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Principal Issues: [TaxInterpretations translation] Is the reimbursement of certain travel expenses in a particular situation a taxable benefit?
Position: Question of fact.
Reasons: Depends on whether travel is undertaken in the course of business travel or between a temporary residence and a special work site.
Federal Tax Roundtable 7 October 2011
APFF Conference 2011
14. Reimbursement for automobile expenses for a special work site
Consider the following facts:
- An employee is sent to a special work site abroad.
- The employee must accordingly live in a temporary place of residence.
- As a result, the employee must incur travel expenses to travel between the temporary place of residence and the special work site.
- The employer therefore decides to reimburse the employee for travel between that temporary place of residence and the special work site.
Our analysis of the latest technical interpretations such as Technical Interpretations 2004-0059521E5, 2004-0084201E5 and 2008-0291081E5 shows us that it is unclear whether that employee is taxed for a taxable benefit in the amount of reimbursement received from the employer. Indeed, we can see that the CRA's position has changed twice. On April 29, 2004, the CRA ruled on a similar situation and stated that this type of travel was personal in nature and should therefore be included as a taxable benefit. A few months later, on October 27, 2004, the CRA stated that the reimbursement of the cost of the rental vehicle should not be included under paragraph 6(1)(a). And finally in 2008, the CRA stated that travel between a temporary residence and special work site was indeed personal in nature and, therefore, a taxable benefit arose.
Question to the CRA
In the situation where an employee is at a work site at the request of the employer, and is beyond the principal business location of the employee’s employer, so that the employee must pay additional amounts for travel (such as renting a vehicle) because the employee is abroad and would not have had to pay such amounts if the employee had worked in the employee’s usual place of work, does the CRA consider that the reimbursement of travel expenses between the temporary residence and the special work site is a taxable benefit to be included under paragraph 6(1)(a)?
The amount of a reimbursement of expenses received by an employee from the employee’s employer may give rise to a taxable benefit to be included in the employee's income under paragraph 6(1)(a) if it results in an economic advantage or benefit to the employee or if it relates to the personal expenses of the employee. In that regard, we are of the view that generally the travel expenses incurred by an employee in travelling between the employee’s principal place of residence and the employer's place of business to which the employee reports for work, or a special work site within the meaning of paragraph 6(6), are personal expenses of the employee. Similarly, travel expenses incurred by an employee in travelling between a place other than the employee’s principal place of residence which is the employee’s temporary residence, and a special work site, are personal expenses of the employee.
Notwithstanding subsection 6(1), paragraph 6(6)(b) provides inter alia that an employee does not have to include in computing employment income certain amounts reimbursed to the employee in respect of personal travel expenses. As indicated in Technical Interpretations 2004-0059521E5 and 2008-0291081E5, that exclusion does not apply to transportation assistance that the employee received for travel between the special work site and a temporary residence of the employee that is the employee’s principal place of residence.
In this case, it appears to us that the employee would have to include under paragraph 6(1)(a) in calculating employment income any amount reimbursed in respect of travel expenses between the employee’s temporary residence and the special work site.
Finally, as indicated in Technical Interpretation 2004-0084201E5, we are of the view that a reasonable amount of reimbursement for travel expenses incurred by an employee in travelling in the performance of duties of employment away from the municipality where the employer’s establishment at which the employee ordinarily worked is not to be included under paragraph 6(1)(a) in calculating the employee’s employment income. It should also be noted that subparagraphs 6(1)(b)(vii) and (vii.1) exempt reasonable allowances for travel expenses received in such circumstances. In the situation described in that Technical Interpretation, the employer’s establishment where the employee ordinarily worked did not change. The employee simply performed a business trip in the performance of the duties of employment. However, in the situations described in the documents bearing the numbers 2004-0059521E5 and 2008-0291081E5, the employees were assigned to a new establishment of their employer (a special work site) and consequently, the travel expenses incurred to travel between their temporary residence and the employers’ establishments at which the employee ordinarily worked (special work sites) were personal expenses to them.
October 7, 2011
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