

Keith Ashfield

Lori Merrigan
613.957.8979
May 25, 2010
2009-030899