15 February 1994 External T.I. 9336865 F - Waived Conference Fees

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.

XXXXXXXXXX

Attention:  XXXXXXXXXX

Dear Sirs:

RE:  Waived Conference Fees - Directors

This is in reply to your letter of December 8, 1993 in which you asked us for our views on whether or not directors are subject to tax in respect of the amount of a conference fee where they attend the related conference free of charge.

It is apparent that the situation set out in your letter represents an actual fact situation. Should you wish the Department's position on the situation, you should submit all the relevant facts and documentation to your local district Taxation Office. We are, however, providing you with the following general comments.

Our Comments:

You are concerned with the type of situation where a non-profit corporation is involved which provides various services to member organizations on an ongoing basis throughout Canada. Each year, the corporation holds its annual conference in a selected Canadian city and asks that each of the its directors attend the conference primarily in their official capacity as a director of the corporation. During the course of the conference, the directors participate in the annual meeting and directors' meetings. Although these directors are responsible for paying their own expenses (air fares, hotel, and meals), the non-profit corporation waives the annual conference fee.

With respect to the above situation, we have given consideration as to whether the attendance at the conference by the directors without charge represents remuneration in the nature of directors' fees for the purposes of paragraph 6(1)(c) of the Act (the Act). In this regard, such remuneration normally represents consideration that is for the benefit of the directors personally. On the other hand, if the waiving of the conference fee is primarily for the benefit of the non-profit corporation, it is our general view that it would be non-taxable.

In relation to this issue, if the directors receive remuneration for attending meetings (other than those set out above) with respect to the affairs of the non-profit corporation, this would be an indication that the amount of the waived conference fee is taxable. Consistent with this point, the fact that the directors pay their own expenses may be an indication that the directors' attendance at the conference could be considered to be mainly for their own benefit.

On the other hand, the main function of the directors of a corporation is to manage and direct the affairs of the corporation. Consistent with this function, if the main purpose in requesting the directors to attend the conference is to further the aims and objectives of the non- profit corporation, then it would be our view that the waived conference fee is not in the nature of a director's fee (i.e., it would be non-taxable).

As a further comment, we are mentioning that our comments have been made in connection with a non-profit corporation in respect of which directors perform duties for which remuneration is received that is not commensurate with the services they provide. (In other words, the remuneration is not one of the features which attracts an individual to become a director of such a corporation). In view of this point, it would be necessary to have some understanding of the operation of the non-profit corporation in relation to the circumstances under which the directors carry out their duties. In addition, the nature of the conference would also be relevant. Of course, the final determination of the tax consequences of a waived conference fee in the above situation can only be ascertained following a review of all the relevant facts and documentation.

We also wish to mention that in the above situation, it is our view that even though each of the directors of the non-profit corporation may only receive nominal consideration for the services they provide (or perhaps no consideration), it our view that they could nonetheless be considered to be holding an office or employment as a consequence of the definition in subsection 248(1) of the Act. In such circumstances, it is our view that the amount of a waived conference fee might constitute a benefit for the purposes of paragraph 6(1)(a) of the Act rather than being in the nature of director's fees. However, it is also our view that this would only occur where the director's attendance at the conference is not considered to be mainly for the benefit of the non-profit corporation.

These comments represent our opinion of the law as it applies generally and as indicated in paragraph 21 of Information Circular 70-6R2, are not binding on the Department.

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

Yours truly,

P.D. Fuoco for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch