29 June 1995 External T.I. 9507635 - TAXABLE BENEFITS

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:

Taxable benefits - general questions regarding employer paid tuition fees, employer contributions to group disability insurance plan and payment by the employer of personal use automobile operating costs.

Position TAKEN:

General positions relating to each of the above discussed and reference to departmental publications.

Reasons FOR POSITION TAKEN:

Previous correspondence. Established position as outlined in numerous publications.

            950763
XXXXXXXXXX  D. Zion

June 29, 1995

Dear XXXXXXXXXX:

Re: Taxable Benefits

We are writing in reply to your letter of March 10, 1995 in which you request a written ruling regarding taxable benefits. We apologize for the delay in responding.

Advance income tax rulings, in addition to there being a charge for the service, are given only in respect of proposed transactions and cannot be provided where the main issue involves a question of fact. The specific issues which you have raised in your request appear to relate to a factual situation involving specific taxpayers. The tax implications inherent in such transactions can be determined only by reviewing all the relevant facts and documentation. Such a review is normally made by the local Revenue Canada Tax Services office and, accordingly, the following comments are more general in nature.

We have enclosed, as requested, the interpretation bulletins to which we refer in our general discussion of the taxable benefits about which you have enquired. In addition to these bulletins, we have also enclosed the most current version of the Employers Guide to Payroll Deductions - Taxable Benefits and Non-Resident Information which contains basic information regarding a number of taxable benefits including those under discussion.

Our Comments

Generally, pursuant to paragraph 6(1)(a) of the Act, the value of benefits received in respect of, in the course of, or by virtue of an office or employment are included as income unless specifically excepted. The Department's position as outlined in paragraph 19 of IT-470R, Employee Fringe Benefits, states that where the course for which the tuition fees were paid was undertaken on the employer's initiative and for the benefit of the employer rather than the employee, the amount paid by the employer as a reimbursement of those fees is not considered to be a taxable benefit to the employee.

It is a question of fact as to whether the employer or employee is the primary beneficiary of the course taken. When the courses are taken primarily to obtain a particular degree, whether undergraduate or post graduate, it is the Department's position that the reimbursement or payment of the corresponding tuition fees is a taxable benefit because the degree itself is a personal asset of the student and not of the employer. It is possible that certain training at a university or other educational institutions may be of primary benefit to the employer rather than to the employee. For example, where an employee working in a particular occupation is required to take additional courses to enhance the skills and knowledge required by that employer in order to more effectively perform the duties of employment of that particular occupation, the payment of the tuition fee by the employer will generally not be considered a taxable benefit to the employee provided that it can be shown that the training was provided at the employer's initiative and for the employer's purposes. However, it is also the Department's view that courses taken to improve an employee's chances of promotion or to prepare for alternate job opportunities are considered to be taken primarily for the benefit of the employee, albeit the employer may also derive some secondary benefit.

If there is some question in determining whether or not a taxable benefit has arisen as a result of the reimbursement or payment of tuition fees by an employer, full details may be submitted for review to the Revenue Canada Tax Services office serving the area where the employee resides.

Where an employer has contributed amounts to a group disability insurance plan, the employee in respect of whom the contribution was made is not required to include the value of that benefit in income by virtue of the exception in subparagraph 6(1)(a)(i) of the Income Tax Act (the "Act"). However, benefits received out the plan are generally included in income by reason of paragraph 6(1)(f) of the Act. We refer you to Interpretation Bulletin IT-428 "Wage Loss Replacement Plans" for further details regarding the taxability of these benefits. As it is necessary to review the terms of a particular plan before its tax status can be determined, if there is some question as to the status of the contributions or plan, the pertinent facts and documentation should be submitted to your local Tax Services office for review.

The payment by the employer of the operating costs related to the personal use of an employer provided automobile by the employee brings that employee within the application of new paragraph 6(1)(k) of the Act. The amount of the benefit in respect of the operation of the automobile is determined by reference to the number of kilometres driven for personal use during the period in the year in which the automobile is made available by the employer or a person related to the employer. For 1993 and subsequent taxation years, the automobile operating expense benefit of such an employee shall be determined as the prescribed amount (presently 12 cents) for every such kilometre driven, less any reimbursements to the payer in respect of operating expenses unless the employee reimburses to the employer the full amount of personal usage cost. Alternatively, where the business usage exceeds 50% and the employee optionally elects the employee may include one-half the standby charge as the operating cost benefit. The employee must, however, inform the employer in writing by the end of the year of his or her intention to have this election apply for that year. Further information, including sample calculations, regarding this benefit is contained in the Source Deductions Guide.

These comments represent our opinion of the law as it applies generally and are not binding on the Department. Nevertheless, we hope that 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