Paragraph 6(1)(a)

Commentary

Subject to the listed exceptions in ss. 6(1)(a)(i) to (v), s. 6(1)(a) requires the inclusion in a taxpayer's income for a taxation year from an office or employment of the value of board, lodging "and any other benefits of any kind whatever" that are received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment.

Determination of "benefit"

The numerous cases considering whether a taxpayer has received or enjoyed a "benefit" for purposes of s. 6(1)(a) turn in large part on the facts of each case. Nonetheless, a number of principles (or, at least, tendencies) may be present.

The Federal Court of Appeal has stated that "to be taxable as a benefit, a receipt must confer an economic advantage on the employee," (Schroter, following Hoefele), and that if an employee receives an economic advantage, but the primary benefit of that receipt is the employer, no benefit arises under paragraph 6(1)(a) (Schroter, following Lowe). Accordingly, an expense which is incurred by an employer primarily for its benefit likely is not a benefit to the employee (Dhillon), perhaps even in circumstances where this gives rise to a material acquisition of something of value to the employee (Rachfalowski). Conversely, the reimbursement by the employer of a loss or expense incurred by the employee primarily for the benefit of the employer likely does not give rise to a benefit to the employee (Lowe). For example, subsidizing the additional mortgage expense incurred by the employee as a result of relocation at the employer's request to a pricier city or at a time of increased mortgage interest rates may not give rise to a benefit (Hoefele, Splane, Douglas, Zaugg, cf. Pezzelato, see also McNeill). In one case, the provision of an interest-free loan in connection with an employee relocation also did not give rise to a benefit (Siwik). Other examples are reimbursement for the costs of non-civilian clothing (Huffman), the provision of a pickup truck that is used for the performance of duties of employment rather than commuting to work (Anderson), the receipt of lodging and meals in the course of an intensive training program (Dhillon) or the reimbursement of additional meal expenses incurred as a result of working overtime (Confederation des Caisses Populaires). Reimbursing (or paying for) legal expenses of the employee (including defence costs in a prosecution) should not give rise to a taxable benefit if there is a sufficiently close nexus between the conduct that gave rise to the litigation and the performance by the employee of duties of employment (Clemiss, Savard, Bilodeau, see also Pellizari). The provisions of free parking typically will not give rise to a taxable benefit where the employee is required to use his or her car in travelling between the office and other work locations, or between such locations and the offices of customers or potential customers (Adler, Chow, Saskatchewan Telecommunications, Anthony, Johannsson). Where the employer pays for a parking pass for the employee in circumstances where other employees must pay for parking, there will be a taxable benefit based on the price of the parking pass unless perhaps it is established that the economic benefits to the employer from providing the parking substantially exceed the monetary value of the parking pass (Shroter). Depending on the facts, such a finding of no benefit may or may not arise where the employee takes a trip to a resort or the like for promotional purposes of the employer or a business partner of the employer (Lowe, Philp, Hart, see also Stevens).

The above principles excluding a finding of a benefit for purposes of s. 6(1)(a) may not be satisfied if any resulting benefit to the employee is significant rather than incidental (McGoldrick), for example, where the employee as a result of an employer-requested relocation is assisted in acquiring a home having a greater market value, albeit perhaps of lower quality (Derosiers, Lao, Phillips), where a minimum resale price for an employee home is guaranteed (or the right of the employee to this guarantee is bought out - Blanchard), where an employer-subsidized course results in the employee obtaining a professional designation (Jex), or where the employee receives free hotel accommodation after the Christmas party (Dunlap). Similarly, the reimbursement of additional expenses of a largely personal nature incurred as a result of an employer-requested relocation generally will give rise to a taxable benefit (Guay, Dionne, Suffolk). There also will be a taxable benefit where the employee is compensated for the lack of availability of a tax benefit such as the overseas employment tax credit (Killinger) or for the higher tax rate on Canadian-source employment income (Gernhart).

Bowman J. (as he then was) suggested that the phrase "of any kind whatever" was not intended to add to the meaning of what constitutes a benefit but rather to prevent the meaning of the word from being restricted by interpreting it ejusdem generis with board and lodging (Pezzelato).

Meaning of "enjoy" and "board"

Bowman C.J. stated that "enjoy" means to "have the use of or benefit of" (Rachfalowski).

It was found in a British context that the provision of a continental breakfast was "board" (Otter v. Norman).

Timing of recognition of benefit

A benefit is received when there is a transfer of valuable property to the employee. Accordingly, the Henley case found that the time at which an employee received any benefit from the issuance to him by a client of his employer of a warrant to acquire shares of the client was the time of issuance of the warrant, so that a subsequent exercise of the warrant represented a mere exercise of existing contractual rights rather than the receipt of a further benefit in the course of his employment (see also Abbott v. Philbin). The earlier decision in Robertson (followed in Markin) was distinguished on the basis that where an employee receives a right to acquire property only upon the fulfillment of a significant condition, the benefit will not be received until that condition is satisfied. (In the Robertson case, options to acquire shares of a third party did not vest until the employee had worked for specified periods of time.)

Similarly, in Hogg amounts were considered to be received at the time of their vesting rather than when they subsequently were actually pocketed by the employee at the time of his retirement.

Determination of what is "in respect of, in the course of, or by virtue of...employment"

As the concept of "benefits...in respect of...employment" is broad, s. 6(1)(a) is not restricted to payments that partake of the character of remuneration for services (Savage, effectively overruling Phaneuf, see also Cooke).

Benefits received by an employee in recognition of work performed (or otherwise in respect of his or her employment) will be taxable benefits even where they are provided by a third party, e.g., the provision of a free trip to a sunny locale as a reward (see Phillips), or the provision and then forgiveness of a loan by his employer's customer (Norris). Thus, compensation received by police officers from third parties for performing security services outside their regular hours of employment nonetheless may be taxable benefits if their employer is closely involved in the allocation and coordination of these additional assignments (Baptist, cf. Gordon). Amounts received by an employee for consultation services provided by him following the cessation of his regular duties of employment also may be taxable benefits (Heggie). Kickbacks received, for example, by a corrupt purchasing agent will be taxable benefits even though the employer presumably has no knowledge of these receipts (Robson, Poynton, see also Goldman).

"Allowances" received by a prospective employee from the employer while being trained for the position generally will be taxable under s. 6(1)(a) or s. 6(1)(b) (Dhillon).

The House of Lords has stated that "'In the course of employment' does not mean during the currency of the engagement, but means in the course of the work which the workman is employed to do and what is incident to it." (Armstrong v. Redford.)

The phrase "in respect of, in the course of, or by virtue of...employment" has also been considered in the context of s. 7(5).

Valuation of benefit

Although some earlier cases focused on the cost of providing a benefit to the employer (e.g., Stevens), it is now established that a benefit from employment is generally to be valued at its fair market value where this is determinable (Spence, applying Schroter). Fair market value will often be determinable (through direct comparison to similar goods or services) even if the specific benefit is not available on the open market (Anthony).

A substantial discount may be applied to take into account limitations associated with what the employee is actually receiving, e.g., the degree of disturbance and lack of privacy associated with accommodation provided at a boarding school (Schutz). The benefit from free business class seats received under a frequent flyer program as a result of travel in the course of employment was valued by multiplying the ratio of the price of the most heavily-discounted economy class fare to the price of a full fare economy class ticket by the full retail price of a business class seat (Mommersteeg).

Even in the absence of s. 6(15), an employee generally would be considered to receive a benefit from employment, when an amount owing to his or her employer is forgiven, equal to the amount of the forgiveness (McIlhirgey, Bolton, Norris).

Cases

Xia v. Canada, 2020 FCA 35

a share of pooled tips paid by casino patrons was taxable

The taxpayer, who received wages from working as a slot attendant at a casino in 2011 and 2012 of $27,011 and $29,327, respectively, which he reported in his returns, was found by the Tax Court to also be taxable on unreported tip income of $23,937 and $39,219, respectively, being tips that had been paid by patrons out of their non-taxable winnings and then allocated among the attendants. In dismissing the taxpayer’s appeal, de Montigny JA stated (at paras 4-6):

… Subsection 5(1) and paragraph 6(1)(a) … are quite broad as to what constitutes income. … It is clear from the language of these provisions that gratuities fall within the ambit of taxable income.

The fact that the tip amounts received by the appellant derived from non-taxable income is irrelevant for tax purposes. It is the nature of the gratuity as a source of income in the hands of the appellant that matters. …

… [T]he decision of the Tax Court is consistent with previous decisions according to which tips paid out of gambling winnings constitute taxable income… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 163 - Subsection 163(2) penalty for failure to report a share of tips paid by patrons of a casino 134

Smith v. Canada, 2019 FCA 173

free parking pass was taxable benefit notwithstanding business benefit to employer

The taxpayer worked as a flight attendant for Jazz Aviation LP, who provided him with a parking pass at the Calgary airport. In submitting that this did not result in a s. 6(1)(a) benefit, the taxpayer argued that two factors established that the parking pass primarily benefitted his employer: the remote location and unusual hours of Mr. Smith’s employment; and his employer’s stated belief that providing a parking pass to flight attendants enhanced their reliability and flexibility. In confirming that there was a taxable benefit, Laskin JA, stated (at paras 41, 42, 47 and 48):

It is clear from … Savage that the fact that an employer has a business purpose in conferring something of economic value on its employees does not necessarily take it outside paragraph 6(1)(a). …

The “personal” nature of commuting costs is well-established in the case law.

… Mr. Smith’s commuting costs originated in his personal decision as to where to live … .

… [A]n important factor in cases concerning employee parking is whether the employee uses a vehicle in the course of his or her employment duties. …

In this case, Mr. Smith was not required to use a vehicle in the course of his duties. …

After quoting (at para. 50) commentary that:

…The ultimate question … is… whether or not employees are deriving a personal benefit from the provision of a particular good or service, not whether the good or service is being provided for employment-related purposes. … If employees could not do their job without the particular good or service, it is less likely to be serving a personal purpose. This inference is strongest if the good or service does not appear to be necessary for employees to do their job. …

Laskin JA concluded (at para 51):

In this case, it is in my view determinative that Jazz Aviation did not require its flight attendants to commute to work by car, but was content to preserve the personal nature of employees’ commuting choices. This fact demonstrates that the cost of parking at the airport was a consequence of Mr. Smith’s personal choices and not bound up in his employment duties or in the nature of his work as a flight attendant. … [Consistently with Schroter, it] was “an ordinary, every day expense.” …

Anthony v. The Queen, 2010 DTC 1356 [at 4392], 2010 TCC 533 (Informal Procedure), aff'd 2012 DTC 5019 [at 6633], 2011 FCA 336

Free parking for school employees was found to be a taxable benefit which should be valued at fair market value. The Minister's and taxpayers' valuations both used the direct comparison approach, which determines value by checking prices for similar products or services. Paris J. rejected comparisons to parking lots that were far away from the school, and ones that were close to busy streets. Of all parking places that experts compared, the only reasonable ones were in two nearby apartment buildings. Paris J. took the average of their prices, less 10%, to be the fair market value of the benefits; experts for both sides agreed that, being outdoors, the school parking was worth 10% less than otherwise comparable indoor parking.

On appeal, the Court rejected the taxpayer's further submission that fair market value is an appropriate basis for valuation only where there is an open market for the benefit in issue (para. 6).

Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Other 119

Canada v. Spence, 2011 DTC 5111 [at 5937], 2011 FCA 200

The taxpayers enrolled their children at the Montessori school where they taught, and were charged tuition at a 50% discount to that charged to the other parents. The trial judge found that the resulting taxable benefit should be valued at the costs incurred by the school in connection with the taxpayers' children minus the tuition paid. The Court of Appeal agreed with the Minister that the appropriate valuation method, as per Schroter, should be based on the fair market value of the service, so that the taxable benefits were equal to the difference between the regular tuition and the discounted tuition charged to the taxpayers.

Schroter v. Canada, 2010 DTC 5062, 2010 FCA 98

economic benefit with free parking pass

The taxpayer had received a taxable benefit upon being given a parking pass by his employer. Dawson JA found that the trial judge had taken into account the principle in Hoefele that "to be taxable as a benefit, a receipt must confer an economic advantage on the employee" and the principle in Lowe that "if an employee receives an economic advantage, but the primary beneficiary of that receipt is the employer, no benefit arises under paragraph 6(1)(a)." In particular, the taxpayer received an economic benefit because, unlike other employees at the office, he did not have to pay for parking, and the trial judge had not made a palpable error in finding that the taxpayer had failed to establish that the employer was the primary beneficiary of the employee's parking pass.

As for the value of the benefit received, "the equal treatment of taxpayers is facilitated by valuing their benefits at their fair market value" (para. 47). Here, the value of the benefit received was the retail price for a parking pass at the parking facility.

Canada (Attorney General) v. Henley, 2008 DTC 6017, 2007 FCA 370

benefit recognition deferred until condition satisfied

The taxpayer, who was an employee of an investment dealer ("Canaccord"), received a portion of the warrants that were issued by a client of Canaccord to Canaccord upon the successful completion of an equity offering by the client. In finding that the taxpayer received a benefit from employment in the year in which the warrants were transferred to him rather than in the subsequent year (following substantial appreciation in the value of the shares of the client) when he exercised those warrants, Ryer J.A. stated (at para. 21):

"To summarize, Robertson may be considered to stand for the proposition that where, in the course of an employment relationship, an employee receives a right to acquire property from his or her employer upon the fulfilment of a condition or contingency, the receipt of that right will not constitute a paragraph 6(1)(a) benefit to the employee and such a benefit will not arise until the condition or contingency has been fulfilled."

Here, as the taxpayer had done all that was required of him in the year in which the warrants were transferred to him, the receipt of the paragraph 6(1)(a) benefit was not deferred until the time of exercise.

Guay v. Canada (Attorney General), 2006 DTC 6391, 2005 FCA 97

The reimbursement by the employer of the taxpayer of expenses incurred by him in sending his children to a lycée francais in the Dominican Republic was a taxable benefit given that the reimbursement of the tuition did not fit within the exceptional case where the expense was imposed by the very nature of his employment.

McGoldrick v. Canada, 2004 DTC 6407, 2004 FCA 189

personal benefit of free meals was more than incidental/not primary employer benefit
see also, 2006 DTC 2045, 2005 TCC 735 (Informal Procedure)

The operator of the casino at which the taxpayer worked (at which there was no food that could be purchased by employees other than in vending machines) prohibited food from being brought on to the premises for sanitation reasons and provided one free meal per shift at a cafeteria. The Court found that the Tax Court Judge had not made any palpable and overriding error in finding that although the meals were provided for a business purpose, the personal benefit to the taxpayer could not be said to be incidental.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 180 - Subsection 180(3) Housen v. Nikolaisen standard 64

Dhillon v. The Queen, 2002 DTC 2083 (TCC)

employer-paid meals were of virtually no benefit

The taxpayer was found to be an employee of the RCMP during a 27-week instruction program at a "training academy" given that she had approximately four hours per week of work duties (e.g., front desk reception and guard duty), that most trainees, including her, became full-time constables following completion of the program and the "master servant" relationship that existed in the training program.

Out of a total allowance of $9,520, the RCMP deducted $2,482 for meals, $971 for lodging and $320 for various insurance coverage items. These deductions did not represent an allowance under s. 6(1)(b) because she had no discretion over their use, and they did not represent a benefit under s. 6(1)(a) since these expenses were incurred in the course of employment and were of virtually no benefit to her (in light of the rigorous conditions at the Academy) and instead were incurred by the RCMP for its own account and for its own benefit. Hershfield T.C.J. stated (at p. 2092) that:

"The taxability under paragraph 6(1)(a) of any benefit conferred is not the amount the employer determines as pay foregone but the value of the benefit as determined in accordance with principles applicable for the purposes of that paragraph."

and that:

"To include any value in income it must first be determined to be a benefit that benefits the employee as opposed to being primarily for the benefit of the employer."

Buccini v. Canada, 2000 DTC 6685 (FCA)

Following the amalgamation of the taxpayer's employer with other Canadian subsidiaries of the U.S. parent, the taxpayer executed a settlement agreement with the employer in which he acknowledged that a payment of $83,900 was in full settlement of all claims arising from his employer's unilateral termination of the employee stock option agreement between the taxpayer and the employer. In finding that the sum was not taxable under s. 6(1), Malone J.A. noted (at p. 6689) that it was "well-settled law that damages for breach of a contract of employment are not taxable under section 6".

Bernier v. Canada, 2000 DTC 6053 (FCA)

A lump sum was paid to the taxpayer as compensation for the unilateral termination by her employer of a stock option plan and not for an assignment of rights under the stock option plan. Given that the source of the payment was not a stock option contract but, rather, its unilateral repudiation, the amount received by the taxpayer did not fall under s. 7(1)(b), and was a taxable benefit under s. 6(1)(a).

Dionne v. R., 99 DTC 5282, [1999] 2 CTC 158 (FCA)

The amount received by an employee residing in the North as reimbursement for the costs of transporting food that could not be purchased locally represented a taxable benefit.

Desrosiers v. R., 99 DTC 5279, [1999] 4 CTC 47 (FCA)

In finding that the taxpayer, who moved from a job in Aylmer, Quebec to Toronto, received a taxable benefit when his new employer paid to him the difference between the cost to him of a clearly inferior home in Oakville and the value of his previous home, Noël J.A. stated (at p. 5281):

"The Revenue Department is not concerned with the use, whether good or bad, that the applicant may have made of the financial assistance he received. What matters is the existence of a benefit which is quantifiable in monetary terms."

Her Majesty the Queen, Respondent v. Wallace Robson, Appellant, 98 DTC 6452, [1999] 2 CTC 171 (Ont CA)

In finding that kickbacks paid to an employee by subcontractors doing business with the employee's employer were taxable employment income for purposes of ss.5 and 6 of the Act, the Court noted (at p. 6453):

"If a taxpayer receives a benefit because of his or her employment then it must be said that the benefit was received in respect of or by virtue of the employment. This is so whether the benefit comes from the employer or a third party."

Canada v. Lao, 97 DTC 5498 (FCA)

The taxpayer, who was relocated from Edmonton to Toronto by his employer, was taxable on $22,500 that he received from his employer to help compensate him for the higher housing prices in the Toronto area. His net worth had been increased by this payment and, accordingly, he had been "enriched" rather than "restored".

Markin v. The Queen, 96 DTC 6483, [1996] 3 CTC 212 (FCTD)

The taxpayer's employer granted him and other employees a contractual right to receive an undivided 0.5% of the net profits attributable to the interest of the employer in oil and gas properties. The taxpayer had the right upon the termination of his employment to surrender his net profits interest in consideration for a cash payment. The lump sum of $389,760 received by the taxpayer for such surrender of his interest on his termination of employment was found to be a benefit of his employment given that he had acquired his net profits interest by virtue of his employment.

On the basis of the Robertson decision, infra, this benefit was taxable in the year of receipt.

Lowe v. The Queen, 96 DTC 6226, [1996] 2 CTC 33 (FCA)

reimbursement of costs incurred for employer's business not a benefit

The taxpayer, who was an account executive with an insurance company and was responsible for maintaining and developing relationships with independent insurance brokers, did not receive an employment benefit when his employer paid the cost of him and his wife attending a four-day trip to New Orleans in which they spent most of their time ensuring that the brokers had a good time. Any benefit received by him "was a mere incident of what was primarily a business trip" (p. 6230). In the case of his wife, although she was under no obligation to be present, it nonetheless was clear that her presence was at the request of the employer and was primarily to serve the employer's business.

Attorney General of Canada v. Hoefele, 95 DTC 5602, [1996] 1 CTC 131 (FCA)

interest rate subsidy did not increase net worth

After a national real estate company advised that a Toronto home cost 155% of a similar home in Calgary, Petro-Canada agreed to pay a time-limited interest subsidy to employees that it required to relocate from Calgary to Toronto based on the increase (up to 55%) in the principal of their house mortgages.

Before going on to find that such subsidies were not a "benefit" because there was no resulting increase in the employees' equity in their homes, Linden J.A. stated (at p. 5604) that "a receipt which does not increase net worth is not a benefit and is not taxable".

Words and Phrases
benefit
Locations of other summaries Wordcount
Tax Topics - General Concepts - Tax Avoidance form matters 82
Tax Topics - Income Tax Act - Section 80.4 - Subsection 80.4(1) new mortgage debt of relocated employees 125

The Queen v. Blanchard, 95 DTC 5479, [1995] 2 CTC 262 (FCA)

As part of an offer of a position at the Fort McMurry processing plant of Syncrude Canada Ltd., the taxpayer was given the option of participating in a housing program which, among other things, provided that upon the cessation of his employment with Syncrude Canada, he would be guaranteed a market for the sale of his Fort McMurray home at no commission and at a price not to be less than a stipulated minimum price. An amount subsequently received by the taxpayer in consideration for his agreement to end his participation in this housing program was found to be a benefit from employment given that the housing program was offered as an incentive for relocation to the Fort McMurray plant, the program was offered only to employees of Syncrude Canada and, but for his continuing employment with Syncrude Canada, he never would have received the termination payment.

The Queen v. Phillips, 94 DTC 6177, [1994] 1 CTC 383 (FCA)

As a result of the announced closure by his employer (CNR) of its Moncton repair and maintenance shop, the taxpayer moved to its Winnipeg facility. A lump sum payment of $10,000 which the taxpayer received from CNR pursuant to a special agreement negotiated by his union, which was paid to any employee who purchased a house in Winnipeg to replace a house in Moncton on the transfer of his employment, was found to be taxable because it clearly was received by him by virtue of the employment relationship, and it increased his net worth by $10,000. The payment could not be characterized as a reimbursement for actual losses incurred by him in connection with the transfer.

Clemiss v. The Queen, 92 DTC 6509, [1992] 2 CTC 232 (FCTD)

In finding that the reimbursement by a corporation of legal fees incurred by the taxpayer (its chief executive officer) in defending against criminal charges in relation to his alleged defrauding of the corporation was a benefit, Reed J. stated (p. 6518):

"In the present case the expenses were incurred by the plaintiff not in order to do the job but to answer criminal charges laid against him personally ... While the actions which gave rise to the criminal charges took place in the context of the plaintiff's employment with the company and his membership on the Board of Directors I could not find that there is the close nexus between their outlay and the plaintiff's position as an employee and director of the corporation, in order to conclude that they were incurred by reason of that employment or directorship."

Wargacki v. The Queen, 92 DTC 6198 (FCTD)

Two employees received a non-interest bearing loan from their employer to, in a sense, acquire its shares which were then pledged to it. The shares could only be released from the pledge, on the employees paying off their loans, at a maximum rate of 20% per annum, and while the shares were pledged they effectively were subject to the control of the company. Joyal J. found that on a proper construction of the relevant agreements, the loans were not enforceable to the limits of their purported values. Accordingly, a purported forgiveness of the principal amount of the loans in excess of the fair market value of the shares following a plunge in the shares' market value did not give rise to a benefit under s. 6(1)(a).

On the other hand, the forgiveness of the loan owing by a taxpayer for the acquisition of warrants to acquire shares of the company did give rise to such a benefit.

McIlhirgey v. The Queen, 91 DTC 5381 (FCTD)

The taxpayer was given an interest-free loan by his employer to acquire its shares, which were pledged as security for the loan. On the termination of his employment, it was agreed that his shares would be sold, the sale proceeds applied to reduce the amount outstanding under the loan, and the balance of the loan forgiven. In finding that the taxpayer realized an employment benefit equal to the amount of the forgiveness, Cullen J. stated (p. 5385) that "the forgiveness of the outstanding balance of the loan had the very real benefit ... of avoiding a decrease in his net worth".

Splane v. The Queen, 90 DTC 6442, [1990] 2 CTC 199 (FCTD), briefly aff'd 92 DTC 6021 (FCA)

payment of increased house mortgage interest merely reimbursed for a loss

The taxpayer, who was asked by his employer to relocate from Ontario to Alberta, sold his home in Smith Falls for $65,000 and purchased a home near Edmonton for $63,000. In each of the subsequent three taxation years, the taxpayer was reimbursed by his employer for the difference between the mortgage interest (of 14.25%) paid by him in respect of his new home and the prior interest rate of 12.5% payable on his Smith Falls mortgage. Because the taxpayer received no economic advantage from these payments but was simply reimbursed for losses incurred by reason of his employment and the employer's requested transfer, the payments received by him did not constitute a taxable benefit.

Robertson v. The Queen, 90 DTC 6070, [1990] 1 CTC 114 (FCA)

only quantifiable benefit from non-s. 7 option grant arose at exercise time

In 1974, an individual ("Pierce") who employed the taxpayer as a ranch manager, granted him an option to acquire 2500 common shares of Ranger Oil owned by Pierce at a price approximately equal to their fair market value at that time. The option was exercisable at the rate of 500 shares per year subject to the taxpayer continuing his employment. Marceau J.A. held that although there was a benefit from employment both at the time of the granting of the option and at the time of exercise (in 1980, when the price of Ranger Oil had substantially appreciated), the "first benefit, although a real one, eludes independent quantification", with the result that "only the second benefit, the quantifiable one, falls within the scope of s. 6(1)(a)":

"The employee who was granted an option to buy shares is in the same situation as the employee who was given the opportunity to purchase his employer's manufactured goods at a variance with their fair market value or the possibility to borrow money from his employer at a lower rate of interest. There is no fixed quantifiable benefit which flows to the first employee until he buys the shares just as there is no quantifiable benefit to the second employee until he purchases the goods or borrows the money."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) carve-out to the extent of previous recognition 90

Huffman v. The Queen, 89 DTC 5006, [1989] 1 CTC 32 (FCTD), aff'd 90 DTC 6405 (FCA)

reimbursement for employment-related clothing was not benefit

A plainclothes detective was required by his superior officers to wear suits or blazers, which due to the equipment he had to carry with him, were of a larger and looser fit than his civilian clothing. Reimbursements which he received pursuant to the collective agreement were not a benefit since he simply was being restored to the economic situation he was in before being required to incur the clothing expense.

Hogg v. The Queen, 87 DTC 5447, [1987] 2 CTC 257 (FCTD)

Under a trusteed stock purchase plan the taxpayer's employer matched amounts contributed by the taxpayer to the plan and the taxpayer was entitled at any time after the first 3 years of the plan to withdraw all amounts in the plan other than amounts attributable to the employer's contributions of the two preceding years. The amounts in the plan received by the taxpayer on his retirement were not income to him in that taxation year, with the exception of amounts attributable to the employer's contributions during the two preceding taxation years, because they had vested in preceding taxation years.

The Queen v. Heggie, 87 DTC 5400, [1987] 2 CTC 173 (FCTD), briefly aff'd 94 DTC 6132 (FCA)

The taxpayer, who was president of Swift Canadian Co. Ltd. ("Swift") was asked to make himself available for consultation following the acquisition of the assets of Swift by Gainers, and pursuant to this arrangement the taxpayer was on the business premises on two or three occasions during the following year, and had two lunches with the C.E.O. Payments received by the taxpayer, and his use of the company automobile, came "within the broad scope of subsection 6(1)".

McNeill v. The Queen, 86 DTC 6477, [1986] 2 CTC 352, [1986] 2 CTC 364, [1986] DTC 6486 (FCTD)

A Quebec air traffic controller received from his employer, the federal government, the sum of $15,571 to compensate for house mortgage expenses that he might incur outside Quebec, and the sum of $2,155 which was computed as a percentage of his income, as part of a Department of Transport policy to seek to relocate controllers with anglophone ancestry to outside Quebec so as to avoid labour relations problems. The sum of $15,571 was not received by the controller in respect of his employment. The payment "was primarily motivated by considerations extraneous to the employment, namely public and labour relations considerations". Secondly there was no benefit to the controller (albeit he was under no obligation as to how he should spend the sum) because the effect of the payment of the sum was merely to partially reimburse him for the capital loss he incurred on his relocation. Although the sum of $15,571 was thus non-taxable, no proof was put forward by the controller "to show that he actually suffered other losses due to his relocation equal to the $2,155.41 he received, and a benefit accordingly accrued to him under s. 6(1)(a) in respect of this amount".

The Queen v. Savage, 83 DTC 5409, [1983] CTC 393, [1983] 2 S.C.R. 428

$300 received by an employee of a life insurance company pursuant to its policy of paying such amounts to all of its employees who passed the difficult Life Office Management Association courses would, in the absence of s. 56(1)(n), have been taxable as falling within the broad words of s. 6(1)(a). Although to be taxable under s. 6(1)(a) a payment must be received in one's capacity as employee, there is no requirement that "the payment must partake of the character of remuneration for services".

Words and Phrases
in respect of
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n) 83
Tax Topics - Statutory Interpretation - Redundancy/reading in words exclusion in specific provision extended to general provision to avoid redundancy 34

Hart v. The Queen, 82 DTC 6237, [1982] CTC 275 (FCA)

A farming company owned by Hart paid the costs of a sightseeing tour made of Australia by Hart. Although the tour program was predominantly concerned with agricultural activities, points and activities of general interest also were included. The finding of the trial judge, that 1/2 of the payments by the company should be included in Hart's income as a benefit, was upheld.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 180 - Subsection 180(3) 55

The Queen v. Demers, 81 DTC 5256, [1981] CTC 282 (FCTD)

The monthly amounts paid to the taxpayer while employed by the Organization of American States included the monthly pro-rated portion of the sum of $4,280, which was intended to help compensate him for the high cost of living in Haiti during his 12-month posting there. As this amount did not represent reimbursement for specific expenses, and instead represented an adjustment to the taxpayer's remuneration (albeit, one intended to take into account variations in the cost of living experienced in the jurisdiction in question), this amount represented part of the taxpayer's taxable remuneration.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(6) 83

Phaneuf Estate v. The Queen, 78 DTC 6001, [1978] CTC21 (FCTD)

The taxpayer purchased shares of a corporation ("Ogilvie") for their par value, which was significantly below their fair market, as a result of a direction in the will of the founder of Ogilvie that his executors sell common shares to employees of Ogilvie for the shares' par value. It was held "that this provision was simply one of his bounty to his employees as persons and not in any sense as renumeration for their services as employees", and there accordingly was no income inclusion in the employee's hands pursuant to s. 6(1)(a). It was irrelevant that the taxpayer purchased the shares subject to a shareholders' agreement which had the effect of restricting ownership of Ogilvie shares to its employees.

R. v. Poynton, 72 DTC 6329 (Ont. CA)

amount was income notwithstanding that subsequently required to be repaid

Amounts received by the taxpayer, who was the Secretary-Treasurer and General Office Manager of a general building contractor, as a result of kickback arrangements entered into by him with subcontractors and as a result of his arranging for his employer to pay for the cost of work on his home (in both cases, done without the knowledge of the other officers of his employer) represented income to him notwithstanding that he repaid the amounts in a subsequent year, when his fraud was discovered. Evans, J.A. stated (at p. 6335) that he did not believe that the language in the statutory predecessors of sections 5 and 6 "to be restricted to benefits that are related to the office or employment in the sense that they represent a form of remuneration for services rendered".

Philp v. MNR, 70 DTC 6237, [1970] CTC 330 (Ex Ct)

sales incentives paid to 3rd-party employees were taxable benefits

A corporation ("Oshawa") whose business was the selling of groceries and other goods to a chain of independent franchised IGA retailers, paid the costs of attendance of various managers of the independent retailers and their wives for a six-day excursion to the Bahamas pursuant to a one-year sales incentive program. The managers attended a two-hour "College of Profit" on three mornings of their stay in Nassau, and the balance of their time was devoted to recreational activities, albeit with the opportunity to discuss business with other attendees. The employment benefit to the managers was set at 1/2 the cost to Oshawa. The same 50/50 apportionment between personal and business components also applied to the wives in the light of evidence that the franchises in effect were small family businesses.

Goldman v. Minister of National Revenue, 53 DTC 1096, [1953] CTC 95, [1953] 1 S.C.R. 211

The taxpayer, who was appointed as chairman of a committee of shareholders of a company in receivership in order to negotiate on behalf of the shareholders, nominated a Mr. Black to be counsel for the shareholders' committee and requested that Mr. Black give to the committee members a portion of the counsel fee received by Mr. Black. The portion of the fee which the taxpayer received was remuneration from his office, and fully taxable.

Armstrong v. Redford, [1920] AC 757, at 778 (HL)

quoting Davidson v. M'Robb, [1918] AC 304 (HL)

"In the course of employment" does not mean during the currency of the engagement, but means in the course of the work which the workman is employed to do and what is incident to it.

See Also

Ristorante a Mano Limited v. Canada (National Revenue), 2022 FCA 151

"but for" test applied in determining payments were "in respect of" employment

The appellant, which operated a restaurant, paid “due-backs” to its servers representing the tips on sales processed on credit and debit cards (“electronic tips”) minus deductions made by it as a processing charge and amounts to be paid to kitchen staff, and further deductions based on the amount of cash sales collected by the servers. Monaghan JA indicated (at para. 52) that the question of whether a due-back constituted pensionable salary and wages for purposes of the Canada Pension Plan Act, or insurable earnings for purposes of the Employment Insurance Act, turned on the “question … whether, based on the relevant facts in the case, the amount in question is paid by the employer to the employee in respect of their employment.”

In confirming that the due-backs were amounts in respect of the servers’ employment, she referred to the broad meaning accorded to “in respect of in Nowegijick, and then stated (at paras. 25-26):

But for their employment with the appellant, the servers would not have received the due-backs from the appellant.

Moreover, nothing in the legislation suggests that, to qualify as an amount in respect of employment, the amount must be calculated in a particular way, or with reference to hours worked or sales or any other measurable factor. …

Furthermore, the due-backs were paid by the appellant to the servers (para. 37):

[T]here is no dispute the electronic tips came into possession of the appellant or that the appellant transferred the due-back, representing a portion of those electronic tips, to the servers.

Words and Phrases
in respect of
Locations of other summaries Wordcount
Tax Topics - General Concepts - Payment & Receipt net tips on restaurant credit card sales distributed to the servers were earnings "paid" to them 236

Lussier v. Agence du revenu du Québec, 2022 QCCQ 9

no taxable benefit in an insurance company employee attending a conference for insurance brokers in Cancun

The taxpayer, who was employed by an insurance company (“BMO”) as the business development manager, was in charge of the account for a managing general agent (“BBA”) which, as such, was the main liaison of BMO with a group of financial advisors and brokers who sold its insurance products. In August 2015, BBA approached BMO to pay $12,000 as one of the sponsors of a conference for the highest-performing BBA brokers in Cancun, Mexico. The taxpayer was chosen by BMO to represent it at this conference, where he attended for a week, put on a 20-minute presentation, but spent most of the time on events, such as snorkeling, with the attendees and responding to messages from the BMO office.

The ARQ position before Pilon JCQ was that 37.5% of the trip was for business purposes, so that the balance of the trip cost funded by BMO of $1,872 was a taxable benefit to the taxpayer. Before concluding that there was no taxable benefit, Pilon J found (at para. 38) that maintaining good relations with managing general partners, including through participation in conferences organized by them, was key to the BMO business model, it was logical to send the taxpayer to the conference as he was the BBA contact, his going alone was not a family vacation or a reward, and his “pursuits” there had a promotional focus.

She concluded (at paras. 43-46, TaxInterpretations translation):

Mr. Lussier participated in entertaining activities … including a catamaran expedition … . While this activity may have been enjoyable, it does not change the purpose of Mr. Lussier's presence. The recreational activities were an opportunity to create or maintain relationships with advisors and brokers. …

BMO had no say in BBA's choice of location for its convention, and the fact that it was held outside Quebec does not in any event have an impact on the TA criteria … .

[T]he ARQ's … approach is somewhat penalizing and unfair to Mr. Lussier. His employer did not give him the choice to participate in a trip, on which he went alone, and where he was expected to work and develop business, which he did, both during business hours and beyond. …

[T]he ARQ's position stems either from a misunderstanding of what constitutes the steps required for business development where there is a legitimate growth objective, or from a desire to dictate to a business what its business model should be and how to achieve it. In either case, the ARQ's position is unjustified.

Filion v. Agence du revenu du Québec, 2020 QCCQ 3024

an office holder received no taxable benefit from improper expense charges which were docked from his compensation early the next year

The taxpayer, who was a deputy in the Quebec National Assembly, and who owned the building in which his constituency office was located, directed the Assembly to pay in 1998 for expenses totaling $22,918 spent on the building that, in fact, were in part of a personal nature. Furthermore, on January 15, 1999, he was entitled to receive a $52,617 transitional allowance in connection with his electoral defeat, but with payment on this amount being stopped because an investigation had been initiated into the misuse of the 1998 payments received by the taxpayer. In this regard, in 2004, the taxpayer was imprisoned. In 2013, the Superior Court effectively found that the taxpayer was entitled to the excess of the $52,617 transitional allowance over the $22,918 which he had largely misappropriated. The ARQ reassessed the 1998 year of the taxpayer in 2015 for a $22,918 benefit, but recognized a deduction of that amount for his 2013 year.

After finding that it had not been established that all of the 1998 expense charges would otherwise give rise to a taxable benefit (noting for example, at para. 32, TaxInterpretations translation, that “the installation of a permanent partition between the first and second floors of the building does not imply an automatic increase in property value in the order of the expenditure incurred”), and after finding that the ARQ had not been barred from reassessing beyond the normal reassessment period, Tremblay JCQ found that there was no taxable benefit at all to the taxpayer in light of the more-than-offsetting seizure that occurred on January 15, 1999, stating (at paras. 100-102):

The correspondence between the misappropriation of funds and the appropriation of the transitional allowance by the Office of the National Assembly prevents the plaintiff's economic situation being considered to have been truly altered in 1998 to his benefit as a result of his misappropriation.

The National Assembly did indeed pay out sums to third parties on the basis of misrepresentations or instructions from the plaintiff, but it recompensed itself through set-off in the first days of 1999.

At the time the plaintiff filed his return in April 1999 for his 1998 taxation year, he did not retain a taxable benefit resulting from his conduct for which he ultimately was found to be criminally responsible … .

Aubin v. Agence du revenu du Québec, 2019 QCCQ 6243

no taxable benefit in paying the employee’s costs of attending a retreat hosted by a client

A senior employee (Aubin) of the National Bank of Canada (the “Bank”) was invited by an important client of the Bank (“Colabor”) to attend, along with his spouse, a conference hosted by Colabar in Vienna in 2011 and in Chile in 2012 for Colabor’s senior employees and commercial partners. The Bank paid the full costs of Aubin’s attendance at the two conferences, which were $7568 in 2011 and $12,898 in 2012. A second senior employee (Gagnon) also attended the 2011 conference with his spouse at the same cost to the Bank. The ARQ assessed Aubin and Gagnon on the basis that 87.5% of such costs borne by the Bank for the 2011 conference were taxable benefits to them under the Quebec equivalent of s. 6(1)(a) and, in the case of Aubin for the 2012 conference, 91.25%. The conferences included business sessions as well as many social occasions, but the taxpayers’ found the latter as more valuable in providing opportunities to speak one-on-one with senior management. Colabor expected spouses to attend.

After having quoted inter alia from Lowe and 9905737, Forlini JCQ stated (at paras. 83-84, TaxInterpretations translation):

[T]he participation of Messrs. Aubin and Gagnon at the Colabor conferences was principally for the benefit of the Bank and not for the taxpayers. Furthermore, the taxpayers as well as their spouses attended at the conferences at the express request of their employer.

The competitive nature of the banking sector rendered the essentially commercial character of the participation of Messrs. Aubin and Gagnon in the conferences quite convincing. Doubtless, the taxpayers experienced a certain pleasure in visiting museums, wineries and tourist attractions during the conferences, but such pleasure had an accessory and secondary character to the purpose of the activity, i.e., developing a business relationship between the Bank and an important client.

Kyard Capital 2007 Inc. v. Agence du revenu du Québec, 2019 QCCQ 1617

payment of professional dues was benefit

The individual taxpayer (“Fontaine”) was the president and majority shareholder of a corporation (“Kyard”) that earned fees from the provision of accounting and administration services to a single client (being a group of companies owned by a family who had come to Canada from Hong Kong).

The ARQ assessed Fontaine to inter alia add to his employment income pursuant to s. 37 of the Taxation Act (the equivalent of ITA s. 6(1)(a)) the amount of his Quebec CPA dues that had been paid by Kyard. In confirming this aspect of the assessment, Chalilfour JCQ noted (at paras. 116-117, TaxInterpretations translation):

… Mr. Fontaine deducted the amount of the dues form his net income while Kyard also took that expense. It is appropriate to correct that situation.

… The professional dues paid by Kyard must be added to the net income of Mr. Fontaine.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) no shareholder benefit in paying legal fees of individual shareholder defending against suit (that threatened corporation's business) brought by ex-spouse 267
Tax Topics - General Concepts - Solicitor-Client Privilege unnecessary to waive privilege in order to substantiate the nature of legal services provided 143

Pelletier v. Agence du revenu du Québec, 2018 QCCQ 1655

employer payment of the law society dues of a tribunal member was not a taxable benefit

The taxpayer was a commissioner of the Quebec Employment Injury Board who, in order to perform that role, was required by statute to be a member of the Quebec bar. The payment by his employer of his Quebec bar fees did not give rise to a taxable benefit.

In distinguishing Tremblay, Lapierre JCQ stated (paras. 18-19, 21-22, TaxInterpretations translation):

His services were not retained qua lawyer. He was an adjudicator exercising quasi-judicial functions. His functions were not the prerogative of lawyer as contemplated under the Act respecting the Barreau du Québec.

Only the members of the safety-security branch of the [Board] were otherwise required to be a lawyer, and this was not by reason of the nature of the tasks they performed but by virtue of a statutory requirement. …

Without this requirement, Mr. Pelletier would have had no need to maintain his professional status in order to exercise his employment. He could have instead, as in the case of judges, ceased to pay the dues, which brought him nothing to the extent that he did not act as a lawyer. …

This is especially true given the Mr. Pelletier’s function was not subject to the authority of the Barreau du Québec, nor to that of his union, nor to the Code of Professional Conduct of Lawyers.

Accordingly, the payment of his dues did not “enrich” him.

Scott v. The Queen, 2017 TCC 224

a distribution from a health and welfare trust to compensate for lost insurance coverage was not a taxable benefit as it did not come within s. 6(4)

In 1980, Nortel had established a health and welfare trust (the “HWT”) for its employees. Following its insolvency and filing under the CCAA (with the related CCAA proceedings being court-supervised), it made lump sum payments in 2011 to the two taxpayers, pursuant to a court-approved settlement agreement, in satisfaction of their entitlement to payments under the HWT. Ms. Ellis, was a retired employee, who had had a vested right for the HWT to pay the periodic premiums for life insurance policies on her life (giving rise to income inclusions to her under s. 6(4)), with the insurance proceed to be paid to her beneficiary on her death. The facts for Ms. Kennedy were similar.

After finding (at para. 102) that the 2011 distribution was paid to Ms. Ellis “as partial compensation for the termination of the Group Life Plan” and (at para. 103) that such payment “providing partial compensation the loss of the status of being a member of the Group Life Plan …constituted a benefit,” Sommerfeldt J stated (at paras. 121, 124):

As explained by Bowman J in … Tsiaprailis … where, in addition to the general provision in paragraph 6(1)(a), there is “a specific [statutory provision] containing detailed conditions for the inclusion of an amount in income that would not otherwise be income” … the general provision cannot be used “to fill in all the gaps left by” the specific provision… .

I have concluded that subsection 6(4) of the ITA and Part XXVII of the ITR are specific provisions designed to include in income certain amounts in respect of insurance coverage under a group term life insurance policy. … As those specific provisions have not captured the distributions paid in 2011 by the HWT to Ms. Ellis and Ms. Kennedy, paragraph 6(1)(a) of the ITA cannot be used to fill in the gaps left by subsection 6(4) and Part XXVII or to sweep those distributions into income.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Rules (General Procedure) - Section 89 - Subsection 89(1) - Paragraph 89(1)(a) trust return not admitted at trial opening where no previous notice and not relied upon by CRA 229
Tax Topics - Income Tax Act - 101-110 - Section 107.1 - Paragraph 107.1(a) s. 107.1(a) in effect produced a rollover on cash distribution of mooted benefits 181
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(a) - Subparagraph 56(1)(a)(iii) payment made as compensation for termination of monthly death benefits was paid, at the least, in lieu of a death benefit 249
Tax Topics - General Concepts - Stare Decisis Supreme Court obiter accorded deference 153
Tax Topics - Income Tax Act - Section 9 - Compensation Payments surrogatum principle references "why the compensatory amount was paid," and not confined to business receipts 207
Tax Topics - Statutory Interpretation - Specific v. General Provisions termination payment that did not come within s. 6(4) should be treated as excluded from s. 6(1)(a) 153
Tax Topics - Income Tax Act - Section 6 - Subsection 6(4) lump sum received as compensation for no longer benefiting from contributions to a group life insurance policy did not come within the terms of s. 6(4) 334

RFC 2012 Plc v. Advocate General for Scotland, [2017] UKSC 45

payments derived from employment services are assessable even where they are agreed to be redirected to a trust with a 3rd-party trustee

Companies, including the taxpayer (“RFC”), within the Murray International group of companies, which wished to benefit an employee (generally, a footballer or executive) made a cash payment (often corresponding to a discretionary “bonus”) respecting the employee to a trust which had been set up by one of the Murray companies (the “Principal Trust”). The paying company recommended that the trustees of the Principal Trust resettle the sum in question (in their discretion) on to a sub-trust and would ask that the income and capital of the sub-trust be applied in accordance with the wishes of the employee. The beneficiaries of the sub-trust (generally, family members) were chosen by the employee. In practice, the trustees of the sub-trusts invariably gave effect to the wishes of the employee. The employee would be appointed protector of the sub-trust (i.e., with a power of appointment, and the right to change trustees), and the trustee of the sub-trust would then lend the employee the money that had been advanced to the sub-trust at LIBOR +1.5% and with a 10–year term subject to extension. On the employee’s death, the loans and interest would be repayable out of his estate, thereby reducing the value for Inheritance Tax purposes.

In finding that the amounts paid to the Principal Trust constituted “anything…that constitutes an emolument of the employment” under s. 62(2)(c) of the Income Tax (Earnings and Pensions) Act 2003, Lord Hodge stated (at paras 39, 58 and 59):

I see nothing in the wider purpose of the legislation, which taxes remuneration from employment, which excludes from the tax charge or the PAYE regime remuneration which the employee is entitled to have paid to a third party. Thus, if an employee enters into a contract or contracts with an employer which provide that he will receive a salary of £X and that as part of his remuneration the employer will also pay £Y to the employee’s spouse or aunt Agatha, I can ascertain no statutory purpose for taxing the former but not the latter. The breadth of the wording of the tax charge and the absence of any restrictive wording in the primary legislation, do not give any support for inferring an intention to exclude from the tax charge such a payment to a third party which the employer and employee have agreed as part of the employee’s entitlement. Both sums involve the payment of remuneration for the employee’s work as an employee.

Parliament in enacting legislation for the taxation of emoluments or earnings from employment has sought to tax remuneration paid in money or money’s worth. No persuasive rationale has been advanced for excluding from the scope of this tax charge remuneration in the form of money which the employee agrees should be paid to a third party, or where he arranges or acquiesces in a transaction to that effect. …

In finding that the relevant source deduction (“PAYE”) regulations pointed in the same direction, he noted that s. 21 thereof spoke of making “a relevant payment to an employee,” Regulation 12 provided that “other payees are treated as employees,” and stated (at para. 40):

I therefore read “payment to an employee” or essentially similar phrases in the subordinate legislation as a reference to the payment of the employee’s emoluments whether to the employee or to another person.

Smith v. The Queen, 2017 TCC 62 (Informal Procedure)

provision of free monthly parking pass was taxable

The taxpayer was employed by Jazz Aviation LP (“Jazz”) as a flight attendant. Based on his home location, a car was his only means of getting to the Calgary airport. Pursuant to the terms of a collective agreement, he was provided by Jazz with a monthly parking pass. The Minister assessed the taxpayer for 2011 for a $504 taxable benefit, being 12 times the monthly charge that the taxpayer would have been required to pay to the Calgary airport to acquire monthly passes.

After noting (at para. 27) that McGoldrick had found that “where the material acquisition at issue was provided to the employee primarily for the benefit of the employer,” there was no taxable benefit, Ouimet J stated (at paras 36, 39, 44 and 48), before dismissing the appeal:

…[D]espite the fact that it was important for Jazz that its flight attendants be reliable and flexible and that they report to work on time, the evidence does not show that flight attendants were required under the Collective Agreement or otherwise to commute to work by car or even to have a driver’s licence.

… The evidence did not show that flight attendants who commuted to the Calgary airport using their own car were more reliable and flexible than those using other means of transportation. …

… I was not presented with any evidence that …quantifies the effect on Jazz’s profits or costs of the use of a parking pass by Mr. Smith and/or other flight attendants.

… The only conclusion I can reach is that Jazz paid for the parking pass simply because it was required to do so pursuant to the Collective Agreement. …

Blank v Commissioner of Taxation, [2016] HCA 42

payments under profit-linked phantom units in affiliate were ordinary income when received

The taxpayer was employed by Glencore International AG (“GI”), an international commodity trading business incorporated in Switzerland, or a subsidiary from November 1991 to December 2006, with his employment in Australia commencing in 2002 when he also became an Australian resident. In 1994, GI granted him rights (Genusscheine, or “GS”) pursuant to an agreement with him and evidenced by profit sharing certificates issued pursuant to its articles of association, to share in future consolidated net income. At the same time, Glencore Holding AG (“GH”), the ultimate parent, issued shares to him for cash at their SF par value, with the shares being subject to a put in his favour, and a call in GH’s favour, exercisable, at a price equal to the par value, upon his termination of employment or certain other triggering events. The two agreements were “stapled,” i.e., the validity of each agreement was conditional on the execution of the other.

The original agreement for GSs was replaced at various junctures, including in 2005 by the “IPPA 2005” (described at para. 35 as a "novation," being "'simply a new contract standing in the place of the old'"), at which time the taxpayer was granted phantom units (Profit Participation Units, or “PPUs”) in GI for calculating his entitlement to the profit participation ultimately payable to him as deferred compensation (styled as “Incentive Profit Participation” or “IPP”) on the surrender of his rights. The PPUs were linked to GSs (in which the taxpayer had no interest) issued by GH to GI, which were to be repurchased by GH when his employment terminated. Under the IPPA 2005, his IPP became due 30 days after his termination of employment on December 31, 2006 and was payable in 20 instalments over five years (with interest). A proportion of each instalment was to be withheld and paid to the Swiss Federal Tax Administration ("the Swiss FTA") on account of Swiss withholding tax. Pursuant to a Declaration dated March 31, 2007, the taxpayer, in consideration for the “Amount” of US$160,033,328 and CHF 80,000, relinquished to GI his claims to the PPU and GS, and assigned all his GH shares to GH.

In finding that the Amount was income to the taxpayer under s. 6-5(1) of the Income Tax Assessment Act 1997, which provided that a person's "assessable income includes income according to ordinary concepts, which is called ordinary income," the Court stated (at paras 59, 61, and 63):

The terms of the IPPA 2005 expressly stated that the Amount was deferred compensation from Mr Blank's employment with Glencore Australia. … The Amount was paid as a lump sum as an additional reward to Mr Blank for the services he had performed for the Glencore Group. …

The IPPA 2005 also recorded that Mr Blank had no interest whatsoever in the GS and did not acquire any right in or title to any assets, funds or property of GI, Glencore AG or any other subsidiary. … [A] GS granted no more than a claim to a cumulative portion of the balance sheet profit, and that the claim was granted not upon the issue or allocation of the GS to the employee but upon restitution of the GS at the time the employment ceased. …

The fact that the Amount was paid after the termination of the contract of service, by a person other than the employer (here, GI) and separately to ordinary wages, salary or bonuses, does not detract from its characterisation as income if the payment is, as here, a recognised incident of the employment.

Words and Phrases
novation

Advocate Gen. for Scotland v. Murray Group Holdings Ltd., [2015] CSIH 77, [2015] BTC 36 (Ct. of Ses. (Inner House, 2nd)), aff'd sub nomine RFC 2012 Plc (formerly The Rangers Football Club Plc) v Advocate General for Scotland (Scotland) [2017] UKSC 45

income derived from service is assessable even where agreed to be redirected to 3rd party

A company in the Murray Group of companies which wished to benefit one of its employees (generally, a footballer or executive) made a cash payment (often corresponding to a discretionary “bonus”) respecting the employee to a trust which had been set up by one of the Murray companies (the “Principal Trust”). The paying company recommended that the trustees of the Principal Trust resettle the sum in question (in their discretion) on to a sub-trust and would ask that the income and capital of the sub-trust be applied in accordance with the wishes of the employee. The beneficiaries of the sub-trust (generally, family members) were chosen by the employee. In practice, the trustees of the sub-trusts invariably gave effect to the wishes of the employee. The employee would be appointed protector of the sub-trust (i.e., with a power of appointment, and the right to change trustees), and the trustee of the sub-trust would then lend the employee the money that had been advanced to the sub-trust at LIBOR +1.5% and with a 10–year term subject to extension.

Before finding that the payments made by the companies to the Principal Trust in respect of the employees were emoluments or earnings that were subject to the obligation to deduct tax under the PAYE system, Lord Drummond Young stated (at para. 56):

[I]f income is derived from an employee’s services qua employee, it is an emolument or earnings, and is thus assessable to income tax, even if the employee requests or agrees that it be redirected to a third party….[I]t is irrelevant that the redirection is through the medium of trust arrangements. It is equally irrelevant that the trustees who receive the payment, at whatever remove, exercise a genuine discretion as to what happens to the funds. The funds are ultimately derived as consideration for the employee’s services, and on that basis they are properly to be considered emoluments or earnings.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Evidence Scottish Court of Session entitled to deal with questions of English law 300
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) Scottish and English trust concepts had similar practical effect 90

Blank v. Commissioner of Taxation, [2015] FCAFC 154, aff'd [2016] HCA 42

phantom profit participation unit amounts not income until paid by employer rather than when due

The taxpayer was employed by Glencore International AG (“GI”) or a subsidiary from November 1991 to December 2006, with his employment in Australia commencing in 2002 when he also became an Australian resident. In 1994, GI granted him rights (Genusscheine, or “GS”) pursuant to an agreement with him and evidenced by profit sharing certificates issued pursuant to its articles of association, to share in future consolidated net income. At the same time, Glencore Holding AG (“GH”), the ultimate parent, issued shares to him for cash at their SF par value, with the shares being subject a put in his favour, and a call in GH’s favour, exercisable, at a price equal to the par value, upon his termination of employment or certain other triggering events. The two agreements were “stapled,” i.e., the validity of each agreement was conditional on the execution of the other.

The original agreement for GSs was replaced at various junctures, including in 2005 by the “IPPA 2005,” at which time the taxpayer was granted phantom units (Profit Participation Units, or “PPUs”) in GI for calculating his entitlement to the profit participation ultimately payable to him as deferred compensation (styled as “Incentive Profit Participation” or “IPP”) on the surrender of his rights and which were treated in much the same way as GSs (including stapling to an equal numbers of shares in GH). Under the IPPA 2005, his IPP became due 30 days after his termination of employment on December 31, 2006 and was payable in 20 instalments over five years (with interest). Pursuant to a Declaration dated March 31, 2007, the taxpayer, in consideration for the “Amount” of US$160,033,328 and CHF80,000, relinquished to GI his claims to the PPU and GS, and assigned all his GH shares to GH.

It was then agreed between the taxpayer and GI that GI would withhold from the full amount of the first four instalments of the Amount (two of which were due in 2007) on account of Swiss withholding tax, and an agreement to this effect was executed in January 2008, at which time the amount of the first two instalments was remitted to the Swiss authority (the FTA).

In finding that payments to the taxpayer were ordinary income derived by him, Kenny and Roberston JJ stated (at paras. 84, 89-90):

That the GS, Phantom Units and PPUs were not the benefit…conferred on the appellant under the relevant profit sharing arrangements but only mechanisms for calculating his profit share to be paid on termination exposes the fact that it was the payment of this profit share that was the actual benefit conferred on the appellant under the IPPA 2005… . In this circumstance, the fact that the IPPA 2005…described this payment as “deferred compensation” was not merely a label…but was an apt description… .

…The appellant had a restricted right to assign certain rights to a personal holding company provided he had GI’s consent. We are not satisfied that the profit participation agreements in this or any other way conferred a gain at the time the GS or Phantom Units were allocated to him that might be turned to pecuniary account… .

The fact that these two kinds of agreements were “stapled”…. does not mean that the PPUs (including GS and Phantom Units) were a calculation device to determine the value of the appellant’s shares in GH… .

Respecting the timing of recognition of the 2007 instalments, s. 6.5 of the Income Tax Act Assessment Act 1997 provided that "you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct." Kenny and Roberston JJ held (at para. 95):

The… Commissioner’s submission… postulates that income is relevantly “dealt with” on behalf of a taxpayer when the debtor (here GI) refrains from making payment of a debt due to the taxpayer at the creditor’s request. Brent v Federal Commissioner of Taxation [1971] HCA 48; 125 CLR 418 [at para. 13] indicates that more is required… . There was therefore no derivation of income in the 2007 income year when the first two instalments, though due, were merely withheld from payment to the appellant. … The applicant derived the first two instalments as income when, in January 2008, they were paid, with his agreement, to the FTA by GI on his behalf.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 115 - Subsection 115(1) - Paragraph 115(1)(a) - Subparagraph 115(1)(a)(i) no apportionment possible between resident and non-resident services 286
Tax Topics - General Concepts - Payment & Receipt payments under phantom units not received when they vested 344

Shaw v. The Queen, 2013 DTC 1214 [at 1193], 2013 TCC 256

The taxpayer and eight other managers worked for a business corporation ("Robert Ltd.") owned by an individual ("Robert"). Robert had Robert Ltd.'s assets sold to a 3rd party. The managers continued to work for the business, hired by a subsidiary of the buyer.

Starting a few months later, Robert had Robert Ltd. make alleged gifts to its former managers in several installments over approximately a year. The amount of the gifts was $10,000 per year employed - a total of $140,000 for the taxpayer. A letter from Robert indicated that the bonuses would only be payable if they continued to work for the new employer.

VA Miller J relied on the statement at para. 9 of Blanchard that, because of the breadth of the words "in respect of" in s. 6(1)(a), a benefit from an employer is a taxable benefit unless it is "wholly 'extraneous' or 'collateral' to one's employment." Although the taxpayer emphasized that he had a deep personal friendship with Robert, it was clear that the payments were within the scope of s. 6(1)(a) as posited in Blanchard.

VA Miller J stated (at para. 21):

The fact that the Appellant was not employed by Mr. Robert when he received the Payment does not alter my conclusion. ... Although the taxpayer must be an employee or an officer, it is not necessary that he be the employee or officer of the person who bestowed the benefit at the time the benefit was given: C v Minister of National Revenue, 1950 CarswellNat 33 (TAB). ...

Morissette v. The Queen, 2013 DTC 1002 [at 21], 2012 TCC 37 (Informal Procedure)

CRA issued a directive stating that meal allowances of over $17 per meal would be considered unreasonable, and on that basis the taxpayer's employer treated his $20 meal allowances as a taxable benefit.

In allowing the taxpayer's appeal, Tardif J. found that:

  • the $17 threshold was arbitrary and unsubstantiated, and therefore there was no basis to conclude that $20 was unreasonable; and
  • whether an employer treats a benefit as a taxable benefit is ultimately irrelevant to its proper tax treatment, "particularly if it is the product of a superficial and arbitrary analysis" (para. 7).

Williams v. The Queen, 2011 DTC 1087 [at 480], 2011 TCC 66 (Informal Procedure)

no strong causal connection between the employment and occupation of accommodation

The taxpayer and her husband were both members of the clergy who ministered to a congregation. The taxpayer's husband's housing allowance covered nearly all of their rent and utilities, and the taxpayer had over $19,000 of housing allowance that did not go towards those expenses. Webb J. found that the taxpayer was eligible for a deduction under s. 8(1)(c)(iv) with respect to the relatively nominal portion of the rent and utilities which was not paid by her husband, but not under s. 8(1)(c)(iii). Subparagraph (iii) requires that the living accommodation be occupied "in the course of, or because of, the taxpayer's office or employment." The taxpayer was not occupying her house "in the course of" employment because occupying the house was not a part of condition of her employment. She did not occupy the house "because of" employment either (para. 20):

[T]he phrase "because of" as used in subparagraph 8(1)(c)(iii) of the Act "implies a need for a strong causal relation between" the occupation of the residence and the employment of the Appellant. ... There is no strong causal connection in this case ... as the house was not provided by her employer but was simply a house in which the Appellant and her spouse chose to reside.

Suffolk v. The Queen, 2010 DTC 1201 [at 3509], 2010 TCC 295 (Informal Procedure)

When the taxpayer moved her employment from Australia to Canada, her employer reimbursed her for the cost of purchasing various new appliances, as her Australian appliances operated only at 240 volts. In light of the distinction drawn in the Phillips case between payments made by an employer to an employee in relation to expenditures in the new location, and payments made to reimburse losses incurred by the employee as a result of a move (with only the latter being potentially non-taxable receipts), and in light of the fact that the goods left in Australia still had significant economic value, the payment made to the taxpayer was taxable.

Schroter v. The Queen, 2009 DTC 205, 2008 TCC 681 (Informal Procedure), aff'd respecting the first taxpayer sub nom. Schroter, 2010 DTC 5062, 2010 FCA 98

The first taxpayer was found to have received a taxable benefit upon being given a parking pass because it was awarded on the basis of his promotion to "pay band 5", and his resulting ability now to work more overtime was primarily of benefit to him, with the benefits received by his employer being characterized as incidental. Although the quantum of the benefit was to be based on the cost-savings to him, this should not be based on the cost of public transit or the cost of parking in another lot because these alternatives would not have been satisfactory to the first taxpayer.

As to the second taxpayer, he gave evidence that his free parking pass was awarded to him primarily because he had applied for the parking pass to be used for business reasons. Accordingly, there was no benefit to him.

Schutz v. The Queen, 2009 DTC 19, 2008 TCC 523

Rossiter, ACJ applied discounts of 25% to 80% to what otherwise would be the fair market value of accommodation provided on campus to faculty and staff at a private boarding school based on the degree of disturbance and lack of privacy associated with their accommodation.

McCreath v. The Queen, 2008 DTC 5086, 2008 TCC 595

The taxpayer was required to include in his income a per-kilometre travel allowance paid to him by his employer, the Nova Scotia Liquor Corporation, for travel between his home office and the NSLC office approximately 55 kilometres away. Campbell, J. stated (at para. 12):

"I do not believe that the decisions in Campbell [2003 DTC 420], Toutove [2006 DTC 2928] can be extended to cases, such as this, where a taxpayer makes a personal decision to work from home when the employer has provided and maintains a regular office for his use."

Savard v. The Queen, 2008 TCC 62

In finding that legal and other fees incurred by the taxpayer in connection with his prosecution for crimes committed while he was employed by a different corporation than the corporation which reimbursed him for those fees were, when so reimbursed, a taxable benefit to him, Tardif, J. noted that the test was whether the reimbursements were intended to remedy a prejudice caused by his employment and, on that basis, the reimbursements were a taxable benefit.

Rachfalowski v. The Queen, 2008 DTC 3626, 2008 TCC 258 (Informal Procedure)

The taxpayer, who did not like to golf, was required by his employer to belong to a golf club. He used the facilities only very occasionally. The amount of the annual membership dues paid by his employer was not includable in his income. Bowman C.J. stated (at para. 20) that the principle to be extracted from the Canadian, U.K. and U.S. jurisprudence "is that a 'benefit' is not included in an employee's income if it is primarily for the need or convenience of the employer" and that "this is so even where it represents a material acquisition or something of value". He went on to note (at para. 24) that here "membership in the golf club was clearly primarily for the benefit of the employer" (and, in any event "the benefit, if any, to the appellant of the membership in the golf club was minimal at most".

Bowman C.J. also noted (at para. 8) that "the meaning of 'enjoy' or 'jouir de' in section 6 has the meaning of 'have the use or benefit of' or 'avoir, bénéficier (de) posséder'."

Words and Phrases
enjoyment

Bilodeau c. La Reine, 2008 DTC 2870, 2004 TCC 685

Before going on to find that legal fees incurred by the taxpayer in successfully defending its president from criminal charges laid on the basis of an indecent act allegedly performed by him in the course of his employment did not give rise to a taxable benefit, Lamarre Proulx J stated (at para. 53):

"There is no economic benefit conferred on an employee unfairly accused of sexual misconduct while carrying on his duties. In the case at hand, the charges were brought against Mr. Bilodeau personally but were dismissed. These were therefore not personal legal fees."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Legal and other Professional Fees indecent act defence linked to work activities 97

Adler v. The Queen, 2007 DTC 783, 2007 TCC 272

Free parking passes provided to various employees of the Telus which enabled them to park at parking facilities constituted taxable benefits, with the exception of oases provided to two employees in respect of whom Telus was the principal beneficiary of the passes since the parking spaces provided to them reduced Telus's costs associated with the extensive use of their cars on Telus business.

Henley v. The Queen, 2006 DTC 3431, 2006 TCC 347, aff'd supra 2008 DTC 6017, 2007 FCA 370

appreciation in warrants allocated to employees on capital account

The taxpayer's employer ("Canaccord" - a broker dealer) was issued broker compensation warrants in connection with an equity treasury financing by a Canaccord client, and Canaccord allocated a portion of those warrants to the taxpayer as compensation for his employment services. Sheridan J. found that at the time of the allocation of the warrants by Canaccord to the taxpayer in September 1998, the warrants constituted property to which the taxpayer had an enforceable equitable right and that as at that moment, their dealings in respect of the warrants ceased to be that of employer and employee and became those of broker and client. On this basis and the fact that the benefit received by the employer at the time of the allocation to him of the warrants (namely, their in-the-money value of 1 cent per warrant) could be measured distinguished this case from the Robertson case. The taxpayer received a benefit from employment at the time of the allocation in September 1998, and was eligible for treatment under the option and capital gains provisions of the Act when the warrants were exercised in 2000 and he sold the underlying shares.

O'Flynn v. The Queen, 2005 DTC 556, 2005 TCC 230 (Informal Procedure)

The taxpayers were able to establish that a dental plan was available to all employees of the corporate taxpayer notwithstanding that only members of two families that owned the corporation availed themselves of the dental benefits. Accordingly, the dental premiums were deductible under s. 18(1)(a), and there was no inclusion in the individual taxpayers income by virtue of s. 6(1)(a)(i).

Killinger v. The Queen, 2004 DTC 2058, 2003 TCC 904

When it was determined that the taxpayer was not eligible for the overseas employment tax credit, his employer paid him two lump sums, upon the signing by him of releases, that were calculated to compensate him for the additional tax burden of not being eligible for the credit. In finding that these payments were a taxable benefit (and also would have been salaries, wages or other remuneration under s. 5(1)), Campbell J. indicated that the true character of the payment was to make up amounts that the taxpayer felt his employer owed him as an employee and that there was no evidence to support a conclusion that the payment was made to release the employer from an action in tort.

McGoldrick v. The Queen, 2003 DTC 1375, 2003 TCC 427 (Informal Procedure), aff'd supra

The employee was provided meals free of charge at the cafeteria of his employee (the Casino Rama) and effectively was forced to eat there as employees were not allowed to bring food onto the premises and it was impractical to eat offsite. Woods J. found that the cost of these meals was a taxable benefit given that the meals represented an ordinary everyday expense, so that the receipt of the free meals improved the taxpayer's economic position. Free hams and turkeys provided to him also were a taxable benefit. However, entertainment events were not "received" by him as he only occasionally attended them, and therefore were not included in the taxable benefit.

Deputy Minister of Revenue for Quebec v. Confederation Des Caisses Populaires et d'Economie Desjardins Du Quebec, 2002 DTC 7404 (Que. CA)

The reimbursement of meal expenses [and transportation expenses] incurred working overtime did not give rise to a taxable benefit, given that such expenses would not normally have been incurred, and while the food the employee otherwise would have consumed at home was still intact, this small saving should be ignored.

Anderson v. The Queen, 2002 DTC 1876 (TCC)

The taxpayer, who was a tradesman employed by a natural gas utility, kept all the tools and instruments required by him to maintain and repair the equipment involved in the transmission of natural gas in a pickup truck owned by his employer, and was required by his employer to keep the pickup truck at home at the end of the day. He was assessed on the basis that there was a benefit to him in respect of the pickup truck (which was not an automobile for purposes of the Act) on days when he drove the truck to the office where an assigned desk was used for storing paperwork, or when he was on standby (but not on those days when he drove directly to a job site).

Beaubier T.C.J. found that there was no benefit given that the pickup truck in essence was his work place and was required by his employer not to be used for personal use.

Chow v. The Queen, 2001 DTC 164 (TCC)

The provision of free parking privileges to two employees of Telus did not give rise to employment benefits to the employees given that in the case of the first employee, the parking space allowed him to work later hours without Telus being required to provide taxi fares, and in the case of the second employee, the parking space allowed him to report for work at 5:00 a.m. in Alberta in order to facilitate business dealings with Toronto.

Bure v. The Queen, 2000 DTC 1507 (TCC)

A fee paid by a hockey club directly to an agent of the taxpayer who negotiated a contract between the taxpayer and the hockey club represented a taxable benefit to the taxpayer.

Tremblay v. Québec (Sous-ministre du Revenu), 1999 CanLII 10635 (Court of Quebec)

taxable benefit when Government paid the law society fees of Crown attorney

The taxpayer, who was a Crown attorney employed by the Quebec government, was found by Bossé J to have received a taxable benefit by virtue of his employer’s payment of his dues to the Quebec Bar, taking into consideration that the payment of such dues for him was not driven by the requirements of the contract of employment and resulted in his enrichment because this was an expense which he otherwise would have had to bear.

Saskatchewan Telecommunications v. The Queen, 99 DTC 1306 (TCC)

No benefit was conferred by the taxpayer on its employees through the provision to them of parking stalls at substantially less than the market rate (or, in some instances, for no charge at all) on the basis of evidence that the employees were required, by and large, to travel from time to time from their assigned offices in the course of various duties assigned to them by the taxpayer and that their use of the parking facility after office hours for their personal use was relatively minimal.

Dunlap v. The Queen, 98 DTC 2053, [1998] 4 CTC 2644 (TCC)

The taxpayer received a benefit from employment equal to the preset per-person charge paid by his employer to a hotel for the cost of the taxpayer and a guest attending the annual firm Christmas party which consisted of a dinner, open bar and over-night accommodations at the hotel.

Landry v. R., 98 DTC 1416, [1998] 2 C.T.C. 2712 (TCC)

A lump sum payment made to the taxpayer by her disability insurer in settlement of her claim for long-term disability benefits was not taxable to her given that the premiums paid by her employer had been included in her income.

Jex v. R., 98 DTC 1377, [1998] 2 C.T.C. 2688 (TCC)

Tuition reimbursement payments received by the taxpayer from his employer (Revenue Canada) for successfully obtaining an accounting professional designation were taxable benefits to him given that the courses were taken primarily for his benefit. "The fact that an employer encourages the upgrading of skills cannot be equated with a requirement to do so" (p. 1380).

Douglas v. R., 98 DTC 1001, [1998] 2 C.T.C. 2095 (TCC)

Three annual lump sum payments received by the taxpayer totalling $15,000 to compensate him for higher real estate costs in the city to which he was transferred were included in his income except to the extent of the amount that was calculated to be equal to the higher mortgage interest costs he incurred in the years in question as a result of the move.

Gordon v. R., 97 DTC 1529, [1997] 2 CTC 2264 (TCC)

off-duty police services

Amounts that the taxpayer, a police constable with the Metropolitan Toronto Police Force, received from third parties for providing off-duty services (such as security, crowd control, and traffic control) that had been coordinated with the Police Force and the Metropolitan Toronto Police Association, represented business income rather than employment income.

Siwik v. The Queen, 96 DTC 1678, [1996] 2 CTC 2417 (TCC) (Informal Procedure)

employer interest-free home relocation loan

The taxpayer did not receive employment benefit by virtue of an interest-free home relocation loan made to him. There was no relevant distinction between the employer foregoing interest on a loan (as in the case at bar), and the employer making a payment to the employee as a reimbursement of interest paid by the employee, or to a separate financial institution to fund interest that the institution otherwise would have charged to the employee.

Gernhart v. The Queen, 96 DTC 1672, [1996] 3 CTC 2369 (TCC), briefly aff'd 98 DTC 6026 (FCA), Docket: A-625-96

tax equalization payment
applied in 2005-0123311E5 F

Tax equalization payments received by a U.S. resident while employed in Canada were found to be benefits under s. 6 as well as being income by virtue of s. 5(1). Bonner TCJ. stated (at p. 1676):

"The tax equalization payment is an obvious benefit when the appellant's position is compared with that of any other resident of Canada in receipt of the same income but not in receipt of tax equalization."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1) 30

Pezzelato v. The Queen, 96 DTC 1285 (TCC)

The taxpayer's employer loaned him $250,000 to purchase a home on his move from Ingersoll, Ontario to Toronto because the taxpayer could not sell his Ingersoll home in time to finance the purchase of his Toronto home. In finding that the reimbursement by the taxpayer's employer of the interest paid by the taxpayer on the loan was a taxable benefit, Bowman TCJ. noted that the decisions of the Federal Court of Appeal in Phillips and Blanchard were irreconcilable with the earlier decisions in Splane and Ransom and that he should follow the Phillips and Blanchard cases because they were more recent decisions.

Bowman TCJ. also stated that the phrase "of any kind whatever" was not intended to add to the meaning of what constitute a benefit but to prevent the meaning of the word from being restricted by being interpreted ejusdem generis with board and lodging.

Words and Phrases
any kind whatever

Mommersteeg and Giffen v. The Queen, 96 DTC 1011, [1995] 2 CTC 2767 (TCC)

"Free" air travel received by members of the taxpayers' families as a result of the taxpayers' participation in frequent flyer plans represented a benefit from employment given that such free travel became available to the employees because they travelled in the course of their employment. The fact that other conditions unconnected with employment also had to be met in order to receive the free travel (i.e., membership in the frequent flyer plans) was of no consequence.

The value of a "reward" ticket received by each taxpayer for travel by business or first class was "equal to that proportion of an unrestricted business or first class fare which the price of the most heavily discounted economy class fare on that flight is of the price of a full fare economy class ticket" (p. 1017).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 231.1 - Subsection 231.1(1) 58

Cook v. The Queen, 95 DTC 853, [1995] 1 CTC 2251 (TCC)

A lump sum that the taxpayer received in settlement of her action against Great-West Life Insurance Company for its denial of benefits under a disability policy issued to her employer represented a taxable employment benefit, given that such sum arose out of the contract between her employer and Great-West. The decision in Peel v. MNR, 87 DTC 268 (T.R.B.) should not be followed, because it did not give effect to the broad meaning according to the phrase "in respect of" in The Queen v. Savage, 83 DTC 5409 (SCC).

Bolton v. The Queen, 95 DTC 277, [1993] 2 CTC 3203

In finding that the taxpayer received a benefit when a second mortgage on his Alberta home owing by him to his employer was settled for less than the amount owing by him, Sarchuk TCJ. found that section 41 of the Property Act (Alberta) merely restricted the ability of the mortgagee to collect an amount, but did not affect the quantum of liability of the taxpayer. Accordingly, the taxpayer's counsel was unsuccessful in a submission that no benefit was received by virtue of the discharge of the second mortgage because it did not represent an amount still owing by the taxpayer. Sarchuk TCJ. also found that the forgiveness of the balance of the loan occurred as an integral part of the arrangements under which the taxpayer's employment was brought to an end by mutual agreement with the employer, with the result that the amount in question was a benefit received by the taxpayer in respect of his employment.

Zaugg v. The Queen, 94 DTC 1882, [1994] 2 CTC 2425 (TCC)

Interest subsidy payments paid directly by the taxpayer's employer that were calculated to compensate him for the higher mortgage that he required in order to obtain equivalent accommodation on his transfer from Calgary to Toronto, did not give rise to a benefit from employment.

Norris v. The Queen, 94 DTC 1478, [1994] 1 CTC 2495 (TCC)

A loan owing by the taxpayer to a corporation to which he provided his services in his capacity as employee of a management company constituted employment income to him when forgiven given that the taxpayer would not initially have received the loan had he not been an employee of the management company. Brulé TCJ. stated (p. 1482) that "the fact that the benefit is conferred not by the employer but by a third party does not change the characteristic of an amount received as a benefit".

Stevens v. MNR, 93 DTC 291, [1993] 1 CTC 2429 (TCC)

The taxpayer, who was the employee of a company that assembled and sold tour packages, was found to have received a taxable benefit equal to the average cost to the company of airline seats which it chartered when the company provided to the taxpayer, along with other employees, the right to use seats which the company had been unable to sell to customers. It was irrelevant that there were benefits to the company from having its employees acquire first hand knowledge of the facilities at various vacation sites. It also could not be said that the seats had no value to the employee given that she had applied for travel at around that time to the specified sites and given her failure to discharge the onus of proving some other value was more reasonable.

Pepper v. Hart, [1992] BTC 591 (HL)

A private college operated a concessionary scheme allowing sons of staff members to attend the school for 20% of the normal fees. In finding that this did not give rise to a taxable benefit under a section which referred to the "expense incurred in or in connection with" provision of in-house benefits, it was found that this section referred to the additional expenses attributable to each boy (such as food, stationery and laundry) rather than a proportion of all the running expenses of the school.

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Hansard, explanatory notes, etc. Parliamentary history to be consulted only in limited circumstances 109

Mairs v. Haughey, [1992] BTC 373 (C.A.)

A lump sum which an employee of a company received from the Department of Economic Development in consideration for giving up his rights under a redundancy scheme was found not to be "benefits and facilities of whatsoever nature" provided to him "by reason of his employment" for purposes of s. 154 of the Income and Corporation Taxes Act 1988. He received the payment by reason of giving up his right to get a payment if he became redundant, and not by reason of his employment. In addition, there was no benefit because "the money received was paid to him, by way of fair valuation, in consideration of his surrender of a right to receive a larger sum in the event of the contingency of redundancy occurring" (p. 406).

O'Leary v. McKinlay, [1991] BTC 37 (Ch. D.)

An arrangement under which the taxpayer's employers made an interest-free loan, repayable on demand, to a trust of which the taxpayer was the principal beneficiary and that deposited the loan proceeds with a bank in Jersey, was found to give rise to an emolument from the taxpayer's employment, equal to the interest earned on the bank deposit, given that the practical effect of the arrangement was that the taxpayer became entitled to receive the interest paid by the bank so long as he continued to play football for his employer, and because he was not free to invest the loan in any way he chose (so that the interest income was not investment income).

Dundas v. MNR, 90 DTC 1529, [1990] 1 CTC 2492 (TCC)

On the assumption that a payment made to a taxpayer in respect of the termination of his rights under a stock option agreement by virtue of an amalgamation constituted damages for the breach of that agreement, such payment was taxable under s. 6(1)(a) on the basis of the dictum of Pigeon in the Cewe case that "damages payable in respect of the breach of a contract of employment are certainly due only by virtue of this contract".

Locations of other summaries Wordcount
Tax Topics - General Concepts - Stare Decisis 72

Glynn v. C.I.R. (Hong Kong), [1990] BTC 129 (PC)

The taxpayer was held to have derived a "perquisite" of employment equal to the amount of his daughter's school fees which his employer had agreed under his contract of employment to pay directly. "There is no difference between a debt of the taxpayer discharged by an employer pursuant to the contract of service and money paid for the benefit of an employee by his employer pursuant to the contract of service." (p. 129)

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Prior Cases 56

Otter v. Norman, [1988] 3 WLR 321 (HL)

The provision of a continental breakfast was "board".

Pellizzari v. MNR, 87 DTC 56, [1987] 1 CTC 2106 (TCC)

The taxpayer, and the corporation of which he was sole shareholder, director and officer, were charged under the Criminal Code in connection with an alleged overbilling of clients of the corporation. The charges ultimately were dropped.

In finding that the payment by the corporation of the legal fees of $15,000 gave rise to an income inclusion to the taxpayer under s. 5(1), Couture C.J. stated (at p. 58) that he was "satisfied that the amount of the $15,000 paid by the corporation over two taxation years must be allocated between the two taxpayers since each one of them was charged and legal services were rendered to each one of them accordingly".

Locations of other summaries Wordcount
Tax Topics - General Concepts - Effective Date 75
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) benefit qua employee 155

Abbott v. Philbin, [1961] AC 352, [1960] 2 All E.R. 763, : [1963] UKHL TC_39_82 (HL)

appreciation in stock options was not attributable to employment

An executive in October 1954 was granted by his employer upon the payment by him of £20 a non-transferable option to acquire, within the following ten-year period, shares of his employer at a price equal to their market value in October 1954. The granting of the option gave rise to a "perquisite" or profit of his employment, i.e., something which could be turned to pecuniary account, and the exercise of the option in March 1956 (when the option was in the money) therefore did not give rise to a perquisite. Viscount Simonds stated (at 367, AC):

There could not be one perquisite at the date of the grant and a second perquisite when the shares were taken up. ... I do not find it easy to say that the increased difference between the option price and the market price in 1956 ... arises from the office [of employment]. It will be due to numerous factors which have no relation to the office of the employee, or to his employment in it.

Lord Radcliffe stated (at 379):

The advantage which arose by the exercise of the option ... was not a perquisite or profit from the office during the year of assessment: it was an advantage which accrued to the appellant as the holder of a legal right which he had obtained in an earlier year ... . The quantum of the benefit, which is the alleged taxable receipt, is not in such circumstances the profit of the service: it is the profit of his exploitation of a valuable right.

Wilkins v. Rogerson (1960), 39 TC 344 (C.A.)

The taxpayer's employer advised its male employees that if they went to a tailor to be fitted for any combination of a suit, overcoat or raincoat, the employer would pay the cost of the new clothing, up to a limit of £15, directly to the tailor. The value of the "perquisite or profit" realized by the taxpayer by virtue of his employment was the amount for which he would have been able to resell his new suit (£5) rather the cost to his employer of his new suit (approximately £15). Harman L.J. stated (p. 353):

"The taxpayer has to pay on what he gets. Here he has got a suit. He can realize it only for £5. The advantage to him is, therefore, £5. The detriment to his employer has been considerably more, but that seems to me to be irrelevant ..."

Administrative Policy

30 June 2022 Internal T.I. 2022-0936671I7 F - Frais de déplacement

one-time travel between a home office and the employer’s office was in the course of employment

Given the great distance between the residence of new employees hired by the employer for a 24-month period and the employer's offices, they work from home. Although their contract of employment designates one of the employer's offices as their place of work, they are only required to attend there for a single three-day visit for training and team building activities.

The employer reimburses them in this regard for reasonable accommodation and transportation costs (train, bus, etc.) – or pays an allowance based on a kilometric rate for use of their private vehicles, as well as a meal allowance upon presentation of receipts.

Before concluding that the reimbursements were not includible pursuant to s. 6(1)(a), CRA stated:

[T]ravel between an employee's residence and a place of work other than a regular place of work is generally considered to be in the performance of the duties of the office or employment. …

Generally speaking, a regular place of work is any place to or from which an employee regularly reports or performs the duties of the employee’s employment. …

[Here] the place of work designated in the employment contract is not a regular place of work for the new employees. Consequently, travel between the residence of one of these employees and the employee’s place of work designated in the employment contract would be travel in the performance of the duties of the employee’s office or employment. In this case, amounts paid for travel expenses such as reimbursement for board, lodging and transportation will not have to be included in computing income from an office or employment pursuant to paragraph 6(1)(a).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(vii.1) per-kilometer allowances for one-time travel between home office and employer’s office qualified under s. 6(1)(b)(vii.1 252
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(vii) one-time travel between home office and employer’s office did not qualify as travel away from the employer’s establishment 247
Tax Topics - Income Tax Act - Section 6 - Subsection 6(6) - Paragraph 6(6)(b) potential exclusion of allowances for meals and hotels paid for travel to a remote work site (an office) of the employer where the employees stay for 3 days 361

3 May 2022 CALU Roundtable Q. 8, 2022-0928871C6 - Employee benefits and Life Insurance

a life insurance policy’s sale to an employee for less than FMV could produce a s. 6(1)(a) benefit even where the employer’s payment of premiums had been taxable

An employer (Opco) acquires a term life insurance policy on the life of a key employee with whom it deals at arm’s length. The employee’s estate, or a related person is designated as beneficiary. The annual premium is paid by the corporation and included in the employee’s income as a taxable benefit. Upon its renewal, the policy is transferred to the employee for no consideration under s. 148(7), whereupon the employee starts paying the annual premiums.

Given that the key employee has been including the annual premium amount in income as a s. 6(1)(a) benefit, does a further benefit arise on the transfer of the policy to the key employee for no consideration?

After noting that in 2019-0799051C6 it addressed a similar situation regarding a permanent policy, CRA stated:

In circumstances in which the person to which the interest in the policy was transferred to is an individual who is an employee or shareholder of the corporation which effected the transfer, either of subsections 6(1) or 15(1) of the Act may apply to include in the income of the individual the amount by which the fair market value of the policy exceeds any actual consideration paid by the individual for the policy.

CRA went on to indicate that where “the person on whom the benefit has been conferred is both a shareholder and an employee … a determination will have to be made … as to whether the benefit was conferred by the corporation on the person as a shareholder or as an employee.”

27 August 2020 Internal T.I. 2016-0675801I7 F - Prestations de maternité complémentaires

Quebec supplementary maternity benefits subsidized childcare centres are taxable, but may not be subject to EI deductions

Regarding the tax treatment of supplementary maternity benefits paid under a plan for Quebec's subsidized childcare centres, the Directorate indicated that:

  • the benefits paid were income that should be reported in Box 14 of the T4 slips and was subject to source deductions; and
  • an employment insurance (EI) premium deduction must be made, unless:
    • The total amount of the combined supplement and weekly EI benefits does not exceed the employee's gross regular weekly earnings; and.
    • The supplement does not reduce the employee's accrued credits such as for a retiring allowance, unused sick leave or vacation leave.

19 November 2020 External T.I. 2020-0848111E5 F - Remboursement d'équipement de bureau pour le télétravail

aggregate reimbursement during COVID exceeding $500 for teleworking office furniture and computer is taxable benefit

In 2020-0845431C6, CRA indicated that, in the COVID-19 context, it was “prepared to accept that the reimbursement, upon presentation of supporting documentation, of an amount not exceeding $500, of all or part of the cost of acquiring personal computer equipment to enable the employee to immediately and properly perform the employee’s work, is primarily for the benefit of the employer, so that it does not result in a taxable benefit to the employee.”

CRA now indicated that this administrative position also applies to office equipment (e.g., a desk or chair) – but that the $500 limitation applies to all such equipment on a per employee basis so that, for example, where the employer reimburses the $400 and $250 cost of a desk and computer monitor, respectively, CRA will consider the $150 excess over $500 to be a taxable benefit.

27 October 2020 CTF Roundtable Q. 13, 2020-0861021C6 - Reimbursement of Equipment

CRA extends the COVID $500 safe harbor re employer reimbursement of home office computers to other home office items

In 2020-0845431C6, CRA indicated that, in the COVID-19 context, it is willing to treat the reimbursement of an amount not exceeding $500 for the purchase of personal computer equipment as not taxable if it is mainly for the benefit of the employer.

CRA now indicated that, although there are no plans for now to increase the threshold, the $500 threshold for employment benefits will be extended to office furniture or other home office items and will not be limited to computers.

Invoices should be provided by the employee in those circumstances where there is reimbursement respecting the $500 threshold.

14 April 2020 APFF Roundtable Q. 5, 2020-0845431C6 F - Avantage imposable - télétravail / Taxable benefit

employer reimbursement of up to $500 for the cost of a telework computer is non-taxable during COVID-19

In the context of a teleconference on COVID-19, CRA confirmed that payments made by an employer to its employees, to enable them to equip themselves to telework, would be taxable to the employees, unless the payment was conditional on an invoice being submitted by the employee, as to which CRA stated:

In principle, an employee receives a taxable benefit when the employee’s employer reimburses a personal expense to acquire telework equipment.

However, the current particular context of declaring a health emergency in Canada due to COVID-19 has precipitated many employees who do not have the necessary computer equipment to telework.

In this particular context, the Canada Revenue Agency is prepared to accept that the reimbursement, upon presentation of supporting documentation, of an amount not exceeding $500, of all or part of the cost of acquiring personal computer equipment to enable the employee to immediately and properly perform the employee’s work, is primarily for the benefit of the employer, so that it does not result in a taxable benefit to the employee.

23 August 2019 External T.I. 2018-0779191E5 - Crowdfunding Contribution by Employer

a large employer contribution on compassionate grounds to an employee’s crowdfunding campaign to cover a child’s therapeutic requirements was not taxable

An employee with a recently-born child with a condition that required costly therapy, established a donation-based crowdfunding campaign to help fund such costs. Would a contribution by the employer, which will likely be the largest contribution to the campaign, represent a taxable benefit?

After noting that this question turned on whether this crowdfunding contribution was received qua individual rather than qua employee, and that the former characterization (in the case of an arm’s length employee who was not an executive) turned generally on the contribution having been provided voluntarily for humanitarian or philanthropic reasons and not based on employment factors such as performance, position, or years of service (or in exchange for employment services), and went on to state:

Additional factors could include whether:

  • the individual was affected by extenuating circumstances or an event (outside of work) that was beyond their control (e.g., serious illness or injury of the individual or a family member, disaster, funeral expenses);
  • the contribution is based on compassionate grounds and is meant to provide short term financial assistance to compensate the individual for personal losses or damage suffered or increased living costs incurred as a result of the extenuating circumstances or event, or to cover the basic necessities of life;
  • the contribution is received as a one-time lump sum amount;
  • the employer has a reasonable expectation that the contribution will be spent within a reasonable amount of time and on items or expenses arising from the extenuating circumstances or event or on the basic necessities of life;
  • the value of the contribution is reasonable and is made within a reasonable period of time following the extenuating circumstances or event;
  • the contribution is not meant to compensate for loss of income and is not subject to any conditions tied to the individual’s employment.

CRA then concluded that these criteria appeared to be met, so that there would be no income inclusion.

31 July 2019 External T.I. 2019-0798361E5 - Business use of vehicles – maintenance employees

on-call maintenance staff who drove intraday in their employer’s pickup truck between home and the maintenance site received no taxable benefit /quantification of carpooling benefit

Maintenance staff of the employer work rotating standby shifts to service a large number of multi-unit buildings of the employer. Such Staff are expected to return home during any down time to wait for their next call, and are supplied with Vehicles (which carry tools and only up to two passengers, and do not qualify under s. 248(1) as “automobiles”) which generally must be taken home with them when they are scheduled to work a standby shift. Where more than one Staff member is required to service a unit, the Staff may choose to carpool to the service location.

As a preliminary matter, CRA stated:

Whether travel between Staff’s home and a particular location is personal will generally depend on whether the location is a RPE [regular place of employment]. … [F]or purposes of determining whether any particular location may be considered a RPE, we would generally consider an entire townhouse complex or apartment building to be one location.

CRA then stated:

[I]t appears that the primary reason for employees returning home in between calls during a standby shift is due to [the employer’s] policy of not paying Staff for down time. Staff, however, must remain available … during this downtime and may be redirected to another call out at any time during a standby shift. In this case it is likely that the employer is the primary beneficiary of an employee’s travel to and from home in between the first and last call out of a standby shift. As such, no taxable benefit should result from this travel.

After noting that “Carpooling appears to be replacing the passenger’s travel between home and work in their own employer assigned Vehicle,” so that “there is a connection between carpooling and the passenger’s employment and therefore, the passenger would be in receipt of a taxable benefit with respect to employer provided travel,” CRA stated:

In a carpool scenario, a reduction in the value of the travel benefit may be warranted based on loss of privacy or quiet enjoyment, additional travel time, etc. … Employees and employers should keep records on employee travel in support of the particular position taken.

In some cases, Staff live in one of the multi-unit buildings, in which case, although they would mainly service that location, they would occasionally be required to service other locations in the city by driving a Vehicle stationed at their building to such other worksite. CRA stated:

[T]o the extent that the location of the employee’s residence is also a place of business … of their employer, travel from such a location to another RPE would not be of a personal nature. As such, no taxable benefit would result from this travel.

4 December 2018 TEI Roundtable Q. E2, 2018-0782361C6 - TEI 2018 Conference Question E2: S2-F3-C2

CRA revised its policy on employee merchandise discounts at the Minister’s request

What is the status of Folio S2-F3-C2? CRA responded:

At the Minister’s request, [the Folio] was removed in October 2017 from the tax pages of the Canada.ca website. The Minister also asked the CRA to review the wording in the folio with respect to employee discounts on merchandise.

The CRA reviewed the wording with respect to employee discounts on merchandise in the folio and drafted new wording.

The revised folio continues to undergo additional review as per our internal procedures. During the review period, the CRA continues to administer employee discounts on merchandise in accordance with the administrative policy outlined in Guide T4130, Employers Guide – Taxable Benefits and Allowances … .

14 May 2019 CLHIA Roundtable Q. 2, 2019-0799051C6 - 2019 CLHIA Roundtable - 148(7) questions

s. 6(1)(a) applied to transfer of life insurance policy to employee at an undervalue, notwithstanding the application of s. 148(7)

As a result of an arm's length employee B no longer being considered to be a key employee, her employer (Corporation A) transfers its “key person” permanent life insurance policy on her life to her for nominal consideration. At the transfer time, the death benefit, cash surrender value and ACB are $1 million, $50,000 and $20,000, respectively. The policy FMV equals its CSV.

Does the transfer engage s. 6 or 148(7) or in Corporation A having to report a gain on disposition of the policy? Before going on to address the application of s. 148(7) to the transaction, CRA responded:

Employee B will have an employment benefit under paragraph 6(1)(a) for the year in which the policy is received. The amount of the paragraph 6(1)(a) benefit will be the amount that is the FMV of the interest in the policy at the time of the transfer less any amount paid by Employee B for the interest (in the described situation, no amount was paid by Employee B).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 148 - Subsection 148(7) - Paragraph 148(7)(b) cost of policy gratuitously transferred to arm's length employee determined under s. 148(7)(b) rather than s. 52(1) 176

19 March 2019 External T.I. 2018-0748731E5 - Taxation of Settlement Amounts

award received by unionized employees based on an unfair labour practice of their employer was not referable to lost remuneration

Before concluding that lump-sum awards that the Labour Board ordered an employer to pay to employees for having committed an unfair labour practice would likely “constitute non-taxable damages that are excluded from income,” CRA noted that the awards were made pursuant to a provision of the applicable Labour Relations Act that was “limited to situations where an employee has not otherwise suffered a loss of income, benefits, etc. as a result of the unfair labour practice.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 3 award received by unionized employees based on an unfair labour practice of their employer was a non-taxable receipt 188

26 March 2019 External T.I. 2017-0729441E5 - Employee insurance discounts

policy re discounts on merchandise does not extend to discounted services, e.g., no commissions on insurance

Employees of an insurance broker (“Employer”) who acquire insurance coverage for personal purposes (e.g., home or automobile insurance) through an employee incentive program are not required to pay a commission or any other amount to the Employer in respect of the placement of insurance. Is there a taxable benefit? CRA responded:

[Such employees are] able to acquire an insurance policy for a lower cost than that which is usually paid by the general public. That is, employees are not required to pay the commission … .

[Such] employees … receive a discount on services (i.e., the placement of insurance) by virtue of their employment. As the CRA’s administrative position concerning discounts on merchandise and commissions from personal purchases does not apply to discounts on services, such benefits are required to be included in employment income under paragraph 6(1)(a) … .

The value of the benefit ... would generally be the difference between the amount customarily charged by the Employer for the placement of insurance ... and the amount, if any, paid by the employee ... .

23 January 2012 External T.I. 2011-0424671E5 F - Avantage imposable - Stationnement

generally no benefit from free parking if employee must use car 3 days a week in duties

Is parking provided free of charge to an employee, who is required to work outside the employer’s place of business on certain occasions in order to meet potential or existing clients, a taxable benefit? CRA stated per Guide T4130 that the benefit from free parking

will not be taxable when it is impossible to determine the fair market value of parking or, where both of the following conditions are satisfied:

  • The employer provides parking to an employee for business purposes
  • The employee regularly has to use their own automobile or one the employer supplies to perform the duties of their employment.

CRA then stated:

As an indication, where an employee is required to use the employee’s automobile, or a car provided by the employer, three or more days a week to perform the duties of employment, and uses the parking space for that purpose, we generally consider … that the parking space is used regularly for reasons related to the employee’s employment.

29 March 2012 External T.I. 2011-0424791E5 F - Imposition du remboursement du permis de conduire

reimbursement of regular cost of driver’s licence included even where employee required to drive

An employer reimburses the standard cost of a driver’s licence for employees, who, without a driver's licence, would be unable to meet the requirements of their employment. CRA stated:

[W]here an employer reimburses the standard cost of a driver's licence to an employee, such a reimbursement will be treated as a taxable benefit to the employee under paragraph 6(1)(a).

2 May 2012 External T.I. 2011-0431701E5 F - Commissions sur une police d’assurance-vie

exempt treatment of commissions received by employees on purchases of life insurance policies on their own account does not extend to purchases as investments or to annuities

An employee of an insurance policy receives commissions on his purchase of (i) two 10-year term life insurance policies for which (in the first case) he and his spouse are the insured and beneficiary, respectively and (in the second case) the reverse, and (ii) a deferred life annuity. Are the commissions included in his income? After referencing the position in IT-470R, para. 27 that commissions received by such a sales employee are not taxable provided the employee owns that policy and is obligated to pay the premiums, CRA stated that this “position … does not apply if the commission amount was substantial and if the life insurance policy was acquired for investment or business purposes,” and that such IT-470R position “only applies to commissions received on the purchase of a life insurance policy, stating:

Thus, in our view, the tax treatment of commissions received on the purchase of annuity contracts must be the same as that accorded to commissions received by investment dealers who acquire shares on the stock exchange or mutual funds as a personal investment. Furthermore, by giving similar treatment, the CRA takes into account the similarities that characterize these products, including the principal purpose of their acquisition, which is the expectation of a return. …

Thus, in light of the facts described in Situation 1, to the extent that the commissions received are not substantial, we are of the view that Mr. X would not have to include them in computing his income for the year in which he receives them. However, in Situation 2, the commissions received by Mr. X should be included in the computation of his income.

5 October 2018 APFF Roundtable Q. 7, 2018-0768781C6 F - Avantage en vertu d’un emploi

specificity needed re travel amounts paid re sabbatical stint

CRA declined to comment on the treatment of amounts paid for the travel of spouse and children of a professor spending sabbatical time overseas for teaching or research purposes, noting that there was a failure to specify “whether the amounts paid are for the performance of the duties of an office or employment, whether they are a reimbursement or an allowance, and whether they are paid for travel or instead as moving expenses.”

9 April 2018 Internal T.I. 2017-0731251I7 F - Activités mondaines

computation of the $150 cost per employee safe harbour for employee parties

Where an employer offers, free of charge, to all its employees, a party or other social event whose cost per person does not exceed $150, is the $150 per person cost calculated for determining whether there is a taxable benefit computed based on the total number of people who were invited or instead on the total number attending? If the cost exceeds $150 per person, is the resulting taxable benefit to those invited or only those attending? CRA responded by first referring to the statement in the T4130 Employers’ Guide that:

“If you provide a free party or other social event to all your employees and the cost is $150 per person or less, we do not consider it to be a taxable benefit. … If the cost of the party is greater than $150 per person, the entire amount, including the additional costs, is a taxable benefit.”

CRA then stated:

[T]he "per person" cost of $150 for this position is based on the total number of people attending the party or social event. …

[A] person who is invited to a party or a social event but who does not attend has not received or enjoyed a benefit.

24 January 2018 External T.I. 2016-0645911E5 F - Avantage imposable - Stationnement

free parking benefit scaled to comparable-spot charge/ business-use exception excludes overtime use

In response to a query as to whether free employer-provided parking was a taxable benefit, CRA stated:

[T]here is no taxable benefit for an employee when both of the following conditions are met:

  • The employer provides parking to its employee for business purposes.
  • The employee regularly has to use his or her own automobile or one the employer usually supplies to do his or her duties.

... [W]e do not consider that parking offered to facilitate working irregular or extended hours is parking for business purposes. ...

For parking, the benefit amount is usually based on the fair market value ("FMV") of parking, less any amount the employee pays to use it. In general, the FMV of a parking space is the price that could be reasonably charged for the use of that space in an open and unrestricted market (i.e., the market price for a similar space in the surrounding area having the same conditions of use as for the space provided by the employer).

21 March 2018 Ministerial Correspondence 2017-0729161M4 - Taxability of employee discounts

meals provided at cost not a taxable benefit

As part of its response to correspondence about media reports on the taxation of discounts on merchandise received by employees, CRA stated:

The media reports also led to confusion about the taxation of subsidized meals for employees. The CRA does not consider these meals a taxable benefit if the employee pays a reasonable charge. A reasonable charge is one that covers the cost of the food, its preparation, and service.

5 March 2018 Ministerial Correspondence 2017-0726641M4 - Taxability of employee discounts

employee discounts on merchandise are generally not taxed

In response to a query on the taxation of discounts on merchandise received by employees and the effect of Folio S2-F3-C2, CRA indicated that the Folio “explains the existing law, which requires that, with some exceptions, the value of benefits received from employment be included in income,” but then stated:

However, the CRA has a longstanding administrative policy that employee discounts on merchandise are generally not taxed. This policy is still in place and is explained in Guide T4130 … .

The CRA is reviewing and clarifying the wording in the … folio.

AD-18-01: "Taxable Benefit for the Personal Use of an Aircraft" 17 March 2018

Effective date

The guidance contained in this communique is applicable to taxable benefits arising from the personal use of aircraft for T1 individual taxation years commencing after 2017. Where the taxpayer concurs, and it is considered reasonable in the circumstances, CRA officials may utilize this guidance for taxation years prior to 2018.

Three main scenarios for computing value of benefit from personal aircraft use

In computing the value of the taxable benefit arising from the personal use of a corporation’s or employer’s aircraft by its shareholders and/or employees, there are three main scenarios to consider:

  1. Where the shareholder or employee takes a flight on the aircraft in circumstances where there is a business purpose for the flight and their presence on the flight, and there is a personal purpose for others taking the flight, the value of the taxable benefit for the personal use would be equal to the highest priced ticket available in the marketplace for an equivalent commercial flight.
  2. Where the shareholder or employee takes a flight on the aircraft in circumstances where there is no business purpose for the flight, the value of the taxable benefit would be equal to the price of the charter of an equivalent aircraft for an equivalent flight.
  3. Where the shareholder or employee uses the aircraft primarily for personal purposes relative to the aircraft’s total use during the calendar year (“primary purpose test”), either alone, or in combination with other persons not dealing at arm’s length, the value of the taxable benefit is equal to the personal use portion of the aircraft’s operating costs plus an imputed available-for-use amount.

Re Scenario 1 (inclusion of personal benefit)

Where the shareholder or employee is accompanied by a family member(s) or friend(s) on the flight, the CRA will generally take the position that the purpose of their taking the flight is personal. … The value of these taxable benefits will be included in the income of the shareholder or employee, unless the family member or friend is also a shareholder or employee, in which case [it] will be included in [their] income … .

Re Scenario 2 (sharing of charter price and exceptions)

If there is more than one shareholder and/or employee on the flight, then the charter price will be split amongst those shareholders and/or employees. …

In the case where:

  • an employee takes a flight for personal purposes on an aircraft that is owned or leased by the employer
  • the taxable benefit was conferred on account of employment and
  • an open market charter is not a viable option based on the unique circumstances of the flight, for example there are demonstrable bona fide security concerns for the employee

the taxable benefit will be computed pursuant to scenario 1 for that particular flight.

Re Scenario 3 (computation of operating and available-for-use benefit)

Operating costs would include all variable and fixed costs incurred/accrued in operating the aircraft during the year. …

The available-for-use amount is equal to the original cost of the aircraft multiplied by an imputed monthly interest rate. … [T]he prescribed interest rates contained in [Reg.] 4301(a) … may be used to approximate an imputed equity rate of return for the calculation. To the extent the aircraft is leased and not capitalized for tax purposes, the available-for-use benefit will be based on the monthly leasing costs incurred/accrued (rather than the original cost multiplied by an imputed interest rate).

The operating benefit and the available-for-use amount are then computed by multiplying the respective costs by the personal use portion relative to the total use portion based on the aircraft log book and other relevant records that outline the flights taken, flying hours, and passengers on the flights. Generally, the relative percentage, and the taxable benefit, will be based on the flying hours attributable to the particular shareholder or employee (and those personal use flying hours attributable to persons not dealing at arm’s length that are not shareholders nor employees).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) 428
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose non-deductibility where personal use of corporate aircraft by shareholders 130

14 September 2017 Roundtable, 2017-0703881C6 - CPA Alberta 2017 Q17: Electric Vehicle Taxable Benefits

benefit from employer-provided charging station

An employee who has been provided with an electric car by an employer for use in performing his or her employment duties, and a charging station for this car is installed at the employee’s residence. Would the installation of the charging station be a benefit outside the automobile benefit provisions? CRA responded:

Where an employer provides an employee with an electric vehicle for use in performing employment duties and installs a charging station at the home of that employee, it is our view that in many cases the employer would likely be the primary beneficiary, provided that ownership of the charging station is not transferred to the employee, and that its cost (including installation) is reasonable in the circumstances.

However, this would not be the case if the charging station is owned by the employee.

As the charging station draws on the employee’s electricity, the employee is reimbursing the employer for a portion of the operating costs. CRA stated in this regard:

[I]f an employer reimburses an employee for reasonable employment-related electricity costs paid by the employee, the reimbursement will not generally give rise to a taxable benefit.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(k) operating expense benefit from vehicle charging station reduced by employee's related personal electricity bill 90
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(h.1) requirements for employee deduction of electricity costs for home vehicle charging station 185

17 February 2017 External T.I. 2016-0662341E5 - Airline passes – retired and current employees

use of space-confirmed, but not standby, passes by airline employees is taxable
For French version, see 2016-0669931E5 F

Will S2-F3-C2 be revised to reflect the administrative policies in IT-470R, paras. 42, 44 respecting standby airline passes provided to current airline employees (“current employees”) and standby and space-confirmed airline passes provided to retired airline employees (“retired employees”)? CRA stated:

[S]tandby airline passes used by current employees are not taxed. …[T]he use of space-confirmed airline passes by current employees continues to be a taxable benefit… . The fair market value of the space-confirmed airline pass will generally be the amount the employee would have had to pay for the same benefit, in the same circumstances, if there was no employer-employee relationship.

…[S]tandby and space-confirmed airline passes used by retired employees are not taxed. …

S2-F3-C2… provide[s] CRA’s interpretive positions, not administrative policies. … The CRA webpage, Benefits and allowances, will be updated to include these administrative policies.

15 November 2016 TEI Roundtable Q. 1, 2016-0670911C6 - Agenda questions for November 2016 liaison meeting

reduced benefit from incentive trip where employment performance/detailed receipts/$500 exception for 3rd party benefit reporting/benefits at FMV

a. “Incentive” Trips (S2-F3-C2, para. 2.25)

Would CRA amend S2-F3-C2, para. 2.25 (“However, where an employee receives a trip as an employment incentive or award and is not engaged in employment/business activities during a substantial part of each day of the trip, the employee is the primary beneficiary….”) to account for trips that may be viewed by employees as “incentives” but serve a primary business purpose for the employer? CRA responded:

Paragraph 2.25 does recognize that employment-related activities may be part of an incentive or award trip. The last sentence of paragraph 2.25 states “If the employee is required to perform employment duties during that trip, any benefit included in the employee’s income may be reduced for any actual employment-related activity.” In your example, if a sales team is awarded a trip for achieving a set target and they are required to perform employment duties while on the trip, then the benefit may be reduced to the extent of the employment-related activities.

b. Detailed receipts (S2-F3-C2, para. 2.16)

Could CRA amend S2-F3-C2, para. 2.16 to reflect that “detailed receipts” are not always required? CRA responded:

The definition of reimbursement is consistent with Verdun…, which states “Even when these amounts are…reasonable estimations of the costs…[they are] additional remuneration, not…reimbursement of expenses, which require detailed receipts….”

In most cases, the best evidence to show how much was spent is the actual receipt (for example, an invoice). …

c. Third-party benefit reporting

Could CRA amend S2-F3-C2, paras. 2.27-2.28 to clarify which party has the reporting responsibility for third-party benefits – and would CRA consider extending the same $500 reporting threshold for non-cash gifts to benefits received from third parties? CRA responded:

…We will consider adding a link to RC4157 to paragraph 2.69.

