24 June 2016 External T.I. 2015-0571471E5 F - Passe de ski familiale -- translation

Principal Issues: 1) Whether a family season ski and snowboard pass offered by an employer to his/her employees is a taxable benefit in a given situation? 2) If so, can the value of the family season ski pass be established at cost for the employer?

Position: 1) Question of fact. 2) No.

Reasons: 1) Taxable benefit as per 6(1)a) but either the administrative position in paragraph 33 of IT-470R or the CRA’s gift and award policy could be applicable. 2) The cost for the employer is not representative of the value of the benefit received by the employee.

XXXXXXXXXX 2015-057147

Sophie Lambert, CPA, CMA, DESS. FISC.

24 June 2016

Sir,

Subject: Privileges for Ski Center Employees

This letter is in response to your letter of February 5, 2015, asking whether a family ski pass offered by an employer to all its employees is a taxable benefit under paragraph 6(1)(a) of the Income Tax Act (footnote 1) in the situation described below.

Unless otherwise indicated, all legislative references in this letter are references to the provisions of the Act.

Facts

We understand that the employer operates a ski resort open to the public and offers its employees a family ski pass (hereinafter "Season Pass") that provides access to the ski or snowboard runs for a particular ski season. XXXXXXXXXX.

You indicated that the Season Pass is offered to employees in the form of a Christmas present or on another special occasion. It can be used by employees and their family members throughout the season. Your questions are:

You asked whether, in the situation described above, the Season Pass constitutes a taxable benefit conferred on employees under paragraph 6(1)(a) of the Act. If so, you inquire as to determining the value of such a Season Pass based on the cost to the employer.

Your comments

We summarize some of your comments as follows:

You begin your analysis by stating that, in your opinion, the Season Pass does not constitute a taxable benefit conferred on an employee in this situation since it benefits primarily the employer.

You submit that the Season Pass, giving access to the ski slopes, is necessary to perform employment duties. Indeed, the employer requires that each employee has a complete knowledge of the ski slopes and their conditions in order to be able to answer customers' questions.

You add that the ski area should be considered a recreational or fitness facility of the employer.

In addition, you cite paragraph 33 of Interpretation Bulletin IT-470R, Employees' Fringe Benefits (footnote 2), which sets out the tax treatment that may arise in situations where employees generally are permitted to use their employer's recreational facilities

Finally, you refer to the Canada Revenue Agency's administrative policy (hereinafter "CRA") which, in certain circumstances, permits certain non-cash gifts and other rewards to be extended by an employer to its employees tax-free.

Our comments

This technical interpretation provides general comments on the provisions of the Act and related legislation, where referenced. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R7, Advance Income Tax Rulings and Technical Interpretations (footnote 3).

I. Taxable benefit under paragraph 6(1)(a)

Paragraph 6(1)(a) provides, inter alia, that there is to be included in computing the income of a taxpayer the value of any benefits received or enjoyed by the taxpayer, or by a person with who does not deal at arm's length with the taxpayer, in the year in respect of, in the course of, or by virtue of the taxpayer’s office or employment.

Paragraph 6(1)(a) of the Act refers to certain exceptions, but none of them applies to your situation.

Generally, in determining whether an employee must include in the calculation of his or her income the value of a benefit received or enjoyed by him or her, the following factors must be considered:

• The benefit conferred on the employee is an economic advantage
• The benefit is measurable and quantifiable
• The benefit is provided to the employee and primarily benefits the employee (or a person with whom the employee does not deal at arm's length) and not primarily the employer.

In the given situation, it is reasonable to consider that the benefit conferred on the employee is an economic benefit and is measurable and quantifiable. However, the question of whether the Season Pass primarily benefits the employer or the employee is a question of fact which can only be resolved after a review of all the facts surrounding the situation of each employee concerned.

Furthermore, it is also the responsibility of the employer to make such a determination and to document and support this decision. Nevertheless, with respect to the opinion you expressed on the subject (footnote 4), we have some doubts that a Season Pass is necessary for the performance of the duties of all the groups of employees listed and that, in all cases, the benefit accrues primarily to the employer.

In short, if the facts show that the Season Pass primarily benefits an employee (or a person with whom he or she is not dealing at arm's length) and not primarily the employer, we are of the view that the value of that benefit should be added in computing that employee's income.

In addition, with respect to the portion of the Season Pass that allows an employee's family members to access the runs, we are of the view that it constitutes a taxable benefit to the employee.

That being said, the employer could also consider two exceptions to the above, which are the administrative position of the CRA where a benefit is offered to all employees, or the policy on gifts. We discuss these under the two headings below.

II- Administrative position where a benefit is offered to all employees

In addition to the statutory exceptions provided for in paragraph 6(1)(a) of the Act, the CRA by administrative position provides an exception that may be relevant in a case such as the one under consideration.

Paragraph 33 of Interpretation Bulletin IT-470R (footnote 5) states that where employees generally are permitted to use their employer's recreational facilities free of charge or upon payment of a nominal fee, the value of the benefit derived by an employee through such use is not normally taxable.

In addition, for the purposes of this administrative position and as indicated in your application, the CRA considers that a ski resort is a recreational facility. This position is still in effect.

However, the administrative position set out in paragraph 33 of Interpretation Bulletin IT-470R (footnote 6) does not apply to situations where recreational facilities are made available to a limited number of employees or particular groups of employees. This administrative position is also not applicable to the portion of the benefit offered to family members.

III- Gift Policies

Generally, gifts or awards that an employer gives to an employee are taxable benefits (footnote 7) under paragraph 6(1)(a) of the Act. However, the CRA has an administrative policy (footnote 8) that exempts non-cash gifts and awards in certain cases.

If it is shown that the Season Pass is offered to the employee as a gift and not as compensation, this gift could be covered by this administrative policy. In addition, this policy allows an employer to give an employee an unlimited number of non-cash gifts and awards with a combined total value of $500 or less without tax impact to the extent that the total fair market value ("FMV") of these gifts does not exceed $500 per calendar year. Any amount in excess of the $500 limit must be added to the employee's income as a taxable benefit under paragraph 6(1)(a) of the Act.

IV-Value of benefit

Finally, your last question relates to the possibility of estimating the value of the benefit (i.e. Ski Pass) based on its cost to the employer. The CRA is of the view that, in the present case, this cost would not be representative of the value of the benefit received by the employee.

We trust that these comments will be of assistance.

Michel Lambert, CPA, CA, M. Fisc.
Manager
Business and Employment Income Division
Income Tax Rulings Directorate
Legislative Policy
and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 R.S.C., 1985 (5th Supplement), ch.1, as amended (hereinafter the "Act").
2 CANADA REVENUE AGENCY, Interpretation Bulletin IT-470R, " Employees' Fringe Benefits", last revised October 9, 1999, archived. (Hereinafter " Interpretation Bulletin IT-470R "),
3 CANADA REVENUE AGENCY, Information Circular IC70-6R7 - Advance Income Tax Rulings and Technical Interpretations, April 22, 2016
4 We refer to your comment noted above that all employees must have access to the ski slopes in order to be familiar with them and be able to answer customer questions
5 Supra note 2
6 Supra note2
7 See Rules for Gifts and Rewards at: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/gfts/plcy-eng.html
8 See Policy for non-cash gifts and awards at: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/gfts/plcy2010-eng.html