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.
The application of subparagraph 67.1(2)(e) in various situations where meals are provided, reimbursed, or meal allowances are paid to employees of construction or transport companies.
1.Insufficient information provided by the taxpayer with respect to employees of construction companies (i.e., are the construction sites special work sites, remote locations or other); therefore, general comments were provided with respect to the exceptions contained in paragraphs 67.1(2)(d) and (e).
2.Meal reimbursements and allowances paid to employees that are transport drivers would generally be subject to subsection 67.1(1), by virtue of not being included within the exception provided in paragraph 67.1(2)(d).
Reasons FOR POSITION TAKEN:
2.Employees that are transport drivers are in travel status (not at special work sites). Reimbursements received by such employees for meal expenses incurred while travelling are usually not included in the employees' income (paragraph 54 of IT-522), nor would meal allowances described within the exceptions provided under paragraph 6(1)(b).
XXXXXXXXXX M. Azzi
January 18, 1996
Re: Deductibility of Meal Expenses
This is in reply to your letter of January 20, 1995, wherein you requested clarification as to the application of subparagraph 67.1(2)(e) of the Income Tax Act (the "Act") in various situations where meals are provided, reimbursed, or meal allowances are paid, to employees of construction or transport companies. We apologize for the delay in responding.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments which are of a general nature and are not binding on the Department.
It might, first, be noted that subsections 67.1(1) and (2) of the Act are not relevant in considering whether a benefit or allowance is taxable in the hands of an employee. Hence, for purposes of determining the status of the employee, it is not relevant whether an exemption to the employer from subsection 67.1(1) of the Act is provided.
Paragraph 6(1)(a) of the Act requires to be brought into an employee's income an amount relating to a benefit in respect of board or lodging and any other benefits of any kind whatever except benefits described in subparagraphs 6(1)(a)(i) through (v) of the Act. Paragraph 6(1)(b) of the Act requires all allowances to be brought into income in the year received for personal or living expenses or for any other purpose, to the extent that they are not described within the exceptions set out in subparagraphs (i) to (xi) thereof. Therefore, generally speaking, the value of free meals constitute a taxable benefit under paragraph 6(1)(a) of the Act and non-accountable allowances are required to be brought into income by virtue of paragraph 6(1)(b) of the Act, subject to the exceptions provided in these provisions, unless the benefits or allowances are exempted by virtue of paragraph 6(6)(a) of the Act. The exemption in subparagraph 6(6)(a)(i) of the Act applies to allowances received or benefits enjoyed by employees at a special work site, whereas subparagraph 6(6)(a)(ii) of the Act relates to employees at a remote location.
Subsection 67.1(1) of the Act requires that an employer bearing the cost of "human consumption of food or beverages..." reduce the cost of such outlays unless the amounts expended are described within the exceptions contained in subsection 67.1(2) of the Act. Underlying any discussion on the exemptions from the restriction provided in subsection 67.1(1) of the Act, should be the understanding that subsection 67.1(1) of the Act is intended to restrict all legitimate business expenditures for food, beverages or entertainment to recognize the personal element of the expenditures. Subsection 67.1(2) of the Act then provides exceptions from the restriction.
Paragraph 67.1(2)(d) of the Act provides an exception where the amount "is required to be included in computing the income of an employee of the person or would be so required but for subparagraph 6(6)(a)(ii)". In other words, amounts spent on meals and allowances taxable under paragraph 6(1)(a) or (b) of the Act, unless exempted by paragraph 6(6)(a) of the Act, fall within the exception of paragraph 67.1(2)(d) of the Act, as do amounts exempted by virtue of subparagraph 6(6)(a)(ii) of the Act. Amounts that fall within the purview of paragraph 6(1)(a) or (b) of the Act that are exempted by subparagraph 6(6)(a)(i) of the Act do not fall within the exclusion provided by paragraph 67.1(2)(d) of the Act and are therefore subject to 67.1(1) of the Act.
In our view, employees that are transport drivers are generally in travel status, not at special work sites. Reimbursements received by such employees for meal expenses incurred while travelling are usually not included in the employees' income, nor would meal allowances described within the exceptions provided under paragraph 6(1)(b) of the Act. Consequently, such reimbursements and allowances would be subject to subsection 67.1(1) of the Act, by virtue of not being included within the exception provided in paragraph 67.1(2)(d) of the Act.
Paragraph 67.1(2)(e) of the Act has, in our view, very limited application. The Technical Notes to the paragraph indicate that it was enacted to provide exemption for the costs relating to a Christmas party. While not restricted to a Christmas party, it could provide an exception for costs relating to another function that is "...generally available to all individuals employed by the person at a particular place of business of the person...". We would like to clarify that the exception provided under paragraph 67.1(2)(e) of the Act applies only to costs incurred "for food, beverages or entertainment" and does not include "allowances".
The "place of business" refers to the location where these employees are considered to be "employed"; i.e., the employee's normal place of employment and not where the food is being served or at a temporary work location albeit a place of business of the employer. In this regard, it can be said that an employee may perform certain functions at different locations of the employer and at locations of customers or clients, but would be considered to be "employed" at the employer's place of business where he or she normally reports for work, receives his or her direction, picks up his or her pay cheque, etc. In other words, a particular employee would be considered to be "employed" at one particular place of business rather than being "employed" at each and every location that the employee performs a function for his or her employer.
We trust that these comments will be of assistance.
Business and General Division
Income Tax Rulings and
Policy and Legislation Branch
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