1 March 2007 External T.I. 2006-0202091E5 - Moving Expenses - Relocations To Canada

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: Taxable status of moving expense reimbursements paid by an employer for an employee moving to Canada.

Position: Question of fact. It depends upon the types of expenses reimbursed. However, the fact that the employee moved from a location outside of Canada has no impact on this determination.

Reasons: The requirement that the employee's former and new residence must both be located within Canada is contained in the definition of "Eligible Relocation" in subsection 248(1) of the Income Tax Act. However, this does not apply for purposes of determining if there is a benefit conferred by the employer for purposes of paragraph 6(1)(a).

								2006-020209
XXXXXXXXXX 							Joy Bertram,
	   							CGA, CPA(vt)
March 1, 2007  

Dear XXXXXXXXXX:

Re: Taxable Benefit - Employer Payment of Moving Expenses to Relocate to Canada

We are writing in response to your fax of August 10, 2006, wherein you requested our opinion on the taxable status of moving expense reimbursements paid by an employer to enable a new employee to move to Canada to commence employment. We apologize for the delay in responding.

You noted that where an employee moves from a location within Canada to another location within Canada, which is 40 kilometres closer to the new work location, most of the moving expenses reimbursed by the employer would not be a taxable benefit to the employee. However, you inquired whether reasonable moving expenses for relocations to Canada would be treated in the same way.

The determination of whether specific moving expense reimbursements are taxable benefits is a question of fact. We would refer you to pages 19 to 21 of Guide T4130: Employer's Guide to Taxable Benefits,- under the heading "Moving expenses paid by employer that are not a taxable benefit." The Canada Revenue Agency's general views on this issue are also discussed in paragraph 35 of Interpretation Bulletin IT-470R: Employees' Fringe Benefits (Consolidated), which states: "where an employer reimburses an employee for the expenses incurred by the latter in moving the employee and the employee's family and household effects because the employee has accepted employment at a place, other than where the former home was located, this reimbursement is generally not considered a taxable benefit to the employee." We would add that while the location of the former home within Canada is required to determine whether moving expenses are deductible by an employee who does not receive a reimbursement from his or her employer, it has no impact in determining whether an employer who has reimbursed such expenses has conferred a taxable benefit on the employee. Provided the moving expenses are within the general guidelines discussed in the above-noted publications, the employer's reimbursement would not be a taxable benefit for a new employee who has relocated from outside Canada.

The above-noted publications are available on our website at http://www.cra-arc.gc.ca.

We trust the above will be of assistance to you.

Yours truly,

Randy Hewlett
Manager
Business and Personal Section
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch