19 June 2009 External T.I. 2009-0310401E5 - Employer-provided vehicle - Remote work location

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: Would provision of a motor vehicle to travel to and from a work site give rise to a taxable benefit?

Position: Yes, but the benefit may be excluded from income if the work site qualifies as a remote work location. A reasonable standby charge and operating expense benefit may apply to any other personal use if the vehicles qualify as automobiles.

Reasons: Travel between an employee's home and the employer's place of business where the employee reports regularly is personal in nature. This would include travel between a work site and a departure or arrival point on the way. The benefit derived from the use of an employer-provided vehicle in respect of such travel would give rise to a taxable benefit under section 6 of the Act, however, the benefit may be excluded from income pursuant to subparagraph 6(6)(b)(ii) if the conditions for a remote work location are met.

XXXXXXXXXX 2009-031040
Rita Ferguson
519-645-5261
June 19, 2009

Dear XXXXXXXXXX :

Re: Vehicle Supplied by an Employer and Related Taxable Benefit

This is in response to your electronic correspondence of February 16, 2009 concerning whether the provision of company-owned vehicles in the situation described will give rise to taxable benefits to the employees.

In your correspondence and in our phone conversation on May 9, 2009 (Ferguson/XXXXXXXXXX ) you indicated that the company (the "Employer") operates a mine in XXXXXXXXXX (the "Worksite"). Individuals employed at the Worksite (the "Employees") work a schedule of XXXXXXXXXX days at the Worksite followed by XXXXXXXXXX days out. The Employer currently pays for the cost of public transportation for the Employees' travel between their principal residences and the Worksite.

As a cost-saving measure, the Employer is considering providing regular pick-up trucks or extended cab pick-up trucks to groups of Employees who could use the vehicles to drive between the Worksite and the XXXXXXXXXX communities XXXXXXXXXX (the "Communities"). For Employees who live in the Communities, this would be as far as they need to travel. For others, this would be a departure point for the balance of the trip home. The Employees would also meet in the Communities for the ride back to the Worksite in the Employer's vehicle. The trucks would also be used at the Worksite in the course of the Employer's business, which would occasionally include use to transport equipment.

When the Employees are not at the Worksite, the trucks would be kept at the residences of those Employees who live in the Communities, or they would be parked at the airport in the particular Community.

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 a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

Generally speaking, travel between an employee's home and his or her regular place of employment is personal in nature. This means that the use of an employer-provided vehicle in respect of such travel will give rise to a taxable benefit under section 6 of the Income Tax Act ("the Act"). However, by virtue of subsection 6(6) of the Act, an exception to these rules is provided in limited circumstances in respect of employment at a "remote work location".

For the "remote work location" exclusion to apply:

(a) the employee must have worked at a location which by virtue of its remoteness from any established community, the employee could not reasonably be expected to establish and maintain a self-contained domestic establishment; and

(b) the period while the employee was required by his or her duties to be away from the employee's principal place of residence, or to be at the work location, was at least 36 hours.

As noted above, one of the tests is whether the employee is unable to establish and maintain a "self-contained domestic establishment" (as that term is defined in subsection 248(1) of the Act) at the particular work location due to its remoteness from an established community. Paragraph 14 of Interpretation Bulletin IT-91R4, "Employment at Special Work Sites or Remote Work Locations", indicates that for a particular work location to be considered to be remote from an established community, the following factors will be considered:

• the availability of transportation;
• the distance from an established community; and
• the time required to travel that distance.

The CRA generally accepts that a work location will be considered to be remote if the nearest established community with a population of 1,000 or more is no closer than 80 kilometres by the most direct route normally traveled in the particular circumstances. However, where the particular work location is less than 80 kilometres from an established community it may nonetheless be considered to be remote, depending on a review of relevant factors. Where the particular work location qualifies as a remote work location, paragraph 6(6)(b) of the Act will allow certain otherwise taxable employer-paid or subsidized transportation costs to be excluded from an employee's income. This provision will only apply where the employee also receives board and lodging, or a reasonable allowance in respect of board and lodging, for a period while the employee was working at a remote work location and the amount is in respect of transportation costs incurred by the employee for travel between the remote work location and a location anywhere in Canada or, in the case of an employee working at a remote work location in another country, a location in that country. In our view, this would include transportation benefits derived from use of an employer-provided vehicle for travel between a location in Canada and a remote work location.

It will be a question of fact if the Worksite qualifies as a remote work location for any particular Employee. If the Worksite does meet the criteria as described above for paragraph 6(6)(b) of the Act to apply, there would be no taxable benefit arising from the use of a company vehicle for an Employee to travel between the Communities and the Worksite.

Although you have indicated that the Employees will not be permitted to use the vehicles for any other personal travel, we would note that any personal use beyond traveling to and from the Worksite would not be covered by subsection 6(6) of the Act and would give rise to a taxable benefit. The value of that benefit, including whether or not a standby charge would be required, will depend, in part, on whether the particular motor vehicle in question is an "automobile" as defined under subsection 248(1) of the Act.

The determination of whether or not a particular pick-up truck owned or leased by the Employer is considered to be an automobile as defined in subsection 248(1) of the Act remains a question of fact, however, based on the information provided, it appears likely that the trucks will be defined as automobiles.

Where a motor vehicle that is defined as an automobile is made available for personal use by an employee, paragraph 6(1)(e) of the Act requires the calculation of a "standby charge." Additionally, where the employer pays any of the operating costs of the automobile related to personal travel, an "operating cost benefit" is also included in the employee's income under paragraph 6(1)(k) of the Act. If the Worksite qualifies as a remote work location for purposes of subsection 6(6), the standby charge calculated under subsection 6(2) of the Act as well as the operating expense benefit should be prorated to recognize that the portion related to travel to and from the Worksite is not to be included.

Finally, although the foregoing stand-by charge/operating cost calculations will only apply if the vehicle in question is defined as an "automobile", personal use of a motor vehicle other than an automobile supplied by the Employer will result in an employment benefit under paragraph 6(1)(a) of the Act. Such a benefit would be based on a reasonable estimate of the fair market value of the benefit, including GST. Additional information is available in our Interpretation Bulletin IT-63R5, "Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer".

We trust the above comments are of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch