26 June 2003 External T.I. 2003-0004715 - PERMANENT RESIDENT AUTHORIZATION FEES

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 payment of permanent residence authorization fees by employer would constitute a taxable employment benefit

Position: Yes

Reasons: Reimbursement of a personal expense is a taxable benefit. Unlike work permit and visa fees, permanent residence authorization fees is not a reasonable relocation expense. Acquisition of permanent residence status in Canada provides an enduring benefit to the employee, and the employee is the primary beneficiary of any benefit.

Wayne Antle, CGA
XXXXXXXXXX 2003-000471
(613) 957-2102
June 26, 2003

Dear XXXXXXXXXX:

Re: Payment of Permanent Resident Authorizations by Employer

This is further to your letter of February 18, 2003, wherein you ask us to reconsider our comments on the tax treatment of reimbursement of an employee's permanent resident authorization fees, which we made in our letter to XXXXXXXXXX, dated January 29, 2003 (File No. 2003-018382).

You have summarized the facts as follows:

XXXXXXXXXX (the "employer") advertises nationally and internationally for candidates to fill vacancies. However, Canadians, who are fully qualified, must be given preference. If the employer offers a position to a foreign national, it must apply to Human Resources Development Canada ("HRDC") to validate that no Canadian was fully qualified for the position. HRDC will issue a temporary work validation for up to two years if it approves the request. The successful candidate must obtain a temporary work permit from Immigration Canada upon entering the country. When the employer recruits to fill a regular continuing position, it is expected that the successful candidate will make a long-term commitment to the employer. Accordingly, if the successful candidate is a foreign national, he or she is expected to apply for permanent residence status before expiration of the temporary work permit.

In our earlier letter, we stated that, in our view, the reimbursement by an employer of fees paid by an employee to obtain a permanent residence visa in Canada would constitute a taxable employment benefit to the employee. We felt that the costs incurred to obtain such a visa were personal expenditures of the employee to enable him or her to obtain permanent residence status in Canada. Since these costs do not appear to be part of the employee's relocation costs (unlike the reimbursement of fees to obtain a temporary work permit upon entering Canada), it was our view that the payments made by the employer in respect of such fees would be included in the employee's income from employment.

We have considered the additional information that you provided, and our position on the tax treatment of employer-paid permanent residence authorization fees remains unchanged. We recognize that employees must either obtain permanent residence status in Canada, or extend their work permits in order to remain in Canada and continue working for the employer. Nevertheless, we feel that there is a substantial difference between the acquisition of a temporary work permit, which is necessary for an individual to enter Canada to work for a particular employer, and permanent residence status, which allows an individual to remain in Canada permanently, and is not tied to any particular employment. It is our view that the acquisition of permanent residence status in Canada provides an enduring benefit to the employee. Accordingly, we feel that the payment of the permanent residence authorization fees confers an economic advantage on the employee, which is primarily for the employee's benefit.

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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