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: Are standby airline passes provided to employees a taxable benefit?
Position: No
Reasons: Paragraph 42 of IT-470R indicated that airline passes provided to airline employees will only-become taxable if the employee travels on a space-confirmed basis and pays less than 50% of the economy fare. Standby passes would not be on a space-confirmed basis and would therefore would not be a taxable benefit.
5-981794
XXXXXXXXXX Karen Power, CA
(613) 957-8953
Attention: XXXXXXXXXX
July 15, 1998
Dear Madam:
Re: Taxation of Airline Passes
We are writing in reply to your correspondence of July 8, 1998, wherein you requested our opinion on whether airline passes provided to your Canadian employees would be considered a taxable benefit.
We understand that airline employees employed by XXXXXXXXXX in Canada are given standby companion passes to use on XXXXXXXXXX. These passes may be used to take a friend or an ineligible relative on a trip. Employees are currently being taxed on the value of the pass, which is calculated as 25% of the average full coach fare. Your employees are of the opinion that the use of standby passes should not result in taxable benefits.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R3 dated December 30, 1996. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments which are of a general nature and which are not binding on the Department.
The Department’s position with respect to airline employees’ transportation passes is set out in paragraph 42 of the enclosed Interpretation Bulletin IT-470R, Employees’ Fringe Benefits. This bulletin explains that there is a taxable benefit to airline employees if they are travelling for personal purposes on a space-confirmed basis, unless they pay at least 50 per cent of the economy fare available on that carrier for that trip on the day of travel. The value of the benefit is equal to the difference between 50 per cent of the economy fare available on that carrier for that trip on the day of travel and the amount that the employee reimburses the carrier for the trip.
However, when airline employees, travelling for personal purposes, occupy what would otherwise be a vacant seat on the plane, the value of the pass is significantly less than the fair market value of the fare. As a result, and in view of the difficulty in calculating the amount of employee benefit in these circumstances, there is no taxable benefit to the employee.
In our view, the standby companion passes provided to your employees would not constitute a taxable benefit.
We trust our comments will be of assistance to you.
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
.../cont'd
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