29 April 1994 External T.I. 9410235 - MEAL EXPENSE REDUCTION

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.

Please note that the following document, although believed
to be correct at the time of issue, may not represent the
current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis,

peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Are otherwise tax free allowances, attributed to a location described in subparagraph 6(6)(a)(i), taxable because an employer decides to report them as taxable benefits to the employee in order have such expenses fall within the exclusion provided by paragraph 67.1(2).

Position TAKEN:

Not taxable in hands of the employee if they qualify for exemption.

Reasons FOR POSITION TAKEN:

If the allowances are in fact attributed to a location described in subparagraph 6(6)(a)(i) they are not taxable and, therefore, do not qualify within the exclusion provided by paragraph 67.1(2)(d)

									941023

XXXXXXXXXX							A.M. Brake

Attention: XXXXXXXXXX

April 29, 1994

Dear Sirs:

Re: Meal Expense Reduction, Subsection 67.1(1)

This is in reply to your letter of April 20, 1994 seeking clarification regarding meal and board allowances to employees and the application of subsection 67.1(1) to reduce the amount to be expensed by the employer under circumstances where the allowance does not qualify for the exclusion to this reduction as provided by paragraph (d) of subsection 67.1(2). Specifically you asked whether the employer was entitled to treat allowances, otherwise exempt by virtue of a location described in subparagraph 6(6)(a)(i), as taxable benefits to the employees in order to qualify for the exclusion to escape the expense reduction.

Reference to statute provisions such as section, subsection, etc., mentioned herein will in all cases, unless otherwise stated, relate to the Income Tax Act S.C. 1970-71-72, c.63 as amended, consolidated to June 10, 1993.

Generally, such allowances are taxable benefits by virtue of paragraph 6(1)(a). However, paragraph 6(6)(a) exempts amounts in respect of locations described in subparagraphs (i) and (ii) thereof. It will depend on the circumstances in any particular situation as to whether an allowance qualifies for exemption under one of these subparagraphs. Should the circumstances relating to a particular allowance support exemption under either of these subparagraphs, the employee would be entitled to exemption and it would be incorrect for the employer to report an otherwise exempt allowance as taxable in the hands of the employee.

The exclusion contained in paragraph 67.1(2)(d) applies to taxable amounts which do not qualify for exemption under subsection 6(6) and in respect of otherwise taxable amounts that qualify for exemption by virtue of a location described in subparagraph 6(6)(a)(ii). Amounts that would otherwise be taxable but which qualify for exemption because of a location described in subparagraph 6(6)(a)(i) are not excluded under subsection 67.1(2). Hence, subsection 67.1(1) would have application to reduce the employer's expenses in respect of the cost of amounts relating to a location described in subparagraph 6(6)(a)(i).

We trust that you will find our comments of assistance.

Yours truly,

R. Albert
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch