24 September 2008 External T.I. 2008-0276771E5 - Taxable Benefits - Relocation

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 benefits paid by the employee's employer to the employee's spouse (who is not an employee of the employer) that result from the relocation of the employee are taxable.

Position: The benefits are taxable to the employee and are subject to proper withholding and reporting.

Reasons: The Law

XXXXXXXXXX 								Michael Cooke
									2008-027677
September 24, 2008

Dear XXXXXXXXXX :

Re: Taxable Benefits - Relocation

We are writing in response to your correspondence of May 1, 2008, wherein you requested our views on how to report certain payments made by XXXXXXXXXX (the "Company") on the relocation of one of its employees.

In your correspondence you indicate that the Company relocated an employee from XXXXXXXXXX to XXXXXXXXXX . As part of this relocation, the Company agreed to pay the employee's spouse $XXXXXXXXXX per week until such time as the spouse found suitable employment in XXXXXXXXXX . In addition, the Company agreed to reimburse the spouse or the spouse's employer for maternity top-up benefits that were required to be repaid by the spouse. The employee's spouse is not employed by the Company.

You want to know whether the amounts paid by the Company are taxable and to whom.

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 income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following comments.

Our Comments

Subject to certain exceptions, paragraph 6(1)(a) of the Income Tax Act (the "Act") requires that the value of any benefits received or enjoyed by a taxpayer in the year in respect of, in the course of, or by virtue of an office or employment be included in the taxpayer's income. The broad wording of this provision means that a taxable benefit may exist where there is any connection between a benefit and the particular office or employment. Accordingly, paragraph 6(1)(a) of the Act can apply to payments made to or benefits enjoyed by an employee's spouse or dependents.

Where an employer pays or reimburses an employee for relocation expenses that would have otherwise qualified for a moving expense deduction under subsection 62(1) of the Act, such payment or reimbursement, as the case may be, will generally not result in a taxable benefit to the relocated employee under paragraph 6(1)(a) of the Act. For additional information on this topic please refer to Chapter 3 under the heading "Moving expenses and relocation benefits" in the Employers' Guide: Taxable Benefits (T4130). This publication and other CRA publications may be accessed at our website at: http://www.cra-arc.gc.ca.

In your situation, the above-described amounts paid by the Company would not qualify for a moving expense deduction under subsection 62(1) of the Act and as such must be included in the employee's employment income as a taxable benefit under paragraph 6(1)(a) of the Act. The Company is also responsible for making proper source withholdings and reporting (T4 slip) for the year these taxable benefits were received or enjoyed by the employee.

We trust that these comments will be of assistance.

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch