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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Whether awards are taxable as fellowships or research grants?
Position: Research Grants
Reasons: The awards main purpose is to enable doctorate level students to undertake field research in developing countries.
IDRC International Development Research Centre
Head Office
250 Albert Street 973346
P.O. Box 8500 Karen Power, C.A.
Ottawa, Ontario
K1G 3H9
Attention: Christopher Smart
March 16, 1998
Dear Sirs:
Re: Awards and Research Grants
We are writing in response to your letter of December 5, 1997, wherein you requested our views on the nature of payments made under the IDRC Doctoral Research Award (the "Award") by the International Development Research Centre (the "Centre").
The Centre is an autonomous public corporation established by an Act of Parliament to stimulate and support research responding to the priorities of developing countries. One of the activities the Centre is involved in is Training and Awards and various kinds of awards are granted to Canadians and citizens of developing countries.
The literature from the Centre indicates that the primary purpose of the Award is to enable doctoral level students to undertake field research in a developing country, in partial fulfilment of their degree at a Canadian university. The award covers living, research, equipment and travel expenses in the developing country. Expenses in Canada are not covered.
The issue is whether the amounts paid by the Centre to these doctoral level students, are taxable as a fellowship under paragraph 56(1)(n) of the Income Tax Act (the "Act") and code "05" on a T4A slip, or as a research grant under paragraph 56(1)(o) of the Act and code "04" on a T4A slip.
Amounts included in income under paragraph 56(1)(n) include fellowships, scholarships, bursaries and certain prizes. Other than prizes, the element in common for these terms is that the amount is paid primarily for the education of the recipient. Unlike a scholarship or bursary, a fellowship is not necessarily granted in respect of educational courses. As indicated in paragraphs 10 to 12 of Interpretation Bulletin IT-75R3 "Scholarships, fellowships, bursaries, prizes and research grants" a copy of which has been enclosed for your convenience, a fellowship is an amount paid, or a benefit given, to a student to enable him or her to advance his or her education. In addition, fellowships may be awarded for doctoral studies and post-doctoral work, including research. When the primary purpose of the payment is to further the education and training of the recipient in his or her individual capacity, such as studying for a doctoral degree, the amount (less the applicable exemption ) will be included in income under paragraph 56(1)(n) of the Act.
Paragraphs 20-23 of IT-75R3 provide guidance on what type of payments would constitute research grants. Grants received in a taxation year to enable a taxpayer to carry on research or any similar work are included in income under paragraph 56(1)(o) of the Act. In order for a grant to be considered a research grant, the terms of the grant must establish that the primary purpose of the grant is to carry out research.
Paragraph 56(1)(o) of the Act provides that research grants are required to be included in income to the extent that the grants exceed allowable expenses incurred by the taxpayer in the year for the purpose of carrying on the work. In addition, paragraph 56(1)(o) of the Act provides that, in order for research expenses to be deductible from the grant, the research expenses must be incurred in the same year in which the research grant is received. Paragraphs 31-35 of IT-75R3 provides more detail on allowable research expenses.
In our view, the payments made pursuant to the Award would be considered research grants taxable under paragraph 56(1)(o) of the Act and code "04" on a T4A slip.
We trust our comments will be of assistance to you.
Roberta Albert, C.A.
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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