18 December 1995 External T.I. 9520935 - MEALS AND ENTERTAINMENT

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.

		952093
XXXXXXXXXX	A.M. Brake

Attention: XXXXXXXXXX

December 18, 1995

Dear Sirs:

Re: Paragraphs 67.1(2)(d) and (e) of the Income Tax Act (the "Act")

This is in reply to your letter of August 3, 1995 and our subsequent telephone conversation (XXXXXXXXXX/Brake) regarding the exceptions provided by the above-noted provisions with regard to the costs of meals and beverages being reduced by subsection 67.1(1) of the Act. We apologize for the delay in our reply.

Rather than deal specifically with the fact situations outlined in your letter, we offer our general comments which should, along with the verbal response already given, clarify this matter to your satisfaction.

Our Comments

Underlying any discussion on the exemptions from the restriction provided in subsection 67.1(1), should be the understanding that subsection 67.1(1) is intended to restrict all legitimate business expenditures for food, beverage or entertainment to recognize the personal element of the expenditures. Subsection 67.1(2) then provides exceptions from the restriction.

In our view, the exception provided in paragraph 67.1(2)(e) has very limited application. The Technical Notes to the paragraph indicate that it was enacted to provide exemption for the costs of food, beverage and entertainment consumed at an employer's 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...". In this regard you might note that the present wording as amended, applicable to taxation years ending after July 13, 1990, is distinctly different from the previous wording which read as follows:

"(e) is incurred by the person for food, beverages or entertainment generally available to all employees of the person at a particular location".

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 they would be considered to be employed at the employer's place of business where they normally report for work, receive their direction, pick up their 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 they perform a function for their employer.

While we agree that an individual could change their location with the same employer, in our view, they would be considered to be employed at one location at any particular time and the fact that they were temporarily at another location would not mean that their place of employment had changed. In the situations which you describe, employees from, say, Halifax and Vancouver who are attending training courses in Toronto would be considered to be employees of their respective cities and would be considered to be in travel status while in Toronto. In our view, the cost of meals for individuals in travel status and at "special work sites" is not exempt from subsection 67.1(1).

In our view, unless the value of the meals consumed by employees are reported as taxable benefits, it is only the cost of meals provided employees at a "remote location" that are exempted under paragraph 67.1(2)(d). We would also like to clarify that the exception provided under paragraph 67.1(2)(e) applies only to costs incurred "for food, beverages or entertainment" and does not include "allowances".

We trust our comments will be of assistance to you.

Yours truly,

R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch