24 June 1999 External T.I. 9911965 - EXPENSES FOR MEALS

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: Whether amounts paid by an employer for meals consumed by employees sent to a client’s special work site would be excepted from the 50% limitation in subsection 67.1(1) of the Act by virtue of proposed paragraph 67.1(2)(e) of the Act.

Position: No. The limitation would apply.

Reasons: The amounts in question are not included in the income of the employees for reasons other than subparagraph 6(6)(a)(i). See paragraph 8 of IT-518R as well as paragraph 51 of IT-522R.

XXXXXXXXXX 			991196
J. E. Grisé
Attention: XXXXXXXXXX 

June 22, 1999

Dear Sirs:

Re: Expenses for Meals

This is in reply to your letter of April 29, 1999, requesting a technical interpretation on the operation of proposed paragraph 67.1(2)(e) of the Income Tax Act (the Act) relating to meal expenses incurred after February 23, 1998.

You provide a hypothetical scenario wherein an employer sends four staff member to work at a client’s place of business for a two week period. The employees stay at hotel accommodations that are paid for by the employer. The employer provides the respective employee’s with a per kilometre reasonable vehicle allowance. The employees travel back home for the weekend on Friday night and return back to the client’s place of business on Monday morning. The client’s place of business is further than 30 kilometres away from the nearest urban area having a population of at least 40,000 persons, and further, it qualifies as a special work site as described in subparagraph 6(6)(a)(i) of the Act.

Given the above facts, you would like to know the income tax treatment with respect to amounts paid by the employer in respect of meals for the following alternatives:

1. employer provides a reasonable meal allowance to the employees;

2. employer reimburses employees for actual meal costs incurred by the employees; and

3. the employer provides the meals directly by virtue of a supply arrangement with a specific restaurant and pays the restaurant directly for the meal costs.

Subsection 67.1(1) of the Act provides that costs in respect of the human consumption of food or beverages are deemed to be 50% of the amount actually paid or payable in respect of the food or beverages and an amount that would be reasonable in the circumstances to pay for them (the 50% limitation). Subsection 67.1(2) of the Act provides several exceptions to the 50% limitation. One of the requirements to meet the exception in proposed paragraph 67.1(2)(e) of the Act is that the amount paid or payable for food or beverages must be in respect of an amount that “would, but for subparagraph 6(6)(a)(i), be required to be included in computing any taxpayer’s income for a taxation year because of the application of section 6 in respect of food or beverage consumed.by the taxpayer or a person with whom the taxpayer does not deal at arm’s length”.

In our view, proposed paragraph 67.1(2)(e) of the Act would not apply to provide an exception to the 50% limitation, since the amounts paid for the meals in the three circumstances presented would be excluded from the employees’ income for reasons other than subparagraph 6(6)(a)(i) of the Act. The allowance in the first circumstance would likely be excluded from the employees’ income by virtue of subparagraph 6(1)(b)(vii) of the Act. The reimbursement and direct payment of meals in the second and third circumstances would not normally be a taxable benefit to the employees. In this respect, please refer to the Department’s position set out in paragraphs 50 to 51 of Interpretation Bulletin IT-522R, Vehicle, Travel and Sales Expenses of Employees.

We hope our comments are helpful.

Yours truly,

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