29 January 2025 External T.I. 2024-1018131E5 - Incentive Payments to XXXXXXXXXX Medical Residents

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) What is the tax treatment of reimbursements received by medical students to partially cover their transportation and accommodations costs when they choose to take elective courses in remote underserved communities? 2) What is the tax treatment of travel and accommodation reimbursements received by medical residents to partially cover their transportation and accommodations costs when they choose to do their practical training in remote underserved communities?

Position: 1) The reimbursements are in the nature of a scholarship or bursary to be included in income under paragraph 56(1)(n), subject to the scholarship exemption under subsection 56(3). 2) The reimbursements are in the nature of earnings supplements to be included in income under subparagraph 56(1)(r)(i) of the Act.

Reasons: 1) The reimbursements assist medical students in pursuing their education. As per paragraph 3.9 of Income Tax Folio S1-F2-C3, if a scholarship program provides reimbursements to pay for such things as lodging or personal travel, the reimbursed amounts would fall within the scope of subparagraph 56(1)(n)(i). 2) In the present case, the reimbursements provide an incentive for medical residents to obtain employment in remote underserviced areas. Therefore, subparagraph 56(1)(r)(i) appears to be the more specific provision that supersedes the general employment provisions in section 6 of the Act.

XXXXXXXXXX									2024-101813
										Randa El-Kadi

January 29, 2025

Re: XXXXXXXXXX Program and the XXXXXXXXXX Program

This letter is in response to your email of May 10, 2024, regarding the reporting requirements for payments made by XXXXXXXXXX (the Agency) to medical students under the XXXXXXXXXX Program (Program 1) and to medical residents under the XXXXXXXXXX Program (Program 2). We apologize for the delay in our response.

You indicate that Program 1 is a longstanding program that provides medical students in the final two years of their medical program with travel (based on a per kilometre rate) and accommodation expense reimbursement (up to a certain limit) for one rotation per academic year. The rotation must be at an XXXXXXXXXX that is 100 kilometers or more from the student’s home medical school.

You indicate that Program 2 is a newer program with similar benefits as Program 1, but it is intended for medical residents and provides immediate and longer-term physician support to underserviced communities in northern regions of the province.

We understand that the Agency has been issuing a T4A, Statement of Pension, Retirement, Annuity, and Other Income, to medical students in Program 1, but, so far, it has not issued any tax slips for payments made to medical residents in Program 2. You are therefore seeking guidance from our Directorate in determining whether the Agency is required to issue any tax slips to recipients of payments made under the two programs.

Our comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (the Act) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

Payments to medical students

Scholarships and bursaries are amounts paid or benefits given to students to enable them to pursue their education. The term bursary is not defined in the Act, however, its meaning is broad enough to encompass almost any form of financial assistance paid to enable a student to pursue their education. Under paragraph 56(1)(n) of the Act, scholarships, fellowships, bursaries and similar prizes received by a taxpayer are included in income in the year of receipt, to the extent that the amount received exceeds the recipient’s scholarship exemption for the year.

As indicated in paragraph 3.9 of Income Tax Folio S1-F2-C3, Scholarships, Research Grants and Other Education Assistance (the Folio), bursaries can include allowances to pay for specific educational costs, such as lodging and personal travel.

Based on the foregoing, it is our view that payments made to medical students under Program 1 would meet the description of scholarship or bursary. Under paragraph 200(2)(a) of the Income Tax Regulations (the Regulations), every payer of a scholarship or bursary must file a T4A to report the amount. However, there is no statutory requirement to withhold income taxes on the payment of a scholarship or bursary.

More specifically, in the present case, the paying Agency would report the amounts reimbursed to medical students in box 105 of the T4A, even though the students may be eligible for a full scholarship exemption under subsection 56(3) of the Act.

Payments to medical residents

Generally speaking, amounts paid as earnings supplements are included in the recipient’s income under subparagraph 56(1)(r)(i) of the Act when they are provided under a project sponsored by a government or government agency in Canada to encourage individuals to obtain or keep employment. An earnings supplement is generally provided to increase the income an individual receives for a temporary period. As discussed in paragraph 3.80 of the Folio, paragraph 56(1)(r) of the Act can apply to training benefit amounts (including allowances) for tuition, books, equipment, travel assistance, lodging or dependent care.

In the present case, it is our understanding that medical residents are individuals who have completed their academic education and accepted a postgraduate medical training program that leads to a postgraduate education license. It is also our understanding that medical residents are employees of the academic hospitals where they do their postgraduate training.

Based on the foregoing and the information you provided, Program 2 seems to provide an incentive for medical residents to accept placements in underserviced northern communities in the province, thus providing physician support to these communities. It is therefore our view that payments made to medical residents under Program 2 are in the nature of earnings supplements under a government-sponsored project to encourage individuals to obtain or keep employment. In the present case, these payments are to be included in the medical residents’ income under subparagraph 56(1)(r)(i) of the Act.

Paragraph 200(2)(c) of the Regulations requires that payments which are taxable under paragraph 56(1)(r) of the Act be reported on a T4A by the payer. Under paragraph 153(1)(s) of the Act, income tax must be withheld from amounts taxable under this paragraph; however, no source deductions are required for Canada pension plan or employment insurance premiums.

More specifically, in the present case, the paying Agency would report the amounts reimbursed to medical residents using code 028 – Other income, on the T4A slip.

We trust that these comments will be of assistance to you.

Yours truly,

Eric Wirag, CPA, CMA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch