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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Taxable benefits - more particularly the taxation of allowances received by government officials. Recent newspaper articles regarding perceived preferential treatment has generated the correspondence.
Position TAKEN:
General positions relating to taxation of allowances and other employment related benefits provided. In addition, an explanation for exclusion of certain allowances prusuant to 6(1)(b) given.
Reasons FOR POSITION TAKEN:
MINISTER/DM'S OFFICE 95-05883M
ADM'S OFFICE
RETURN TO 15TH FLOOR, ALBION TOWERS
October 19, 1995
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable David Anderson, Minister of National Revenue, has asked me to reply to your letter of August 6, 1995, in which you request further information concerning the taxability of certain employment benefits. I apologize for the delay in responding.
Under the Income Tax Act, employees pay tax on the value of all remuneration and benefits they receive by virtue of their employment. In addition to items such as salary, wages, bonuses, commissions and gratuities, renumeration and benefits also include, with certain specified exceptions, the value of a personal benefit of any kind whatsoever or an allowance for any purpose.
Where an employee, whether or not a federal public servant, receives an employer-paid trip or vacation for personal purposes, the value of that benefit, or the amount received in respect of the benefit, is included in the income of the employee as a taxable benefit. However, representation or other special allowances received by certain officers or employees in respect of a period of absence from Canada are specifically excluded from income. This exclusion applies to qualifying allowances paid to individuals such as ambassadors, high commissioners, and federal government foreign service officers. Accordingly, where such an officer or employee receives an allowance which qualifies for this exclusion, the allowance will not be included in income regardless of the purpose for which it was paid.
You have also asked if there are any circumstances that would allow public sector employees to claim exempt allowances that are higher than those permitted in the private sector. In this regard, you ask what is considered a reasonable expense or allowance. There are no limits specified in the Income Tax Act for the amount of a qualifying exempt allowance paid to an employee. The amount of an allowance is usually determined on the basis of some formula that approximates the amount of the actual expenses that are likely to be incurred by the employee. A reasonable allowance is one that is designed to cover the employee's expenses.
I am unable to provide you with copies of formal or informal rulings since I am precluded from disclosing information concerning other taxpayers under the confidentiality provisions of the Income Tax Act.
The rules described above apply to all employees whether or not they are federal public servants, and any exceptions to these rules are specifically provided for in the legislation. The role of Revenue Canada is to administer and enforce the Income Tax Act as passed by Parliament. Implicit in the Department's role is the responsibility to treat all taxpayers fairly and in accordance with the law. As I mentioned in my last letter, issues relating to the underlying tax policy of the legislation are the responsibility of the Department of Finance.
I trust that my comments have addressed your concerns.
Yours sincerely,
Pierre Gravelle, Q.C.
D. Zion
957-2140
October 6, 1995
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