29 November 2002 External T.I. 2002-0165645 - TAXABLE BENEFITS-REIMBURSEMENT EXPENSES

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: Taxable benefits resulting from the reimbursement of employment related expenses, and board and lodging expenses provided at a special work site.

Position: General comments provided.

Reasons: Always a question of fact.

XXXXXXXXXX 2002-016564

Randy Hewlett, B.Comm.

November 29, 2002

Dear XXXXXXXXXX:

Re: Technical Interpretation Request: Employee Benefits

We are writing in response to your letter dated September 24, 2002, wherein you requested a technical interpretation on whether or not certain amounts received by employees of a charitable organization are taxable benefits under the Income Tax Act (the Act).

In your letter, you describe a situation in which a husband and wife, who are both employed by a Canadian registered charity, travel to a foreign country to carry out the activities of the charity for a secondment period of three to five years. They will be reimbursed by the charity for all expenditures incurred to carry out their duties of employment, including the cost of materials and supplies, acquiring and operating a two-person flat-bed pick-up truck, travel between Canada and the foreign country once a year to promote activities of the charity, food and accommodations while staying in the foreign country, initial travel to the foreign country at the beginning of the secondment, and travel to return to Canada at the end of the secondment.

Your letter indicates that the individuals will maintain their principal residence in Canada, which will not be rented out during the secondment. You ask that we confirm that the reimbursements, other than food and accommodations, are not taxable benefits because they represent a reimbursement of expenses incurred to carry out the duties of employment. With respect to the food and accommodations, you ask for confirmation that the "special work site" exclusion in subsection 6(6) of the Act will apply. You also inquired whether the individuals would be considered non-residents if the principal residence is not maintained during the secondment.

Our Comments

Whether or not the reimbursement of expenses will result in a taxable employment benefit in the situation you describe, is a question of fact. Such a determination can only be made after a review of all the circumstances surrounding the situation. Where the particular transactions are completed, the relevant Tax Services Office can carry out this review. Where the transactions are proposed and are the subject matter of an advance income tax ruling request, the Directorate can provide written confirmation of the tax implications. Such a request must be submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings. We are, however, prepared to provide the following general comments that may apply to your situation.

Paragraph 6(1)(a) of the Act requires that in computing the employment income of a taxpayer for a taxation year, there shall be included "the value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment". In general terms, the reimbursement of expenses that are not personal in nature and incurred by the employee exclusively for employment-related purposes, does not result in a taxable employment benefit.

There may also be specific provisions under the Act that exclude from employment income certain benefits otherwise included by virtue of paragraph 6(1)(a), for example, the exclusion in subsection 6(6). You should note, however, that the exclusion for special work sites under subsection 6(6) of the Act only applies where the duties performed by the employee are temporary in nature. As stated in paragraph 6 of Interpretation Bulletin, IT-91R4, Employment at Special Worksites or Remote Work Locations, "as a general rule, duties will be considered to be of a temporary nature if it can reasonably be expected that they will not provide continuous employment beyond a period of two years". Further, this exclusion does not apply unless the employee maintains at another location a principal residence that is available for his or her occupancy and not rented by the employee to another person.

As you are aware, an individual's liability for income tax is also affected by his or her status as a resident or a non-resident of Canada. A determination of residency status will always be a question of fact that can only be made with a complete regard for all relevant information. For further information, you may wish to refer to Interpretation Bulletin IT-221R3 (Consolidated), Determination of an Individual's Residence.

We trust our comments will be of assistance to you.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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