16 January 1997 External T.I. 9629335 - RENTAL SUBSIDY ON RELOCATION

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:

rental subsidy paid to employee upon relocation to assume temporary or permanent duties in other city, subsidy to be permanent or temporary

Position:

taxable unless exempt by reason of 6(6)

Reasons:

employer-provided assistance of an employee's personal expenses is taxable under 6(1)(a) or (b) depending on the type of assistance provided - the decision in Hoefele that no benefit was received because the additional interest expense was a employment related expense does not extend to rental or other personal expenses of the employee

A. Humenuk
XXXXXXXXXX 962933

Attention: XXXXXXXXXX

January 16, 1997

Dear Sirs:

Re: Rental Subsidies paid on Relocation

We are replying to your letter of August 29, 1996, in which you ask whether an employee, who moves from St. John's to Toronto as a result of a change in employment duties, would be considered to have received a taxable benefit if the employer were to pay a rental subsidy to the employee equal to the difference between the fair rental value of comparable apartments in each of the two cities. We apologize for the delay in our response.

In the three scenarios described in your letter, two involve a permanent relocation and one involves a temporary relocation not in excess of two years. In the scenarios involving a permanent relocation, the employer will either continue to pay the rental subsidy as long as the employee works for the employer in Toronto, or will pay a rental subsidy for 5 years, decreasing the amount of the subsidy by $100 per month each year. In the scenario which involves a temporary relocation, the employer will pay the rental subsidy for the duration of the temporary assignment.

The payment or reimbursement of an employee's personal expenses, including living expenses, results in a benefit which is taxable under paragraph 6(1)(a) of the Act unless such benefit is excluded from income under some provision of the Act. If the rent subsidy is paid in the form of an allowance, the amount of the allowance will be included in the employee's income under paragraph 6(1)(b) of the Act, unless it is excluded by reason of subsection 6(6) of the Act.

In each scenario involving a permanent relocation to Toronto, it is our view that the payment of any type of rental subsidy will result in a taxable benefit to the employee. In the case of a temporary relocation, the amount of the benefit may be excluded from income if Toronto qualifies as a special work site in respect of that employee. Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations, explains this exemption in further detail.

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