Principal Issues: An optometrist who studies outside of Canada is required to pay exam fees to obtain a licence to practice in Canada. Are the exam fees fully deductible as a business expense?
Position: No.
Reasons: Where a doctor who studies outside of Canada is required to pay exam fees necessary to obtain a licence to practice in Canada, the exam fees and related travel costs qualify as an "eligible capital expenditure". These expenditures are not fully deductible in the taxation year in which they were incurred but rather go into an eligible capital property pool of which a percentage may be claimed each year as a deduction in computing business income from the practice.
XXXXXXXXXX Randy Hewlett
2005-012135
April 15, 2005
Dear Sir/Madam:
Re: Exam Fees Paid For A Licence To Practice Optometry In Canada
We are writing in response to your request of March 15, 2005, wherein you requested our opinion on the deductibility of exam fees and related travel expenses incurred by a taxpayer to obtain a licence necessary to practice optometry in Canada because the taxpayer's studies were undertaken outside of Canada.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments.
Where a doctor who studies outside of Canada is required to pay exam fees necessary to obtain a licence to practice in Canada, the exam fees and related travel costs qualify as an "eligible capital expenditure". This means that the expenses are not fully deductible in the taxation year in which they were incurred but rather go into an eligible capital property pool of which a percentage may be claimed each year as a deduction in computing business income from the practice. Interpretation Bulletin IT-143R3, Meaning of Eligible Capital Expenditure, which is available on our website at http://www.cra-arc.gc.ca, discusses in detail the deductibility of eligible capital expenditures.
We trust our comments are of assistance.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch