28 March 2012 External T.I. 2011-0423631E5 - Tax treatment of meal allowance

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: What is the tax treatment of a per diem meal allowance that an employer pays to its employees when attending a conference or seminar for more than one day?

Position: Reasonable meal allowances provided to employees while travelling for employment are generally not taxable. It is a question of fact whether a particular allowance is reasonable.

Reasons: The law and our current administrative position.

XXXXXXXXXX 					2011-042363
						N. Pulandiran

March 28, 2012

Dear XXXXXXXXXX :

Re: Per Diem Meal Allowance

We are writing in response to your email of October 6, 2011, concerning the per diem meal allowances paid to employees. More specifically, you have asked us for clarification on the tax treatment and reasonableness of a $65 per diem meal allowance (breakfast, lunch, dinner) that an employer provides to its employees who attend a conference or seminar for more than one day.

Generally, paragraph 6(1)(b) of the Income Tax Act ("the Act") provides that amounts received by an employee in the year as an allowance for personal or living expenses or as an allowance for any other purpose are required to be included in computing the income of the employee, except where specifically exempted by subparagraphs 6(1)(b)(i) to 6(1)(b)(xi) or subsection 6(6) of the Act. Pursuant to subparagraph 6(1)(b)(vii) of the Act, an employer-provided meal allowance will not be required to be included in the employee's income where the following conditions are met:

• the allowance is a reasonable amount,
• the allowance is received for travelling away from the municipality and the metropolitan area (if there is one) where the employer's establishment, at which the employee ordinarily worked or to which the employee ordinarily reported, is located, and
• the travelling is done in the performance of the duties of the office or employment.

Additionally, the Canada Revenue Agency's (CRA) current administrative policy as outlined in Income Tax Technical News No. 40, dated June 11, 2009, provides that in some circumstances, employer-provided travel (including meal) allowances paid in respect of travel within a "municipality" or "metropolitan area" can be excluded from income where the allowances are paid primarily for the benefit of the employer. That is, an allowance may be excluded from income when its principal objective is to ensure that the employee's duties are undertaken in a more efficient manner during the course of a work shift, and where the allowance paid is not indicative of an alternate form of remuneration.

The Act does not define reasonableness for purposes of subparagraph 6(1)(b)(vii) of the Act. Whether an allowance is reasonable for purposes of subparagraph 6(1)(b)(vii) of the Act is a question of fact. As a general rule, an employer can use the overtime meal allowance of $17 stated in Guide T4130, Employer's Guide Taxable Benefits and Allowances, as a reasonable amount. The meal allowance of $17 outlined therein is per meal. Other rates may also be considered reasonable depending on the circumstances. The CRA generally takes the view that an allowance is reasonable if it covers the out-of-pocket costs incurred by an employee while travelling for employment purposes. Also the CRA recognizes the general cost difference between breakfast, lunch and dinner. For example, the cost of a dinner may generally be in excess of a typical breakfast or lunch. However, the CRA would not consider a meal allowance to be reasonable if meals are otherwise included in conference costs.

Where an allowance is considered to be taxable, the employer is required to report the amount in the employee's employment income and is required to withhold and remit all applicable source deductions. For more information, please see CRA's website at: http://www.cra-crc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/llwncs/trvl-eng.html.

We trust our comments will be of assistance to you.

Yours truly,

Nerill Thomas-Wilkinson
Manager
for Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch