28 June 1995 External T.I. 9507535 - TAXABILITY OF TRAVEL ALLOWANCE

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:

whether an $80 per diem to employees to attend conference is taxable

Position TAKEN:

question of reasonable can be dealt with on a case-by-case only. Even if employees otherwise qualify under 6(1)(b) or 6(6), it is difficult to accept that $80 per day is reasonable where the employer is paying the conference fee, accommodation charges and all transportation costs. Where the conference fee includes all meals, what travel cost remain to justify an $80 per day "travel" allowance?

Reasons FOR POSITION TAKEN:

		950753
XXXXXXXXXX	Sandra Short

Attention: XXXXXXXXXX

June 28, 1995

Dear Sirs:

Re: Per Diem Travel Allowance to Employees

This is in reply to your correspondence of February 28, 1995 which asks whether an $80 per diem travel allowance is taxable in the following circumstances:

1.The allowance is given to employees to attend conferences. No receipts are required to be submitted.

2.The employer also pays for the conference fee, hotel and all transportation costs.

3.At some conferences, all meals are provided as part of the conference fee which is paid by the employer. At other conferences, no meals are provided as part of the conference fee.

As examples, you have provided us with information regarding travel allowances paid by

XXXXXXXXXX

An allowance is subject to tax unless it falls within the exceptions listed in subparagraphs 6(1)(b)(i) to (ix), subsection 81(3.1) or subsection 6(6) of the Income Tax Act (the Act). Subsection 81(3.1) of the Act refers to amounts received by an individual in respect of part-time employment as an allowance for or reimbursement of travel expenses during a period throughout which the individual has other employment or is carrying on a business. We have assumed that subsection 81(3.1) is not relevant to your enquiry.

The question of the reasonableness of an allowance can only be dealt with on a case-by-case basis taking into consideration each employee's circumstances. As discussed in Interpretation Bulletin IT-522 at paragraph 41, where the Department considers that an allowance, which is claimed to be non-taxable under subparagraph 6(1)(b)(v), (vi), (vii) or (vii.1) appears unreasonably high, the employee may be required to provide vouchers or other acceptable evidence to show that the allowance is not in excess of a reasonable amount. Where the employee is unable to show that the allowance is reasonable, the whole amount of the allowance is included under paragraph 6(1)(b) in computing the employee's income and, if the employee qualifies, an amount may be deducted under paragraph 8(1)(f), (h) or (j) of the Act, depending on the circumstances.

It is not clear whether the employees referred to in your example may otherwise qualify under any of the excepted circumstances listed under paragraph 6(1)(b) of the Act. Even if they may so qualify, we find it difficult to accept that an $80 per day allowance in the situation where the employer pays the conference fee, hotel accommodation charge and all transportation costs in addition to the per diem can be considered reasonable. Where, in addition, the conference fee includes all meals, we would question what travel costs remain that would justify an $80 per day "travel" allowance.

We also have insufficient information to determine whether the allowance paid to employees attending conferences may otherwise not be required to be included in income by virtue of subsection 6(6) of the Act relating to employment at special or remote work sites. However, subsection 6(6) requires that allowances paid in respect of board, lodging and transportation be "not in excess of a reasonable amount". The Employers' Guide to Payroll Deductions instructs that, where an employee meets all of the conditions of subsection 6(6), then the only portion of an allowance for board, lodging and transportation which must be included in the employee's income is the portion that exceeds a reasonable amount. These comments are also reflected in paragraph 14 of Interpretation Bulletin IT-91R3.

We trust our comments will be of assistance to you.

Yours truly,

J.A. Szeszycki
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch