31 May 2012 External T.I. 2011-0413871E5 - Taxable Benefits - Retirement Moves

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: 1. Whether an employer's payment of moving costs and travel expenses in connection with a retirement move can be treated as a non-taxable benefit.

Position: 1. Question of fact.

Reasons: 1. No taxable benefit is imputed with respect to reimbursed or paid expenses where a relocation is out of a “remote place” at the termination of the employment or it is determined that an employer is the primary beneficiary of the amount paid or reimbursed or no economic advantage is conferred on the employee by virtue of the payment or reimbursement.

XXXXXXXXXX
									2011-041387
									T. Baltkois

May 31, 2012

Dear Ms. XXXXXXXXXX:

Re: Retirement Moves

We are writing in response to your letter dated July 13, 2011, in which you requested our comments as to whether moving costs and travel expenses paid by your organization to relocate an officer to a new location on retirement could be considered non-taxable.

Our Comments

The general position of the Canada Revenue Agency (“CRA”) with respect to the payment of an employee’s moving expenses by an employer is contained in paragraphs 35 and 36 of Interpretation Bulletin, IT-470R (Consolidated), Employees’ Fringe Benefits.

As noted in paragraph 35 of IT-470R, where an employer pays for or reimburses an employee for the expenses incurred in moving an employee and the employee’s family and household effects, either because the employee has been transferred from one establishment of the employer to another or because of having accepted employment at a place other than where the former home was located, this payment or reimbursement is not considered a taxable benefit for the employee. Further, paragraph 36 of IT-470R states that when the relocation is out of a “remote place” at the termination of the employment there (e.g. a retirement move), no taxable benefit is imputed for the reimbursement or payment of moving expenses. While a “remote place” is not a defined term in the Income Tax Act (“the Act), the concept of a “remote work location” is discussed in Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations, and may be of some assistance in this regard.

The position in paragraphs 35 and 36 of IT-470R is based on the legal principle that a benefit is not received or enjoyed under paragraph 6(1)(a) of the Act when the employer is the primary beneficiary of the amount paid or reimbursed, or no economic advantage is conferred on the employee by virtue of the payment or reimbursement. In making such a determination, it must be ascertained whether an employee has received or enjoyed an employment benefit following the payment or reimbursement, or whether the payment simply restored the employee to the position he or she would have been in had it not been for the expenses incurred because of the employment requirements.

Benefits provided to an employee that are principally for the benefit of the employer are generally not considered taxable to the employee, even though the employee may receive some incidental or ancillary benefit. In such situations, it is necessary to demonstrate that the benefit is principally for the employer’s advantage rather than the employee’s. Such determinations are made on a case by case basis and are always a question of fact.

Where it is established that the relocation is out of a “remote place” at the termination of employment, the employer was the primary beneficiary of the amount paid or reimbursed, or no economic advantage was conferred on the employee by the virtue of the payment or reimbursement, a taxable benefit would not arise as a result of an employer’s payment or reimbursement of moving expenses.

We trust these comments will be of assistance to you.

Yours truly,

Nerill Thomas-Wilkinson
Manager
for Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch