23 December 2009 External T.I. 2009-0315071E5 - Employer-provided transit passes

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 transit passes provided by an employer in respect of employees who are required to travel via public transit in performance of their duties of employment would be taxable employment benefits.

Position: It is a question of fact whether a particular benefit is a taxable employment benefit. If the employer is the primary beneficiary of a particular benefit, it is not considered to be a taxable benefit in the hands of the employee.

Reasons: The law.

XXXXXXXXXX 								2009-031507

December 23, 2009

Dear XXXXXXXXXX :

Re: Employer-Provided Public Transit Passes

This is in reply to your email dated March 25, 2009, concerning the above-noted issue.

You have asked for our views on whether public transit passes provided to employees who work as mental health counselors would be considered taxable employment benefits. You have indicated that although these public transit passes may be used by the particular employees in travelling to and from work, the employer's primary purpose of providing these passes is so that the particular employees can travel out to the community to carry out their employment duties of providing community-based service.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Also, where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. Nonetheless, we are prepared to offer the following general comments.

Subject to certain exceptions, paragraph 6(1)(a) of the Income Tax Act (the "Act") requires that the value of any benefits received or enjoyed by a taxpayer in the year in respect of, in the course of, or by virtue of an office or employment be included in the taxpayer's income from employment. The broad wording of this provision means that a taxable benefit may exist where there is any connection between the particular payment or benefit and the particular office or employment.

Therefore, while the potential application of paragraph 6(1)(a) of the Act is very broad, in any particular situation its application will ultimately depend on whether the primary beneficiary of the particular benefit is the employer or the employee. If the primary beneficiary is the employer, no taxable benefit is assessed to the employee. However, a determination of who is the primary beneficiary can only be made on a case-by-case basis.

A combination of factors is normally taken into account and considered on a case-by-case basis. Such factors might include the business purpose of the employer to provide free transit passes, the relative economic benefit received by the employer and the employee, the measurement of the benefit and identifying particular employees who have received or enjoyed such benefits.

We trust these comments will be of assistance.

Yours truly,

G. Moore
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch