1993 External T.I. 9323935 F - Employment at Special or Remote Work Locations

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.

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932393

Attention:  XXXXXXXXXX

January 4, 1994

Dear Sirs:

RE:  Subsections 6(1) and 6(6) of the Income Tax Act (the Act)

We are responding to your letter of August 16, 1993, in which you request our comments regarding your interpretation of a number of scenarios which involve the above noted subsections of the Act. We apologize for the delay in replying.

The particular circumstances outlined in your letter on which you have asked for our views appears to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R2, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate district taxation office for their views. However, we are prepared to offer the following general comments which may be of some assistance to you.

Our Comments:

It is our view that the intent of subsection 6(6) of the Act is to exclude from income an amount received as an allowance in respect of (or the value of) personal or living expenses such as board, lodging and transportation, which would otherwise be included in income as a benefit, where the employee is required by virtue of his employment to incur costs in respect of both a permanent and a temporary residence under circumstances described in paragraphs (a) and (b) of that subsection.

In order to qualify for the exclusion of a board and lodging or transportation benefit the individual must have received the benefit in respect of those expenses incurred at a special work site, a location at which the duties performed were of a temporary nature, if he maintained at another location a self-contained domestic establishment as his principal place of residence. That residence must be available to that individual throughout the period, not rented to any other person, and a sufficient distance away that the employee could not be expected to return home on a daily basis.

From a review of your comments, generally the employees would appear to meet the conditions outlined in subparagraph 6(6)(a)(i). However, we would also refer you to paragraph 6 of Interpretation Bulletin IT-91R3 "Employment at Special or Remote Work Sites" which states that an employee's principal place of residence for the purposes of subparagraph 6(6)(a)(i) of the Act is the "place where the employee maintains a self-contained domestic establishment (a dwelling house, apartment or similar place of residence where a person generally sleeps and eats). A room (or rooms) in a hotel, boarding house or bunkhouse would not ordinarily be a self-contained domestic establishment".

Whether or not an individual maintains a self-contained domestic establishment and otherwise meets the provisions of subparagraph 6(6)(a)(i) of the Act is a question of fact and would have to be determined on an individual case basis. In addition, the onus rests with the employer to determine the amount of an allowance which would be reasonable under the circumstances for board and lodging.

We would like to confirm your understanding of the comments discussed in paragraph 5 of IT-91R3, that regardless of whether or not the employee qualifies for the exemption under subsection 6(6) of the Act, no amount is included in an employee's income for transportation or a reimbursement of transportation expenses, provided to and from the special work site at the commencement and the completion of employment.

Transportation expenses paid by the employer which arise from the employee's return to Canada for one month's leave would also in our opinion be non-taxable.

Transportation assistance is not exempt to the extent it applies to transportation between the employee's temporary residence and the special work site. The benefit referred to is that which is determined under paragraph 6(1)(a) {operating cost benefit}, 6(1)(e) {standby charge} and 6(1)(e.1) {GST} of the Act. Subsection 6(2) of the Act, which defines the "reasonable standby charge", restricts the entitlement to a reduced standby charge to those employees whose use of the automobile, as measured in kilometres driven, in connection with the duties of his employment is at least 90%. From your description of the employee's use of the automobile it is not clear whether he or she would meet this 90% test keeping in mind that travel such as between his temporary residence and the work place is considered personal in nature.

It is your interpretation of paragraph 6(6)(b) of the Act that the value of transportation assistance provided by your client to its employees is exempt from tax in the hands of the employees by virtue of subparagraph (ii) where "there is travel between the city in the foreign jurisdiction and a field office located outside of the city in a remote location." Subsection 6(6) of the Act provides that where a work location qualifies as a special or remote work site, transportation assistance between the work location and the employee's principal place of residence is excluded as a taxable benefit provided all of the criteria set out in that subsection are met.

We must emphasize that each situation must be viewed in the context of its own unique circumstances. Where the employee's temporary principal place of residence is in the foreign city and he or she must report to work at a field office of the employer which itself is in a remote location and independently meets the criteria of subparagraph 6(6)(b) then the transportation assistance will not be considered taxable. A distinction is made between transportation assistance to and from a special or remote work site and commuting assistance. When an employee is commuting daily, any transportation assistance would be a taxable benefit because the employee would not have been away from his temporary residence for not less than 36 hours. In addition, the transportation assistance must be in respect of a period during which the employee also received board and lodging assistance for employment at the remote work location.

We trust our comments will be of assistance to you.

Yours truly,

J.A. Szeszyckifor DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch