29 October 2008 External T.I. 2008-0288681E5 - Special Work Site Exemption

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: Is an employee's work term at a particular location temporary for the purposes of the special work site exemption under subsection 6(6) of the Act?

Position: Question of fact to be determined on a case-by-case basis. However, based on our understanding of the facts, the fact that such employment at the particular work location may be extended for an additional time period would not, by itself, result in a finding that such employment is no longer temporary.

Reasons: The law.

XXXXXXXXXX 							2008-028868
								Michael Cooke
October 29, 2008

Dear XXXXXXXXXX :

Re: Special Work Site Exemption

This is in response to your request for an advance income tax ruling dated July 28, 2008, concerning the application of the special work site income exclusion in subsection 6(6) of the Income Tax Act (the "Act"). As we discussed on October 27, 2008 (Cooke/XXXXXXXXXX ), we are unable to provide an advance income tax ruling since the transactions described in your letter are completed transactions. Accordingly, a refund of your deposit will be sent to you under separate cover.

Notwithstanding the above, and while written confirmation of the tax implications inherent in completed transactions should be directed to the relevant Tax Services Office, we are prepared to offer the following general comments as they may apply to the fact situation described in your letter.

The XXXXXXXXXX (the "Employer") has entered into a XXXXXXXXXX year contract with the government of XXXXXXXXXX to open and operate an XXXXXXXXXX facility outside of Canada (the "Work Site"). The Employer has entered into employment contracts with its employees who have agreed to work at the Work Site for an initial XXXXXXXXXX year period. The employees working at the Work Site will receive or enjoy certain benefits that are intended to offset expenses that they have incurred or would otherwise have incurred for accommodations, meals at the Work Site and for transportation costs for travel between their homes in Canada and the Work Site.

Ignoring whether all the other requirements of subsection 6(6) of the Act have been met in these circumstances, you ask whether an extension of the initial XXXXXXXXXX year work assignment period by an additional period not exceeding XXXXXXXXXX years would cause the Canada Revenue Agency to conclude that an employee's duties at the Work Site would no longer be considered as being "temporary" for the purposes of subsection 6(6) of the Act.

Our Comments:

In general terms, amounts received or enjoyed by an employee in respect of, in the course of or by virtue of an office or employment that is the value of, or an allowance in respect of expenses the employee incurred for accommodations, meals and transportation expenses at a location that is considered the employee's regular place of employment must be included in the individual's employment income under subsection 6(1) of the Act. However, as you are aware, subsection 6(6) of the Act may apply to exclude from income the value of or an allowance in respect of these types of expenses (not in excess of a reasonable amount) where they are incurred by an employee during a period when the employee performed employment duties at a "special work site" or "remote work location" as described in subsection 6(6) of the Act.

Since you are only concerned with the rules for a special work site our comments will focus on this aspect of subsection 6(6) of the Act.

Subparagraph 6(6)(a)(i) of the Act, states, inter alia, that the "duties performed by the taxpayer at the special work site must be of a temporary nature". As noted in paragraph 5 of IT-91R4, "Employment at Special Work Sites or Remote Work Locations", this term refers to the duration of the duties performed by the individual employee and not the expected duration of the project as a whole. The term "temporary" is not defined in the Act but, as noted in paragraph 6 of IT-91R4, we generally accept that duties will be considered to be of a temporary nature if it can reasonably be expected that they will not provide continuous employment beyond a two year period. We also indicate in that paragraph that there may be situations where the continuous two year employment period may not be applicable.

The determination as to whether employment at a particular work location is temporary must be made on the basis of the facts known at the commencement of the particular employment. Factors that would be taken into account in making such a determination would include: the nature of the duties to be performed by the employee; the overall time estimated for the particular project; and the agreed period of time for which the employee was engaged to perform such duties under the employment contract or other terms of the engagement.

Accordingly, in any situation, each employee's personal circumstances would need to be considered on a case-by-case basis in order to determine whether all the requirements of the special work site exemption in subsection 6(6) of the Act have been met. However, provided all the other requirements of subsection 6(6) have been met (e.g. the amounts are reasonable, etc.) the extension of the initial XXXXXXXXXX year work assignment period for an additional period not exceeding XXXXXXXXXX years would not, in and of itself, preclude the application of the special work site exemption in subsection 6(6) of the Act on the basis that such employment at the Work Site is no longer of a temporary nature.

We trust our comments will be of assistance.

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