30 March 2004 External T.I. 2003-0054021E5 - Payment of Permanent Resident Authorizations

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.

Principal Issues: Whether the payment of permanent resident authorization fees by the employer would constitute a taxable employment benefit.

Position: yes

Reasons: Reimbursement of a taxable expense is a taxable benefit. Unlike work permits and work visas, permanent residence authorization fees are 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.

XXXXXXXXXX 2003-005402
Shaun Harkin, CMA
March 30, 2004

Re: Technical Interpretation Request: Payment of Permanent Resident Authorizations

This is in reply to your letter of December 18, 2003, wherein you ask us to reconsider our comments on the tax treatment of the reimbursement of an employee's permanent resident authorization fees, which we made in our letters dated June 26, 2003 (File No. 2003-000471) and January 29, 2003 (file No. 2003-018382).

You have asked us to reconsider our view in light of the fact that when XXXXXXXXXX (the "University") recruits a foreign national to fill a regular continuing position as either a tenure-track faculty or administration member, the candidate will be approved by the XXXXXXXXXX provincially and Human Resources Development Canada federally. The XXXXXXXXXX is an immigration program that allows the Province of XXXXXXXXXX to choose a limited number of immigrants, including immigrants nominated by employers, to meet provincial economic needs. For these individuals, the XXXXXXXXXX will significantly speed up the immigration process. In recognition of the employee making a long-term commitment to establish his or her permanent residence in Canada, serve at the University and contribute positively to Canada's economic health and the mosaic of Canadian society, the University reimburses the individual's and his or her family's permanent residency fees and costs. It is your view that the payment of these costs does not constitute an employment benefit to the employee.

You feel that, should our final decision be that the reimbursement of permanent residency fees and other costs are taxable, it will pose a fiscal impediment to the University's recruiting efforts to bring qualified foreign national candidates and their families to Canada to fill positions for which the University has been unable to find a qualified Canadian.

Our Comments

We have considered the additional information that you provided, and reviewed our earlier positions. However, it remains our view that 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. The fact that the employer pays these fees to recognize the commitment made by the employee to remain with the employer, and to assist in the recruitment of qualified foreign nationals, does not make such payments a non-taxable privilege. As we stated in our previous letter, 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. Since the acquisition of permanent residence status in Canada provides an enduring benefit to the employee, which enables the employee to remain in Canada, work for other employers and apply for Canadian citizenship, 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.

The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R5, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Revenue Agency. Our practice is to make this disclaimer in all instances in which we provide an opinion.

We trust our comments will be of assistance to you.

Yours truly,

Wayne Antle, CGA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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