9 November 2021 External T.I. 2021-0878811E5 - Employee benefit - COVID testing

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 employer-paid COVID testing results in a taxable benefit for employees.

Position: An employee does not receive a taxable benefit in connection with employer-provided COVID testing when the results are mainly for the use of the employer.

Reasons: The employee does not receive an economic advantage in these circumstances.

XXXXXXXXXX								2021-087881
B. Zabolotney

November 9, 2021

Dear XXXXXXXXXX:

Re: Employer-paid COVID testing – employment benefits

We are writing in reply to your correspondence of January 14, 2021, wherein you asked for our comments on whether employer-provided COVID testing would result in a taxable benefit to employees.

You indicate that testing consists of a polymerase chain reaction test where the employee mails in the sample to a laboratory for analysis. The results take several days. We understand that the testing is funded by the employer, participation by employees is voluntary, and an unfavorable test result (i.e., a positive COVID test result) will prevent the employee from entering the employer’s premises. We also understand that where a positive test result occurs, the employee will be able to maintain their employment status through other arrangements agreed to by the employer.

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (the “Act”) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer 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 70-6R11, Advance Income Tax Rulings and Technical Interpretations.

The value of benefits of any kind whatever, received or enjoyed in the course of or by virtue of the taxpayer’s office or employment are included in employment income under paragraph 6(1)(a) of the Act, unless specifically excluded by another provision of the Act. Generally, the value of a benefit will be included in an employee’s income under paragraph 6(1)(a) of the Act where the employee or an individual not dealing at arm’s length with the employee is determined to be the primary beneficiary of the benefit so provided, and if the employee or an individual not dealing at arm’s length receives an economic advantage measurable in monetary terms from the benefit.

It is the longstanding view of the Canada Revenue Agency that an employer is considered to be the primary beneficiary of medical testing in situations where such testing is necessary to fulfill a condition of employment. That is, where the medical test results impact an employee’s employment status in some manner. In the situation you describe, employees are not required to take a COVID test and the COVID test results (whether positive or negative) have no impact on an employee’s employment status. Accordingly, voluntary COVID testing does not create an employment condition, as employee’s have options to maintain employment where a test result is positive for COVID.

However, a taxable benefit will not arise in situations where an employee or an individual who does not deal at arm’s length with an employee does not receive an economic advantage from a particular benefit. In this regard, an employee or an individual who does not deal at arm’s length with an employee generally receives an economic advantage when an employer pays or provides a reimbursement for their personal or living expenses.

In the context of the pandemic, considerable effort is being made to control the spread of the virus. Governments and health authorities are encouraging those who can take steps to prevent the spread of the virus to do so. Employers for example, are being encouraged to make testing available to employees and the authorities are offering training and education in this regard.

Where the results of employer-provided COVID testing are mainly for the use of an employer, it is both unlikely and unintended that an employee would be enriched or considered to have received an economic advantage. In these circumstances, it is our view that employer-provided COVID testing would not result in a taxable benefit to employees.

We trust that these comments will be of assistance to you.

Yours truly,

Tom Baltkois, CPA, CGA
Acting Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch