Citation: 2010 TCC 56
Date: 20100128
Docket: 2007-1604(IT)G
BETWEEN:
CHRISTIAN BERGERON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Lamarre J.
[1]
This is an appeal from
an assessment made by the Minister of National Revenue (the Minister)
for the 2001 taxation year, in which $61,751 was added to his employment income
as a living expense and travel allowance that he received from his employer,
Conseiller en informatique d’affaires CIA Inc. (CIA), in accordance with
paragraph 6(1)(b) of the Income Tax Act (ITA). The
Minister determined that that allowance was not exempt from tax under
subsection 6(6) of the ITA, which concerns employment at a special work
site or remote location.
[2]
Those statutory
provisions read as follows:
SECTION 6: Amounts to be included as income from
office or employment
(1) There shall be included in computing the income of a
taxpayer for a taxation year as income from an office or employment such of the
following amounts as are applicable
. . .
(b) Personal or living
expenses – all amounts received by the taxpayer in the year as an allowance
for personal or living expenses or as an allowance for any other purpose,
except
. . .
(6) Employment at special work site or remote location Notwithstanding subsection 6(1), in computing the income of a
taxpayer for a taxation year from an office or employment, there shall not be
included any amount received or enjoyed by the taxpayer in respect of, in the
course or by virtue of the office or employment that is the value of, or an
allowance (not in excess of a reasonable amount) in respect of expenses the
taxpayer has incurred for,
(a) the taxpayer’s board and lodging for a
period at
(i)
a special work site, being a location at which
the duties performed by the taxpayer were of a temporary nature, if the
taxpayer maintained at another location a self-contained domestic establishment
as the taxpayer’s principal place of residence
(A)
that was, throughout the period, available for
the taxpayer’s occupancy and not rented by the taxpayer to any other person,
and
(B)
to which, by reason of distance, the taxpayer
could not reasonably be expected to have returned daily from the special work
site, or
(ii)
a location at which, by virtue of its remoteness
from any established community, the taxpayer could not reasonably be expected
to establish and maintain a self-contained domestic establishment,
if the period during which the taxpayer was required by the
taxpayer’s duties to be away from the taxpayer’s principal place of residence,
or to be at the special work site or location, was not less than 36 hours; or
(b) transportation between
(i)
the principal place of residence and the special
work site referred to in subparagraph 6(6)(a)(i), or
(ii)
the location referred to in
subparagraph 6(6)(a)(ii) and a location in Canada or a location in the country in which the taxpayer is employed,.
Facts
[3]
The appellant is a
computer specialist, who was hired by CIA to work in France
on contracts granted to CIA France, which was owned by CIA. His first contract commenced
on June 30, 1997, and was later renewed to go until
January 14, 2002. During that entire time, he worked for the same
client, Qualitech, which later became IPSI.
[4]
The appellant testified
that he was always on a contract of employment with CIA. He filed two of them
dated January 1, 2000. The first contract indicated that its commencement
date was January 1, 2000, and the second that its commencement date
was May 1, 2000. It is stipulated in both contracts that the
contracts of employment were for 12 months and were renewable for the following
12 months or less. In addition, each has a clause entitled [Translation] "early
termination". According to that clause, the contract was to automatically
end once the notice of termination of employment, provided for in the general
conditions, ran out. Thus, either party could end the contract or decide not to
renew it by providing the other party one month's written notice. The contract was
also to end upon termination of employment or expiration of the temporary
residence permit for France. Regarding the last point, the contract
provides that it is conditional on obtaining a long-term visa for France,
issued by France’s department of labour and employment.
[5]
The appellant filed in
evidence two temporary residence permits, one of which was valid from
May 15, 2000, to May 14, 2001, and the other from
May 15, 2001, to February 13, 2002. He explained that those
residence permits were valid only if he had a work permit. It is also indicated
on those residence permits that the appellant was a temporary worker and that
he had a temporary work permit.
[6]
The appellant explained
that the contract he was working under at the beginning of 2000 ended in
May 2000 and that CIA rehired him on another contract. From what I
understand, he was assigned management duties and his responsibilities were
more significant. His monthly salary increased from 33,600 French francs (FF)
to 51,800 FF effective May 1, 2000. The fixed monthly payments
to offset living costs and travel required for a stay abroad increased from
16,800 FF to 25,900 FF starting on May 1, 2000. That living allowance
corresponds to 50% of the salary. The appellant explained, however, that that
allowance was calculated on the basis of the cost of living and that, with his
new duties, his cost of living had increased. He therefore asked for a higher
allowance that would be fitting for his new duties, among other things, in
order to buy a car in France. In addition to that allowance, the
appellant was reimbursed for all his travel expenses to travel from his
workplace in France to remote locations (United States, Canada and Lyon, France). The contract setting the salary
and living allowance paid to the appellant in 2001 was not offered in evidence.
However, the appellant is not challenging the amount of the living allowance he
received from his employer, which was $61,751 in 2001, and he reported an
employment income of $123,719 for that year. That allowance did not include the
expenses reimbursed to the appellant for his travel to remote locations. The
amounts reimbursed were not included in the appellant's income by the Minister.
[7]
The appellant also offered
in evidence three medical insurance certificates for his stay in France. The first was established for an assignment not
exceeding three years for a period from June 30, 1997, to April 10, 1999.
The second and third were established for an assignment that could exceed three
years: the second for the period from April 10, 1999, to
April 10, 2002 and the third for the overlapping period from
February 1, 2000, to April 10, 2002.
[8]
The appellant explained
that he rented a furnished apartment in Paris
because he never knew whether the client would end the contract he was working under.
In the fall of 2001, his contract was ended. He had two months' notice and
returned to Canada in January 2002.
[9]
In addition, he kept
access to the accommodation rented by his mother in Montréal, for which he paid
half the rent. He offered in evidence the lease signed by his mother and
statements for his bank account in Canada showing the
withdrawals attributed to rent. He stated that he had kept his vehicle and that
it stayed in the garage next to the accommodation.
Analysis
[10]
It seems that there is
no dispute that the allowance of $61,751, which is at issue, was received by
the appellant for his personal and living expenses in 2001. As such, it is
taxable under paragraph 6(1)(b) of the ITA. The issue is whether it
can be exempted under subsection 6(6) of the ITA. The first condition – whether
the amount paid to the appellant for that living allowance was reasonable – is one
of fact.
[11]
The respondent is of
the view that the appellant did not prove that that allowance did not exceed a
reasonable amount in respect of expenses incurred for his board and accommodation
in France. According to the respondent, the
allowance is a salary in disguise because it corresponds to 50% of the salary.
Thus, if that allowance had really been set on the basis of the cost of living,
it would not have been increased on the basis of the salary increase received
by the appellant in May 2000. In addition, the appellant himself indicated
that he had negotiated that allowance in view of his new responsibilities. The
respondent points out that the allowance provided for in subsection 6(6)
of the ITA must cover living expenses (board and lodging). Yet, the appellant
stated that he had considered buying a vehicle in France.
[12]
For his part, the
appellant believes that it was reasonable for him to receive that allowance
since his work was at a higher level than that of other CIA employees and that,
as a result, he had higher expenses because of his status within the company.
[13]
The evidence showed
that the allowance simply corresponded to 50% of his salary and was adjusted on
the basis of the salary increase in May 2000. The appellant negotiated the
allowance with the employer in the same way he did his salary. I am of the
opinion that the appellant did not show, on the balance of probabilities, that
the allowance was not in excess of a reasonable amount in respect of expenses
he had incurred for his board and lodging during his assignment in France. No
evidence was submitted by the appellant in support of his argument. Since the
first condition is not fulfilled, the allowance in question is taxable under
paragraph 6(1)(b) of the ITA.
[14]
Having so ruled, it
will not be necessary to consider the other conditions that must be fulfilled
for subsection 6(6) of the ITA to apply, which were argued by the parties.
Thus, I will not have to decide whether the appellant's work in France was of a temporary nature, which, in my opinion, in
view of the evidence, could have been interpreted either way.
[15]
In addition, I will not
have to rule on whether the appellant maintained at another location (in this
case, Montréal) a self-contained domestic establishment that was, throughout
the period, available for his occupancy and not rented by the appellant to any
other person. I will just say that I could, on the basis of the evidence, answer
that question in the affirmative.
[16]
For these reasons, I
would dismiss the appeal, with costs to the respondent, under Tariff B of the Tax
Court of Canada Rules (General Procedure).
Signed at Montréal, Quebec, this 28th day of January 2010.
“Lucie Lamarre”
on this 23th day
of February 2011
François Brunet,
Revisor
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