20 December 2013 External T.I. 2013-0500761E5 - Special worksite

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.

Principal Issues: Whether the special work site provisions under subsection 6(6) of the Act apply to a group of employees employed at a foreign work location?

Position: Question of fact, in this case, likely not.

Reasons: The duties do not appear to be of a temporary nature.

XXXXXXXXXX
2013-050076
C. Underhill

December 20, 2013

Dear XXXXXXXXXX:

Re: Special work site

We are writing in response to your e-mail of August 8, 2013, concerning the taxation of certain employer-provided benefits. More specifically, you have asked whether the special work site exclusion under subsection 6(6) of the Income Tax Act (Act) would apply to certain benefits received by employees of XXXXXXXXXX (employers) working at a foreign location. In addition, you have asked whether the comments in Advance Income Tax Ruling (Ruling) 2002-012699 still reflect the position of the Canada Revenue Agency (CRA).

In the situation described, the employers operate XXXXXXXXXX institutions in Canada, but may enter into an arrangement with a foreign government (host) to establish and provide training programs in the host's country for the host's residents. Individuals will enter into employment contracts with the employers to perform employment duties at a XXXXXXXXXX location in the host's country. The employment contracts are for a period of up to XXXXXXXXXX. The employees will receive employer-provided accommodation, a reasonable living allowance, and reimbursement of an annual trip back to their place of residence in Canada for them and their family. The employees will each maintain a self-contained domestic establishment in Canada as his or her principal place of residence throughout the employment contract. The principal place of residence will be available for the employee's occupancy and not rented to any other person throughout the contract period.

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings.

Generally, the value of employer-provided board and lodging, an allowance in respect of living expenses, and a reimbursement of an annual trip to the employee's residence in Canada for the employee and his or her family is included in an employee's income for income tax purposes under subsection 6(1) of the Act. However, subsection 6(6) of the Act provides an exclusion, under certain conditions, for certain benefits received in respect of employment at a special work site or remote work location. The conditions that must be met for the special work site exclusion are explained in paragraph 4 of Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations.

The application of subsection 6(6) of the Act is a question of fact that can only be determined on an employee-by-employee basis. A collective determination cannot be made on a group of employees as a whole, as each employee will have differing circumstances to consider. All of the conditions of subsection 6(6) of the Act must be met for the special work site exclusion to apply to benefits received by an employee.

According to subparagraph 6(6)(a)(i) of the Act, a special work site is a location at which the duties performed by the employee were of a "temporary nature". The term "temporary nature" is not defined in the Act. Paragraphs 5 and 6 of IT-91R4 provide comments on whether employment duties at a special work site will be considered temporary. The determination of the expected duration of the employment duties must be made on the basis of the facts known at its commencement and consideration should be given to the factors noted in paragraph 6 of IT-91R4.

It is the view of the CRA that the duties to be performed by an employee at a particular work location will not be considered to be of a temporary nature where the employer requires the duties to be performed on an ongoing basis, even though the particular employee's contract is for a short term.

The position taken in Ruling 2002-012699 was based on a specific fact situation and continues to reflect CRA's position provided the facts are substantially the same. A key fact in Ruling 2002-012699 was that the operational period of the program was for a limited duration. Unlike the facts in Ruling 2002-012699, it appears the employers will be offering the training programs on an ongoing basis.

In this case, although a particular employee's contract is for a short term, the employers likely will require the duties to be performed on an ongoing basis at the host's XXXXXXXXXX location. As such, we are of the view that the host's XXXXXXXXXX location likely will not be a special work site for the purposes of subparagraph 6(6)(a)(i) of the Act for a particular employee.

We trust these comments will be of assistance.

Yours truly,

Nerill Thomas-Wilkinson, CPA, CA
Manager
for Director
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch