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:
Whether $XXXXXXXXXX /hour pay increase by new employer to perform duties for 1 year in a city other than where the employee resides is an allowance that is excluded from income under subsection 6(6) of the Act.
Position: No.
Reasons:
First, the amount is not an allowance, it is a pay increase of $XXXXXXXXXX /hr.
Second, even if it were an allowance, the fact is that the employee was hired to perform the duties of employment at the employer's place of business for a period of one year. The fact that the employee resides in another city does not render the employer's place of business a special work site.
982328
XXXXXXXXXX R.Brazeau-LeBlond, CA
(613) 957-8953
Attention: XXXXXXXXXX
December 7, 1998
Dear Sirs:
Re: Special Work Site
This is in response to your letter of September 7, 1998, concerning the application of subsection 6(6) of the Income Tax Act (the "Act") in respect of a particular employee of XXXXXXXXXX.
You have advised us that the employee was employed by XXXXXXXXXX, where he performed maintenance work on a number of machines. When XXXXXXXXXX sold some of these machines to XXXXXXXXXX, the employee was hired by XXXXXXXXXX for a period of one year to assist in the relocation of the machines and to train other maintenance personnel. The employee maintains a self-contained domestic establishment in XXXXXXXXXX where his family resides. To compensate for the additional board and lodging costs, XXXXXXXXXX plans to give the employee an hourly pay increase of $XXXXXXXXXX per hour.
Our Comments
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request. The procedures for requesting an advance ruling are outlined in Information Circular 70-6R3 dated December 30, 1996. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments which are of a general nature.
In the situation you describe, the $XXXXXXXXXX per hour pay increase does not appear to constitute an allowance to compensate the employee for increased board and lodging costs. In our view, the amount received would appear to be the employee's salary or wages which should be included in income under subsection 5(1) of the Act.
If, in fact, an allowance was received by the individual in the course of an office or employment for personal or living expenses, it would be subject to tax unless it fell within the exceptions listed in subsection 6(6), subparagraphs 6(1)(b)(i) to (ix), or subsection 81(3.1) of the Act.
Subsection 6(6) of the Act
Subsection 6(6) of the Act allows certain allowances in respect of personal or living expenses, normally considered a taxable benefit under paragraph 6(1)(b) of the Act, received by individuals employed at special work sites and remote work locations, to be excluded from income. Interpretation Bulletin IT-91R4 "Employment at Special or Remote Work Locations" explains the terms "special work site" and "remote work locations" and provides further details concerning the criteria for these exemptions.
One of the requirements for the special work site exclusion under subparagraph 6(6)(a)(i) of the Act is that the duties performed must be of a temporary nature. The term "temporary" is not defined in the Act. The determination of the expected duration of employment must be made on the basis of the facts known at its commencement. In this regard, particular consideration should be given to the nature of the duties to be performed by the employee, the overall time estimated for a project or particular phase of a project on which the employee is engaged to perform duties, and the agreed period of time for which the employee is engaged to perform duties. For instance, in the case at hand, the employee was specifically hired by XXXXXXXXXX for one year to perform the duties of employment at the employer's place of business which is in XXXXXXXXXX. Therefore, the employer's place of business is not a location at which the duties performed by the employee were of a temporary nature and the employer's place of business is not a special work site.
Paragraph 6(1)(b) of the Act
Subparagraphs (6)(1)(b)(vii) and (vii.1) of the Act exclude from income allowances received by an individual for expenses for travelling in the performance of the duties of employment away from the municipality or metropolitan area where the employer's establishment was located, as long as the allowance is reasonable. As mentioned above, the reasonableness of any particular allowance is a question of fact. However, in the situation you describe the employee does not appear to be travelling in the performance of his duties.
Subsection 81(3.1) of the Act
Subsection 81(3.1) of the Act refers to amounts received by an individual in respect of part-time employment as an allowance for or reimbursement of travel expenses during a period throughout which the individual has other employment or is carrying on a business. Such allowances are generally not included in income to the extent that they are paid by the employer and do not exceed a reasonable amount. However, as the situation described does not involve a part-time employee, this provision does not apply.
We trust that these comments will be of assistance.
Yours truly,
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
