11 April 2002 Internal T.I. 2002-0127217 - RELOCATION GRANT

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: Taxation of relocation payment to induce a non-resident to accept employment in Canada.

Position: Employment income.

Reasons: Received in respect of employment.

            April 11, 2002

      Saint John Tax Services Office      HEADQUARTERS
      Client Services Division      Terry Young, CA
            952-1506
      Attention: Marcia Lunn
            2002-012721

Relocation Grant

We are replying to your memo of March 6, 2002, concerning the taxation of a relocation payment made to entice XXXXXXXXXX (the "Employee") to accept employment in Canada. We also acknowledge our conversations of March 26 and April 3, and receipt of the contract between the Employee and the XXXXXXXXXX (the "Employer").

In your memo, you stated that the Employee received a "relocation grant" of $XXXXXXXXXX from the Province to accept employment with the Employer. The Employee was concerned that, because he was moving from outside Canada to a location in Canada to commence employment, he would not be able to deduct his moving expenses pursuant to section 62 of the Income Tax Act (the "Act"), even though the relocation grant would be taxable. According to the Employee, the relocation grant represented approximately XXXXXXXXXX% of his actual expenses.

Our Comments

In our view, the $XXXXXXXXXX relocation grant was received pursuant to a contract between the Employer and the Employee to commence employment. Therefore, the amount is included in the Employee's employment income when received.

We also note that, pursuant to subparagraphs 3(f)(i) and (ii) of the contract between the Employer and the Employee, the Employer agreed to reimburse the Employee for "reasonable moving expenses". This is in addition to the payment of the relocation grant pursuant to subparagraph 3(f)(iii) of the contract. As such, we do not see the basis of the Employee's concern vis-à-vis the taxation of the relocation grant.

We trust that our comments will be of assistance.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Customs and Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.

John Oulton, CA
Manager, Business and Individual Section
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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