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 reasonable travel and automobile allowances paid to an employee of a corporation are taxable income by virtue of the fact the employee is also a shareholder of the corporation.
Position: No
Reasons: ITA
2005-014149
XXXXXXXXXX Rob Ferrari
(613) 957-2138
August 24, 2005
Dear XXXXXXXXXX:
Re: Travel and Automobile Allowance
This is in reply to your letter we received on July 12, 2005, in respect of the above noted matter. You have reviewed the comments in Interpretation Bulletin IT-522R and you indicate that you received reasonable allowances from a corporation for travel and motor vehicle expenses in your capacity as an employee, which fall within the purview of subparagraphs 6(1)(b)(v), (vi) and (vii) of the Income Tax Act (the "Act"). You are also a shareholder of the corporation and you have asked whether as a result of your status as a shareholder if these allowances may be taxable income to yourself and/or non-deductible expenses of the corporation.
Paragraphs 6(1)(b)(v), (vii) and (vii.1) of the Act provide that allowances which are not in excess of reasonable amounts, in respect of travelling and motor vehicle expenses incurred in the performance of the duties of an office or employment, are not required to be included in computing the income of an individual from that office or employment.
If, as in the situation you described, in your capacity as an employee, you have received reasonable allowances that fall within the purview of subparagraphs 6(1)(b)(v), (vii) and (vii.1) of the Act, such amounts would not be required to be included in your taxable income, simply by virtue of the fact that you are also a shareholder of the corporation.
We would note that if allowances paid are unreasonably high, there are other tax consequences that may apply, which are beyond the scope of this letter.
We hope the above comments will be of assistance to you.
Yours truly,
Phil Jolie
Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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