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.
Foreign Service Vacation Travel Allowance
This is further to our memorandum of November 18, 1991 in which we provided our views as to the tax treatment of certain foreign service relocation allowances. We reserved opinion in regards to the allowance in respect of vacation travel assistance until further representation could be made by Ms. K.D. Buenger of Treasury Board Secretariat. The submission was received under your covering memorandum of November 20.
In 1979 the Department provided Treasury Board with confirmation of the tax treatment of various allowances and reimbursements being provided under existing compensation directives. Among these were payments by the employer in respect of transportation costs incurred to move a foreign service employee and family from the location of their posting for vacation purposes. The frequency of these vacation trips were dependent on the degree of hardship associated with the posting environment. Up until now this benefit is being provided on a prepayment or reimbursement basis. The 1979 review of these payments concluded that they would not be considered a taxable benefit under paragraph 6(1)(a) of the Income Tax Act.
It is now proposed to change the administration of these payments by providing an allowance equivalent to the known costs of transportation. In converting the reimbursement into an allowance the provisions of paragraph 6(1)(b) of the Act must be considered. Allowances in respect of personal or living expenses are required to be included in income unless the allowance is one that is described in any of subparagraphs (i) to (ix). Subparagraph 6(1)(b)(iii) of the Act provides for an exclusion from income for employees, such as those in question, of allowances considered to be "representation or special allowances" paid to the employee while he/she was in service outside Canada. Therefore, for the subject allowance to be excluded from income it must be determined that it is a special allowance. It is our view, after a review of all the circumstances, that allowances paid in respect of vacation travel assistance should be regarded as special allowances for the purposes of subparagraph 6(1)(b)(iii) of the Act.
We trust our comments will be of assistance to you.
B.W. DathDirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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