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 employees of a foreign government who are working in Canadian hospitals as part of their post-graduate training are entitled to the exemption under paragraph 149(1)(a) of the Act?
Position: Yes, if all of the conditions in that paragraph are met.
Reasons: We will consider the "top-up" payment made to the doctors by the medical school from a fund provided by the foreign government to be paid by the foreign government.
XXXXXXXXXX
2013-051006
January 14, 2014
Dear XXXXXXXXXX:
Re: XXXXXXXXXX Postgraduate Medical Education Program ("PGME") in Canada
This is in reply to an email from XXXXXXXXXX, to Lucia De Almeida of the Canada Revenue Agency ("CRA") on August 14, 2013. XXXXXXXXXX.
XXXXXXXXXX.
The Program
XXXXXXXXXX, the PGME program can be described as follows.
From XXXXXXXXXX until now, many Doctors have been coming from XXXXXXXXXX to Canada to enrol in post-graduate medical education programs (residencies and sub-specialty fellowships) at various Canadian medical schools, XXXXXXXXXX.
The Doctors XXXXXXXXXX, and are paid a salary by the XXXXXXXXXX Government while pursuing their studies in Canada. The XXXXXXXXXX Government also pays for all tuition fees, medical insurance, liability insurance, travel and other costs on behalf of the Doctors.
The Doctors' salaries are paid monthly in two streams:
a) by cheque or electronic funds transfer directly from XXXXXXXXXX to the Doctors' bank accounts, and
b) a "top-up" amount of $XXXXXXXXXX paid to each Doctor by the respective university. This amount is paid by the respective university from a fund of $XXXXXXXXXX provided in advance to the university by XXXXXXXXXX on behalf of each Doctor. This top-up is necessary to ensure that the Doctors' salaries are equivalent to their Canadian counterparts under the various collective agreements between Interns and Residents Associations (e.g. PAIRO in Ontario), and the Academic Teaching Hospitals Associations in each province.
The Doctors may be required to carry out their duties of employment as residents or fellows at academic teaching hospitals in Canada as part of their post-graduate medical training. All XXXXXXXXXX residents and fellows are licenced by the appropriate provincial licencing authorities (i.e. the College of Physicians and Surgeons of Ontario), and provide clinical services to Canadian hospital patients on a daily basis. However, other than as described above, the Doctors do not receive salary or funding from the universities or hospitals in Canada, or from any other source in Canada in exchange for these duties.
The Doctors may earn investment income while in Canada.
XXXXXXXXXX has told us that Canadian residents or citizens do not pay income tax in XXXXXXXXXX.
Our Comments
Paragraph 149(1)(a) of the Act reads as follows:
149(1) No tax is payable under this Part on the taxable income of a person for a period when that person was
(a) an officer or servant of the government of a country other than Canada whose duties require that person to reside in Canada
(i) if, immediately before assuming those duties, the person resided outside Canada,
(ii) if that country grants a similar privilege to an officer or servant of Canada of the same class,
(iii) if the person was not, at any time in the period, engaged in a business or performing the duties of an office or employment in Canada other than the person's position with that government, and
(iv) if the person was not during the period a Canadian citizen.
For the period during which the Doctors meet all of the conditions in paragraph 149(1)(a) of the Act, the Doctors will not pay income tax under Part I of the Act on any of their taxable income, including investment income. For purposes of paragraph 149(1)(a), we will consider the top-up amount referred to above to be paid by the XXXXXXXXXX Government.
However, the exemption from tax under paragraph 149(1)(a) of the Act does not apply to a period during which all of the conditions in that paragraph are not met. For example, a period where the Doctors carry on business or are employed by someone other than the XXXXXXXXXX Government, would be a non-exempt period. Under subsection 149(6) of the Act, if there is a non-exempt period in a taxation year, tax is payable on the proportion of the taxable income for the year that the number of days in the non-exempt period is of the number of days in the taxation year.
We trust that we have been of assistance. If you have any questions, please contact Sherry Thomson at (613) 957-2122.
Yours truly,
Olli Laurikainen, CPA, CA
For Director
International Division
Income Tax Rulings Directorate
Legislative Policy & Regulatory Affairs Branch
cc: XXXXXXXXXX
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