21 October 2009 External T.I. 2008-0298021E5 - Taxable benefit arising from ferry passes

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: Will employees of a ferry company be taxable on free ferry passage provided by the employer?

Position: No taxable benefit insofar as the passes provide for transportation of passengers only. Where passes entitle an employee to free or discounted transport of a vehicle of any kind, the value of the benefit must be included in the employee's income as required by paragraph 6(1)(a) of the Act.

Reasons: For the purposes of determining under what conditions an employee of a ferry company may use a transit pass without incurring a taxable benefit, we consider ferry passes for the transportation of individuals to be equivalent to bus or rail passes. This administrative policy does not extend to passes that allow for the transport of a vehicle. The value of any benefit received by an employee or a retired employee in regards to the transport of a vehicle by ferry will give rise to a taxable benefit as required by paragraph 6(1)(a).

								2008-029802
XXXXXXXXXX 							Rita Ferguson
								519-645-5261
October 21, 2009

Dear XXXXXXXXXX :

Re: Taxable employment benefit in respect of employer ferry passes

This is in response to your electronic letter of October 28, 2008 inquiring whether changes to the employee travel pass policy of XXXXXXXXXX (the "Employer") would result in taxable benefits to its employees (the "Employees"). The Employer provides ferry services transporting individuals and vehicles. The current policy is to provide transportation to Employees on a space available basis only with no ability to reserve. You wish to know if a taxable benefit will result if current or retired Employees are provided with the ability to reserve space for themselves and their vehicles. You have also asked whether a taxable benefit will result if the Employer allots XXXXXXXXXX Employee travel spaces on the ferries for each crossing and then fills the spaces on a non-reserved first-come, first-served basis.

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 a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

Paragraph 6(1)(a) of the Income Tax Act (the "Act") includes in a taxpayer's income the value of any benefit whatsoever received or enjoyed by the taxpayer in respect of, in the course of, or by virtue of an office or employment. 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. However, Interpretation Bulletin IT-470R, "(Consolidated) Employees' Fringe Benefits" outlines certain privileges provided to employees by employers which would be considered non-taxable, notwithstanding that the value of these privileges fall within the ambit of paragraph 6(1)(a) of the Act. Paragraphs 42 to 44 of IT-470R essentially provide that employees of bus, rail and airline companies will not be considered to have received taxable employment benefits when their employers provide them with transportation passes which allow them to travel on equipment operated by their employers. There is an exception for airline employees who travel on a space-confirmed basis, wherein they will be considered to have received a benefit equal to the difference between 50% of the economy fare for that flight and the amount paid for the pass. Retired employees of transportation companies will not be taxed on pass benefits, even if they worked for airline employers and traveled on a space-confirmed basis.

We can confirm that the provision of ferry passes to the Employees for travel as passengers is treated in the same manner as passes provided to rail or bus employees. However, this treatment would not extend to the transport of a vehicle. The value attributable to the free or discounted vehicle transport provided to current or retired Employees, whether on a space-reserved or standby basis, should be included in income as required by paragraph 6(1)(a) of the Act.

The CRA recently published Income Tax Technical News Issue No. 40, which describes upcoming changes to the administrative policy on surface transit passes provided to transit employees. Effective for 2010, the non-taxation of free or discounted surface transit passes only applies for passes provided to the transit employee and for the exclusive use of the employee. Free or discounted passes provided for an employee's family member will represent a taxable benefit to the employee.

We trust that our comments will be of assistance.

Yours truly,

Rob Ferrari
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch