13 July 2010 Ministerial Correspondence 2009-0314831M4 - Taxation of Post-Doctoral 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: Whether a post-doctoral fellowship is exempt from tax (scholarship exemption s. 56(3)).

Position: Generally, no.

Reasons: See discussion in letter.

Signed on July 13, 2010

XXXXXXXXXX

Dear XXXXXXXXXX :

Mrs. Linda Lizotte-MacPherson, Commissioner of the Canada Revenue Agency (CRA), has asked me to reply to your correspondence addressed to her predecessor, Mr. William V. Baker, 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 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.

The CRA is responsible for administering the tax system and applying the current tax legislation as enacted by Parliament, whereas the Department of Finance Canada is responsible for developing and evaluating federal income tax policy and amending income tax law. As your concerns about the restructuring of graduate student funding across Canada relate to federal tax policy, it is appropriate that you sent a copy of your correspondence to the Honourable James M. Flaherty, Minister of Finance.

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

Yours sincerely,

Brian McCauley
Assistant Commissioner
Legislative Policy and
Regulatory Affairs Branch

Prepared by:
Lori Merrigan
613.957.8979
2009-031483