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 hotel employees receive taxable benefits when they are provided with free beverages.
Position: yes
Reasons: Consistent with comments in paragraph 28 of IT-470R, it is our view that an employee is considered to have received a taxable benefit on he basis of the employer's cost.
xxxxxxxxxx 992173
M. Eisner
Attention: xxxxxxxxxx
September 10, 1999
Dear Sir:
Re Taxable Benefits
This is in reply to your letter of July 16, 1999, concerning the above-noted subject.
You have indicated that hotel employees will be provided with free coffee and tea by their employer. You have asked whether hotel employees would be considered to receive taxable benefits in such circumstances.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transaction are proposed and are the subject matter or an advance income tax ruling request. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R3 dated December 30, 1996. However, we are providing you with the following general comments which are not binding on the Department.
The Department's general position on employee benefits is set out in Interpretation Bulletin IT-470R "Employee's Fringe Benefits" which has been enclosed for your convenience.
Paragraph 28 of IT-470R indicates that where subsidized meals are provided to employees, they will not be considered to have received taxable benefits provided the employees are required to pay a reasonable charge. A reasonable charge is generally defined as one that covers the cost of food, its preparation and service. Where less than a reasonable charge is paid, the value of the benefit is that cost less the amount paid by the employee. Consistent with these comments, it is our general view that an employee is considered to have received a taxable benefit determined on the basis of the employer's cost when free beverages are consumed.
We trust that our comments are of assistance to you.
Yours truly,
John Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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