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 employees in receipt of a taxable benefit when the employer reimburses their monthly cell phone plan and the phone is required to perform their employment duties?
Position: Question of fact but probably no.
Reasons: The amount would be a reimbursement of an expense related to employment duties which is not taxable.
September 24, 2013
This is in response to your email dated May 15, 2013, enquiring about the taxation of reimbursements provided to employees for cell phone plans.
Your enquiry concerns an employer who is considering implementing a "bring your own device" arrangement for employees who are required to use a cell phone for employment related duties. You have stated that the details of the arrangement are as follows:
- The employer will reimburse employees up to a fixed rate per month for the cell phone voice and data plans.
- The fixed amount would be reflective of the employment requirements in terms of data and voice use.
- The employer will not reimburse the employees for any hardware costs.
- The employer will not pay any additional charges unless the charges are business related.
- The employee will have title to the cell phone.
The employer will require the employees to commit to a three year plan with a service provider so that the cell phone could be purchased by the employee for a nominal or greatly discounted price. If the employee withdraws from the plan before the end of the agreement, the employee will be required to pay the cancellation fee.
You have asked whether a benefit would accrue to the employees under the proposed arrangement since the employees will purchase the cell phone at a nominal or greatly discounted price.
This technical interpretation provides general comments to assist you in determining the income tax treatment of your particular fact situation. The income tax treatment of specific transactions will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings.
Generally, the value of any benefits received by employees by virtue of their employment is included in their income under paragraph 6(1)(a) of the Income Tax Act. However, where an employer reimburses an employee for a specific expense incurred in the performance of his or her employment duties, the reimbursement will generally not be a taxable benefit. Therefore, where the reimbursement is for reasonable voice and data services required for employment purposes, an employee would not generally be considered to have received a taxable benefit.
In addition, no taxable benefit will likely result from the employee being able to purchase the cell phone at a nominal or greatly discounted price since the employer is not reimbursing this cost and the nominal or greatly discounted price would generally be available to any member of the public who signs a three year plan with a service provider.
We trust these comments are of assistance to you.
Nerill Thomas-Wilkinson, CPA, CA
Business and Employment Division
Income Tax Rulings Directorate
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