28 May 1996 External T.I. 9603055 - BENEFITS GIVEN FOR TEMPORARY DUTIES OUT OF COUNTRY

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:

allowances for room & board, & transportion to and from special work site

Position:

reasonable allowance is exempt if conditions of 6(6) are met

Reasons:

A. Humenuk
XXXXXXXXXX 960305

Attention: XXXXXXXXXX

May 28, 1996

Dear Sirs:

Re: XXXXXXXXXX
Advance Income Tax Ruling

We are replying to your letter of January 12, 1996, in which you asked for an advance income tax ruling on behalf of the above named taxpayer in respect of the application of subsection 6(6) of the Act.

As discussed, we are unable to issue the advance income tax ruling as requested because the transactions described in your letter are now in progress. We would, however, like to offer the following comments which may be of assistance in determining the tax consequences of some of the allowances and benefits provided to XXXXXXXXXX while he is working in XXXXXXXXXX. Of particular concern was the $XXXXXXXXXX monthly allowance to compensate him for housing and living expenses in XXXXXXXXXX and the $XXXXXXXXXX allowance to compensate him for his travel expenses between his home and XXXXXXXXXX

When an employee maintains his or her principal residence while temporarily performing the duties of employment at a special work site and receives a reasonable allowance for room and board at that other location, the allowance will be excluded from income provided it otherwise qualifies for the exemption under paragraph 6(6)(a) of the Act.

Interpretation Bulletin IT-91R3 "Employment at Special or Remote Work Sites" and Special Release thereto dated March 20, 1987 explains the term "special work site" and provides further details concerning the criteria for this exemption. Further, a reasonable allowance received for transportation between an individual's principal place of residence and a special work site will be exempt under paragraph 6(6)(b) of the Act provided that the individual also receives board and lodging or a reasonable allowance for board and lodging for that same period of time from his or her employer.

While it is a question of fact as to whether a particular work site would qualify as a special work site for any particular employee, it is our opinion, based on your description of the facts, that the site in XXXXXXXXXX would qualify as a special work site in respect of XXXXXXXXXX current assignment there.

With respect to what is considered a reasonable allowance, we take the view that the reasonableness of an allowance is a question of fact. It must be related to the amount of actual expenses an employee is likely to incur in respect of the expenses for which the allowance is provided rather than being based on other factors such as levels of salary. Therefore, an allowance which is expected to cover expenses in addition to board, lodging and transportation would not be exempt by reason of subsection 6(6) of the Act.

Please note that form TD4 "Declaration of Exemption - Employment at Special Work Site" should be filed with the employer so that the relevant benefit or allowance is not subject to the withholding and reporting requirements.

We trust our comments will be of assistance to you.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch