20 February 2012 Internal T.I. 2011-0427391I7 - Amounts Paid for Employee Protection

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 amounts paid to ensure the safety and security of employees are taxable?

Position: It is a question of fact, but likely not.

Reasons: A taxable benefit would not be assessed in circumstances where an employee's safety is at risk because of his/hers employment duties and the employer arranges and incurs reasonable costs for protective security measures.

XXXXXXXXXX                                                  2011-042739
                                                            C. Underhill
February 20, 2012

Dear XXXXXXXXXX :

Re: Taxable Benefits - Protective Security Measures

We are writing in response to your email of November 3, 2011, concerning the tax consequences of providing protective security measures for your organization's employees and their family members.

Your organization is establishing an employee protection program to help protect employees against threats and incidents of intimidation resulting from the employees' duties and functions. The organization will provide protective security measures (at the workplace and/or personal residence) for employees and their family members. The measures provided for a particular employee will depend on the results of a threat and risk assessment for that employee.

In accordance with paragraph 6(1)(a) of the Income Tax Act (Act), employees are generally taxable on the value of all benefits received by virtue of their employment. A benefit is not considered to be received or enjoyed under paragraph 6(1)(a) of the Act when: (a) the employer is the primary beneficiary of the amount paid or reimbursed or (b) no economic advantage is conferred on the employee by virtue of the payment or reimbursement. A determination of who is the primary beneficiary of an amount paid or reimbursed or whether an economic advantage is conferred can only be made on a case-by-case basis.

It is the view of the Canada Revenue Agency (CRA) that an employee is not in receipt of a taxable benefit where the costs for protective security measures are otherwise reasonable and the measures are provided as part of the employer's obligation (both moral and contractual) to ensure its employees are not unduly subject to harm arising directly or indirectly from the employees performing their duties of employment. Generally, employees in receipt of a non-taxable benefit are not allowed a deduction from employment income in respect of the benefit received or the associated costs.

Where employees provide their own protective security measures and are reimbursed by the organization, it is our view that the reimbursement will not result in a taxable benefit. This position is based on the presumption that the employer is the primary beneficiary of the protective security measures provided and the costs of the measures are reasonable. If the employee is not reimbursed, the employee would not be entitled to a deduction from employment income as the particular expense is not specifically identified in paragraphs 8(1)(b) to (s) of the Act.

Once the safety and security concerns resulting from the employee's employment duties and functions are no longer present, and the employer continues to directly or indirectly (i.e. reimbursement) provide protective security measures, the employee will be considered to be in receipt of a taxable benefit.

For provincial and territorial income tax purposes, we can confirm that the above comments are applicable to employees who reside in any territory or province other than Quebec. We are unable to comment on the tax consequences of providing protective security measures for an employee for residing in Quebec because the CRA does not administer Quebec's income tax legislation.

We trust these comments will be of assistance.

Yours truly,

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