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: Are gifts over $100 given to an elected official considered a taxable benefit? Can an elected official be reimbursed for local restaurant meals even if they are receiving 1/3 of their remuneration tax fee under subsection 81(3)?
Position: Question of fact. Yes, if the meals are consumed during the performance of their employment duties.
Reasons: It depends on whether the gifts meet the CRA's administrative policy in order to be non-taxable. The reimbursement of meals consumed while conducting the employer's duties are not considered a taxable benefit.
XXXXXXXXXX
2012-044333
Bonnie Ruttan-Morillo
February 13, 2013
Dear XXXXXXXXXX
Re: Elected Officials
We are writing in response to your letter dated March 28, 2012, in which you ask several questions regarding elected officials and municipalities. As discussed in our telephone conversation of May 1, 2012, you have already received a response to your first question regarding the reimbursement of expenses by a municipality. You have also asked about possible taxable benefits to elected officials with respect to gifts received and meals consumed within the municipality, as well as a question relating to GST/HST. Our responses to these questions are outlined below.
Gifts and awards
Elected officials are subject to the same policies as employees with respect to gifts and awards. Under paragraph 6(1)(a) of the Income Tax Act (the Act), gifts and awards received by employees/officers by virtue of their employment/office are generally included in their income. The CRA's administrative policy regarding gifts and awards, including the exemption for certain non-cash gifts under $500, can be found on our website at the following link: www.cra.gc.ca/gifts
A municipal officer may be in receipt of a taxable benefit where a gift is received from a third party as a result of the office held by the individual. A taxable benefit may also accrue to a municipal officer where his or her spouse is the beneficiary of a gift as a result of the office held. In both cases, the fair market value of the gift should be included in the officer's taxable income.
Both the municipality and the officer are responsible for reporting the value of gifts received by the officer. Where the municipality is aware of a gift because they, or another person, gave a gift to an officer, it is the municipality's responsibility to report the value of the gift. Should the officer receive a gift from a third party without the municipality's knowledge, it is the officer's responsibility to report the value of the gift on his or her tax return.
Meals
With respect to the reimbursement of meals, it is a question of fact whether an officer would be in receipt of a taxable benefit. A municipality may reimburse meals consumed by officers while carrying on their municipal duties away from the municipality and no inclusion in the officer's income is required as per subparagraph 6(1)(b)(vii) of the Act. However, the reimbursement of any personal expenses, including meals consumed within the local municipality, would be a taxable benefit to officers. An exception may apply to amounts paid by the municipality where the amount in question is for the primary benefit of the municipality.
GST/HST Rebates
Our colleagues in the Excise and GST/HST Rulings Directorate have advised us that under section 169 of the Excise Tax Act, a municipality is entitled to claim input tax credits for the GST/HST it has incurred on inputs acquired for use in the municipality's commercial activities. Depending on the property or service acquired, the extent of use of the input would determine the amount of the eligible input tax credit.
If you have further questions on GST/HST technical issues, please call that directorate's national telephone service at 1-800-959-8287.
Summary
In summary, municipal officers are subject to the same rules as employees with the exception of the exemption under subsection 81(3) of the Act. With respect to this non-taxable allowance, it is the municipality that determines whether or not an expense incurred by a municipal officer will be reimbursed or if it should be covered by the officer's non-taxable allowance. The Act only determines whether the reimbursements received by the officer are taxable.
The CRA is responsible for administering the tax legislation enacted by Parliament. If you still have concerns regarding the fairness of the exemption for elected municipal officers under subsection 81(3) of the Act, please contact the Tax Policy Branch of the Department of Finance Canada by writing to 140 O'Connor Street, Ottawa ON K1A 0G5.
We trust these comments will be helpful.
Nerill Thomas-Wilkinson, CPA, CA
Manager
for Director
Business and Employment Division
Income Tax Rulings Directorate
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