4 April 2003 External T.I. 2003-0000165 - RESIDENT CARETAKERS

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 ISSUE:

Taxability of free rent in exchange for maintenance of apartment complex.

Position TAKEN:

General comments. Likely employment income.

Reasons:

Insufficient information.

XXXXXXXXXX 	T. Young, CA
		2003-000016
April 4, 2003

Dear XXXXXXXXXX:

Re: Resident Caretakers

We are writing in response to letter of January 24, 2003, concerning the provision of free rent. You propose providing an apartment in an apartment complex rent-free in exchange for grounds keeping and other duties. No cash remuneration would be paid.

You have asked us what your responsibilities would be vis-à-vis the reporting of this benefit and whether the benefit would be subject to income tax withholding, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. However, we are prepared to provide the following comments, which may be of assistance to you.

If you provide free or reduced rent to an employee, the value of the benefit is included in employment income pursuant to paragraph 6(1)(a) of the Income Tax Act. As outlined in Chapter 2, Other Benefits and Allowances, of Guide T4130, Employers' Guide: Taxable Benefits 2002-2003, the following apply:

? Where no cash remuneration is paid at any time during the year and the only amounts on the employee's T4 slip are for non-cash benefits, you are not required to withhold CPP contributions or income tax. However, even though you are not required to deduct and remit the employee's portion of CPP contributions, the benefit is pensionable for CPP purposes and you are responsible for the employer's remitting the employer's portion.

? Non-cash taxable benefits are not insurable for EI purposes, except for the value of board and lodging enjoyed by an employee in a period during which you pay the employee cash earnings. Therefore, if no cash remuneration is paid, the benefits will not be insurable for EI purposes and are not subject to EI premiums.

? You are required to issue a T4 slip in respect of the employment earnings and deductions, if applicable.

You can find the Guide on our web site at www.ccra.gc.ca. If you require further information on payroll deductions, please contact your local Tax Services Office.

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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