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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Whether Air Miles purchased by employer and transferred to employees to enable them to purchase tickets home for Christmas would constitute employment benefits, especially given our new policy on gifts.
Position: New policy on gifts and awards does not apply to transfers of Air Miles or other loyalty points to employees. Unless special work site exclusion applies, value of tickets is considered a taxable employment benefit.
Reasons: Gifts and Awards policy only applies to non-cash items. Since Air Miles or other loyalty points entitle employees to apply the points against the purchase of various items, the gifting of such points falls outside the policy. The policy was amended to allow employees to provide small non-cash gifts and awards to employees without facing the administrative burden of valuing the items. The provision of Air Miles or other points is outside the scope of this policy.
XXXXXXXXXX 2001-011054
Wayne Antle, CGA
January 9, 2002
Dear XXXXXXXXXX:
Re: Travel Assistance to Employees
This is further to your letter of November 2, 2001 in which you requested an advance income tax ruling on whether Air Miles provided to employees to enable them to purchase airline tickets would constitute taxable employment benefits.
In your letter, you summarized the situation as follows:
As an Air Miles provider, XXXXXXXXXX (the "employer") can purchase Air Miles at a preferred rate, and transfer them to its employees. In order to assist its employees to travel home at Christmas, the employer is buying sufficient Air Miles for its employees to allow them to obtain airline tickets for a trip home. Each employee must sign an agreement that the Air Miles would only be used to acquire such a ticket. The employer can purchase the Air Miles required to obtain a ticket at a price below the cost of buying the actual ticket. You ask whether the purchase of the tickets by the employees using the Air Miles obtained from the employer would be considered taxable employment benefits to the employees, especially in light of our new policy on employer-provided gifts.
As discussed in Information Circular 70-6R4 Advance Income Tax Rulings dated January 29, 2001, we will only consider a ruling request where it is made in respect of a proposed transaction, and it is submitted in the manner set out in this circular. Your deposit will be returned to you under separate cover. However, we will provide you with the following general comments, which are not binding on the Canada Customs and Revenue Agency ("CCRA").
Generally, paragraph 6(1)(a) of the Income Tax Act (the "Act") requires employees to include in their income the value of any benefits whatsoever received or enjoyed in respect of their employment. Subsection 6(6) of the Act provides an exception for employer-paid transportation from a special work site to the employee's principal place of residence, where the employer provides board and lodging, or an allowance for board and lodging while the employee is working at the special work site. Please refer to Interpretation Bulletin IT-91R4 Employment at Special or Remote Work Locations for more information in this regard.
Recently, we have announced changes to our policy on employer-provided gifts and awards. Basically, an employer can provide to an employee on a tax-free basis up to two non-cash gifts per year for special occasions, such as Christmas, birth of a child, or marriage, where the total cost of the gifts (including all taxes) is not more than $500. Cash or near-cash gifts would not be covered by this policy, and the value of such gifts would therefore be considered taxable employment benefits notwithstanding the cost of the gifts. We consider near-cash gifts to mean any items that can readily be converted to cash, or are essentially equivalent to cash, such as securities, gold nuggets, or gift certificates.
It is our view that the new policy on employer-provided gifts and awards would not apply to Air Miles or other similar loyalty points transferred to employees by employers. Accordingly, unless the exception provided in subsection 6(6) of the Act applies, when the Air Miles are redeemed by the employees to obtain airline tickets, the employees would be considered to have received taxable employment benefits equal to the difference between the fair market value of the tickets and the amount paid by the employees to acquire the tickets.
Please refer to the 2001-2002 Employers Guide to Taxable Benefits for more information on the reporting requirements for various benefits, and the corresponding income tax, Employment Insurance, and Canada Pension Plan withholding requirements. You may also call or visit the Business Enquiries section of the XXXXXXXXXX Tax Services Office for further assistance in this regard. Please note that the publications referred to in this letter are available on our website at www.ccra-adrc.gc.ca.
We trust that our comments will be of assistance.
Yours truly
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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