As all the replies so far have mentioned paying tax on grants, I think it is worthwhile noting that this probably isn’t required in many countries (although it is in the US). When I got a grant from the LTF Fund I contacted a tax lawyer to ask if I should pay income tax on it as, based on my experiences with income tax-free academic stipends/scholarships in Australia, Sweden, and Brazil, I assumed I wouldn’t. His reading of the CEA Grant agreement was that:
the money you receive from this research grant should be expended on the research, but it is not dependent on your performance of any services to the granter, and therefore does not represent a compensation for services you render to the granter nor does it represent to the granter any other type of economic advantage
I’m living in Brazil, where the tax code provides an income tax exemption for: ‘scholarships and research grants characterised as donations, when received exclusively to carry out studies or research and provided that the results of these activities do not represent an advantage for the donor, nor do they imply compensation for services’ (I never looked into the tax codes in Australia or Sweden, but I assume they included a similar exemption). This actually surprised the accountant who does the taxes for my company (which I used for research consulting), as he didn’t have any experience with people receiving academic scholarships and thought I would have to pay income tax on it.
Anyway, my assumption is that research grants from EA funders is likely to be tax-free in any country where it’s possible to get tax-free scholarships for PhD studies or postdoctoral research. I think it would be useful for EA Granters to advise recipients to check whether any academic scholarships are tax-free in their country, and if so, to seek advice from a tax professional familiar with the taxation of academic scholarships. I got a bit lucky with the tax lawyer I contacted, as he had advised Brazilians about receiving domestic scholarships to do research abroad, and so was generally familiar with this part of the tax code. Most students I know receiving tax-free scholarships don’t file taxes at all (or earn very much for that matter), so I assume that many tax professionals won’t be familiar with the situation.
This is the case in Sweden too, with one extra rule. The grant/stipend has to be paid as a lump sum, and not e.g. be paid out monthly over several months.
Also, if you are Swedish, you can just call the tax agency, or just read the rules on their website. No need to pay for a tax professional for this. If you do your best to comply and accidentally screw up, the worst that can happen is that you get back-taxes. It’s not criminal unless you do tax evation on purpouse.
The key point here is the third one. So, if you’re a uni student being funded to do a Masters or PhD, your grant is tax-exempt. If you’re like me, and you’re upskilling independently, tax does need to be paid for it.
That said, this took me almost no time and could have potentially saved the LTFF tens of thousands of dollars, so this was a very high EV thing to check.
As all the replies so far have mentioned paying tax on grants, I think it is worthwhile noting that this probably isn’t required in many countries (although it is in the US). When I got a grant from the LTF Fund I contacted a tax lawyer to ask if I should pay income tax on it as, based on my experiences with income tax-free academic stipends/scholarships in Australia, Sweden, and Brazil, I assumed I wouldn’t. His reading of the CEA Grant agreement was that:
I’m living in Brazil, where the tax code provides an income tax exemption for: ‘scholarships and research grants characterised as donations, when received exclusively to carry out studies or research and provided that the results of these activities do not represent an advantage for the donor, nor do they imply compensation for services’ (I never looked into the tax codes in Australia or Sweden, but I assume they included a similar exemption). This actually surprised the accountant who does the taxes for my company (which I used for research consulting), as he didn’t have any experience with people receiving academic scholarships and thought I would have to pay income tax on it.
Anyway, my assumption is that research grants from EA funders is likely to be tax-free in any country where it’s possible to get tax-free scholarships for PhD studies or postdoctoral research. I think it would be useful for EA Granters to advise recipients to check whether any academic scholarships are tax-free in their country, and if so, to seek advice from a tax professional familiar with the taxation of academic scholarships. I got a bit lucky with the tax lawyer I contacted, as he had advised Brazilians about receiving domestic scholarships to do research abroad, and so was generally familiar with this part of the tax code. Most students I know receiving tax-free scholarships don’t file taxes at all (or earn very much for that matter), so I assume that many tax professionals won’t be familiar with the situation.
This is the case in Sweden too, with one extra rule. The grant/stipend has to be paid as a lump sum, and not e.g. be paid out monthly over several months.
Also, if you are Swedish, you can just call the tax agency, or just read the rules on their website. No need to pay for a tax professional for this. If you do your best to comply and accidentally screw up, the worst that can happen is that you get back-taxes. It’s not criminal unless you do tax evation on purpouse.
That’s excellent advice! I just looked up Australia specifically (https://www.ato.gov.au/Individuals/Income-and-deductions/In-detail/Income/Scholarship-payments-and-tax) and it appears that:
For a scholarship payment to be exempt income it can’t:
be an excluded government payment (Austudy, Youth Allowance or ABSTUDY)
come with a requirement for you to do work (either as an employee or contract for labour, now or in the future).
You must also meet both of the following conditions:
you are a full-time student at a school, college or university
the scholarship is provided to you principally for educational purposes
The key point here is the third one. So, if you’re a uni student being funded to do a Masters or PhD, your grant is tax-exempt. If you’re like me, and you’re upskilling independently, tax does need to be paid for it.
That said, this took me almost no time and could have potentially saved the LTFF tens of thousands of dollars, so this was a very high EV thing to check.