The $500 reporting threshold that exists for non-cash gifts and awards received from an employer will not be extended to benefits received from third parties. However…[i]f the amount of the payment is $500 or less, CRA generally waives the T4A reporting requirement unless income tax was withheld at source…[or in the case of] group term life insurance benefits.

d. FMV benefit valuation

Could CRA amend S2-F3-C2, para. 2.26 to include the statement in 2010-0377261E5 that “Where the fair market value cannot be determined with any degree of certainty, it may be reasonable to consider the employer’s cost as a measure of the benefit.” CRA responded:

Paragraph 2.26 will be revised to better reflect Spence… [where t]he FCA… noted that “costs of the benefit to the employer is the wrong instrument to assess the value of the benefit. …”

24 June 2016 External T.I. 2015-0571471E5 F - Passe de ski familiale

no taxable benefit if all employees given season’s pass at ski resort/gift policy also applicable

An employer operates a ski resort open to the public and offers its employees a family ski pass, that provides access to the ski or snowboard runs for the ski season, in the form of a Christmas present or on another special occasion. After noting that “it is reasonable to consider that the benefit conferred on the employee is an economic benefit and is measurable and quantifiable,” and that CRA had “some doubts that a Season Pass is necessary for the performance of the duties of all the groups of employees listed and that, in all cases, the benefit accrues primarily to the employer,” so that there otherwise would be a taxable benefit, CRA noted that it had an administrative policy (for no benefit recognition) “where employees generally are permitted to use their employer's recreational facilities free of charge,” and that this position extended to ski resorts. However, this administrative position

does not apply to situations where recreational facilities are made available to a limited number of employees or particular groups of employees [and]… is also not applicable to the portion of the benefit offered to family members.

Furthermore, CRA’s gift policy would apply (respecting a benefit provided:

If it is shown that the Season Pass is offered to the employee as a gift and not as compensation… [T]his policy allows an employer to give an employee an unlimited number of non-cash gifts and awards with a combined total value of $500 or less without tax impact to the extent that the total fair market value ("FMV") of these gifts does not exceed $500 per calendar year. Any amount in excess of the $500 limit must be added to the employee's income as a taxable benefit… .

7 October 2016 APFF Roundtable, Q.8

policy on employees’ purchases of discounted merchandise excludes condos

A timesharing condo of Corporation A is provided through the property manager to the public at $150 per day, with the manager then paying rent of $100 per day of use to Corporation A. The services contract with the manager provides that Mr. A (a shareholder-employee of Corporation A) can reserve the condo for personal use for up to 30 days per year. When this occurs, Mr. A pays Corporation A $70 per day, equalling its costs. How is any taxable benefit computed to Mr. A under s. 6(1)(a), or s. 15(1)? CRA responded:

[T]he condominium is not merchandise that Company A sells at a discount to its employee. Thus, the administrative policy regarding discounts on merchandise stated in T4130…does not apply… .

[T]he value of a benefit corresponds to the price that an employee would have to pay, in similar circumstances, to obtain the same benefit from the corporation if he or she were not an employee. …

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) T4130 policy re discounted merchandise purchases inapplicable to shareholders 127

10 June 2016 External T.I. 2015-0587131E5 F - Remboursement de frais de repas

meal reimbursements within same metro area not a taxable benefit if purpose is to enhance efficiency

In response to an inquiry on the taxability of the reimbursement of meal expenses to employees, CRA stated:

[A] meal expense reimbursement for travel within the municipality or metropolitan area could be excluded from an employee's income in certain circumstances. Where the principal objective of the reimbursement of meal expenses is to ensure that the employee's duties are undertaken in a more efficient manner during the course of a work shift, then the employer could be the one who principally benefits. …[T]he fact of having business reasons for providing benefits to employees does not automatically lead to the conclusion that the employer is the primary beneficiary. …

[W]here an employee incurs meals expenses for travel outside the municipality or metropolitan area [of the employer's establishment] and the employee is reimbursed by the employer, this amount is not included in the calculation of employment income because this travel mainly benefits the employer.

S2-F3-C2 - Benefits and Allowances Received from Employment

Benefit qua shareholder

2.3 Unless the particular facts establish otherwise, there is a general presumption that an employee-shareholder receives a benefit or an allowance in their capacity as a shareholder when the individual can significantly influence business policy. This presumption may not apply if:

  • the benefit or allowance is available to all employees of the corporation; or
  • all of the employees are shareholders or individuals related to a shareholder, and the benefit or allowance is comparable (in nature and amount) to benefits and allowances generally offered to non-shareholder employees of similar-sized businesses, who perform similar services and have similar responsibilities.

Relations

2.12 …[B]enefits that an employer provides to an individual who does not deal at arm’s length with an employee, such as the employee’s spouse, child, or sibling, are generally included in the employee’s income.

Measurement of benefit

2.14Lowe...confirmed that generally, the value of a benefit will be included in an employee’s income under paragraph 6(1)(a) where the employee or an individual not dealing at arm’s length with the employee:

  • receives an economic advantage measurable in monetary terms; and
  • is the primary beneficiary of the benefit.

Travel

2.20 Travel between an employee’s home, including a home office, and a regular place of employment…is generally personal travel. … However, if transportation between an employee’s home and a regular place of employment is provided by an employer for security reasons, or if public and private vehicles are not allowed or practical, then such travel is not considered personal. Where an employer requires an employee to proceed directly from home to a point of call (for example, a client’s office), return home from a point of call, or travel between two regular places of employment, such travel is employment travel. …

2.21 … An employee may have more than one regular place of employment if the employee regularly performs their employment duties at more than one work location.

2.22 ....

Example 3 – Travel from home office

...The employee regularly works from home, but attends bi-weekly meetings at the head office. The head office is a regular place of employment for the employee. As noted..., travel between an employee’s home (including a home office) and a regular place of employment is personal travel.

Incidental v. primary benefit

2.23 ... McGoldrick...held..., “[w]here something is provided to an employee primarily for the benefit of the employer, it will not be a taxable benefit if any personal enjoyment is merely incidental to the business purpose ….”

2.24 ...[T]he following...may suggest...the employer is the primary beneficiary...:

  • Does the employer have a business purpose for providing the benefit?
  • Is the benefit required for the employee to perform the employment duties more effectively?
  • Is the benefit required to fulfill a condition of employment?
  • Does the employer have a moral or contractual obligation to provide the benefit....[then providing example of providing home security system for prosecutor at risk]

2.25 Where an employer requires an employee to take a trip for employment-related reasons, the employer is the primary beneficiary of the trip. ... However, where an employee receives a trip as an employment incentive or award, the employee is the primary beneficiary... . If the employee is required to perform employment duties during that trip, any benefit included in the employee’s income may be reduced for any actual employment-related activity.

Valuation of benefit

2.26 ...Spence...determined that the value of a benefit...is the fair market value of the benefit.

Third-party benefits

2.28 When an employee receives a discount on merchandise because of their employment [including from a third party]...the value of the benefit is equal to the fair market value of the merchandise purchased, less the amount paid by the employee. However, no amount is included in the employee’s income if the discount is also available to the general public or to specific public groups.

Example 9 – Supplier award

An employee is awarded a Caribbean cruise by her employer’s third-party supplier. ... Although there is no employer-employee relationship between the employee and the supplier, she received the trip because of her employment.

Benefits received in personal capacity

2.29 [A] benefit or an amount is generally received in the person’s capacity as an individual if it is...provided for humanitarian or philanthropic reasons [providing example of disaster relief].

Specific policies on benefits and allowances

2.68 [P]olicies can be found at Benefits and allowances, or in Guide T4130, and include:

9 October 2015 APFF Roundtable Q. 20, 2015-0595681C6 F - Avantages imposables / dépenses d’entreprise

employer-provided parties, bike stands and internal recreation areas generally not taxable benefits

It is "the CRA’s position is that when an employer offers free-of-charge, to all employees, a party or other social event, there is no taxable benefit if the cost per party or other social event does not exceed $100 per person." CRA confirmed that this position extends to a "5 to 7"(congregating for free after-work drinks) or a team lunch of a social nature.

"When the usage of a bike stand area [on the employer’s facilities] by an employee is difficult to quantify and measure, the CRA is of the view that a benefit is not required to be included in computing the income of the employee who uses the bike parking stand." Furthermore, "the furnishing of internal recreational facilities of the employer offered to all the employees does not give rise to a taxable benefit to them."

5 March 2015 External T.I. 2014-0553241E5 F - Bornes de recharge – avantage imposable

no benefit from free car-charging station

An employer installs a charging station for electric vehicles at the workplace. Is there a taxable benefit? CRA responded:

[T]here is only one terminal… that it is available to all employees and… the taxable benefit to be included in the computation of the employees' income using the station would be nominal compared to the cost to the employer of managing that benefit. In these circumstances… [we] accept treating...this benefit in the same way as that of non-guaranteed parking spaces, that is, on a first-come, first-served basis. Therefore, no taxable benefit should be included in computing the income of employees using the charging station.

4 February 2015 Internal T.I. 2014-0561571I7 F - Remboursement des frais d'activité physique

reimbursement of employee physical activity expenses is taxable benefit

Within the context of its "Health Program," the "Employer" reimburses XX% of physical activity expenses incurred by all its employees up to $XXX per employee per year. Are the reimbursements a taxable benefit? The Directorate responded:

]T]he amount of the reimbursement of physical activity expenses by the Employer should be included in computing the income of its employees.

While… the Health Program can contribute to improving employee well-being and satisfaction, thereby generating an overall benefit for the Employer,…the Health Program is a program for the reimbursement of expenses of a personal nature to employees and has, at most, an incidental impact on the operations of the Employer.

18 December 2014 External T.I. 2014-0523711E5 F - Allocation pour déménagement - achat de meubles

allowance that is capped at documented expenses might not be an allowance/reimbursing new furniture might be taxable benefit

associated Canadian corporation) at a Canadian location. Company X wishes to provide him with relocation compensation that Mr. X could use to acquire new furniture and new supplies. The expenses associated with the relocation of the household articles of Mr. X would be greater than the amount of the compensation amount that would be paid to him. The compensation amount would have a fixed amount and would only be paid on presentation of supporting invoices by Mr X. Would this amount be taxable?

In addition to discussing the treatment of an allowance, CRA indicated that the amount could possibly be viewed as an expense reimbursement, given that “if the supporting documents were submitted in order to fix the compensation amount based on the cost of the items purchased, the compensation amount would possibly be a reimbursement of the expenses which is limited to a maximum,” and then stated:

In the case of a compensation amount to reimburse a portion of the purchase of furniture or supplies…it would be necessary to determine whether the reimbursement confers a measurable and quantifiable economic benefit on the employee. If such an economic benefit exists, we are of the view that reimbursement of the purchase price of furniture or supplies would primarily benefit the employee and would constitute a taxable benefit to the employee….

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) favourable policy on relocation allowances does not extend to costs of new goods 174

15 December 2014 Internal T.I. 2012-0445361I7 F - Remboursement de frais de déménagement

reimbursement of moving expenses not a taxable benefit if such moving expenses otherwise deductible under s. 62 which, in the case of multiple moves, can turn on whether there is ordinary residence at each location

The "Employee,” who worked and resided in Canada at "Location 1," was assigned abroad by his “Employer” (to "Location 2"). In a subsequent taxation year, he was assigned directly to another country abroad ("Location 3"). However, the employee sold his residence at Location 1 (the "Residence") only at the time of his assignment to Location 3. After his assignment to Location 3, he returned to a place in Canada ("Location 4") where he acquired a new residence.

Would the Employer’s reimbursement of the expenses of the Residence sale be a taxable benefit. What about the possible reimbursement of expenses of purchase of a new residence at Location 4 upon completion of the Location 3 job?

After stating that “there is no taxable benefit…[where] the reimbursement is made primarily for the benefit of the employer” and that “the reimbursement by an employer of an employee’s moving expenses, does not constitute a taxable benefit…where those expenditures would also qualify, were it not for the reimbursement, as eligible moving expenses under section 62,” CRA indicated that there can be an "eligible relocation" where the individual is absent from Canada but resident there provided that the conditions stipulated in the definition are satisfied, including that the taxpayer ordinarily resided before and after the relocation at the “old” and “new” residence, respectively, with the term "ordinarily reside" having the same meaning as "ordinarily resident."

After further indicating that “the notion of ‘ordinarily reside’ relates more to everyday life than to the permanent nature of the situation,” CRA stated:

If it is established, on the facts, that the employee ordinarily resided at each of Location 1, Location 2 and Location 3, moving from Location 1 to Location 2, and then from Location 2 to Location 3, could each be considered as an "eligible relocation" if all other conditions are met.

Expenses related to the sale of the residence at Location 1 at the time of the move from Location 2 to Location 3 would not be deductible in computing the taxpayer's income because the residence at Location 1 would no longer be considered to be the old residence during the eligible relocation from Location 2 to Location 3. …

If it is instead established on the facts that the taxpayer did not ordinarily reside at Location 2 before ordinarily residing at Location 3…[e]xpenses related to the sale of the residence at Location 1 would be considered expenses of the move from Location 1 to Location 3….

However, there may be other situations in which the reimbursement was made primarily for the employer's benefit and in which, therefore, the reimbursement was not a taxable benefit to the employee.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 2 - Subsection 2(1) criteria for determining “ordinarily resides” under s. 62 (coterminous with “ordinarily resident” under s. 250(3)) 381
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Eligible Relocation expenses re selling a Canadian home after a 2nd relocation abroad are non-deductible if no ordinary residence at 1st location abroad 263

7 January 2013 External T.I. 2012-0460021E5 F - Remboursement de cotisations à un club

where “membership in a fitness centre allows the employee to meet … specific conditions [of employment,” the test of “more than 50% … to the employer's advantage” may be met

Are paramedics required to include a benefit in computing their income when their employer reimburses them for the cost of membership fees in a fitness centre? CRA responded:

[T]he onus is on the employer and employee to establish that membership in the facility is primarily (usually more than 50%) to the employer's advantage.

It is possible that the nature of the duties of a particular employment and the particular conditions of an employment contract require an employee to meet and maintain a certain level of fitness. In such a case, if it is shown that membership in a fitness centre allows the employee to meet the specific conditions that his or her employment requires, it may be, depending on the circumstances, that payment or reimbursement of membership in a fitness centre is considered principally for the advantage of the employer. If this is the case, the payment or reimbursement by an employer of such expenses would not result in a benefit to be included in computing the employee's income under paragraph 6(1)(a).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(l) denial applies to fitness centre fees, irrespective of benefit to employer 48

25 April 2014 External T.I. 2013-0515621E5 F - Frais de voyage / Travelling expenses

benefit where employer pays costs of friend to accompany employee on training trip

An employee, who must undergo training outside the country, is allowed to be accompanied by a friend (who has no connection to the employer’s business) whose travel expenses (accommodation, airfare and meals) are paid by the employer. CRA stated:

[T]he employee must include in the computation of the taxpayer’s income from an office or employment, the value of the trip to the friend who accompanies the employee during the training trip.

11 February 2014 External T.I. 2013-0507421E5 - Taxable benefit - travel expenses

reimbursement for travel between home and regular place of employment is taxable benefit, but not where between RPEs

If an individual has multiple regular places of employment (RPE) and travels between them during the day, the trip from the individual’s home to the first RPE and the trip home from the last RPE is personal, whereas travel between RPEs is considered employment-related - so that reimbursement of the former would give rise to a taxable benefit.

2014 Ruling 2013-0514561R3 - Payment in lieu of continued PHSP coverage

lump sum settlements of CCAA claims under private health services plans were non-taxable

underline;">: Background. Canco is an unlimited liability company, which disposed of its businesses prior to the initial court order under CCAA proceedings staying proceedings against it and appointing a monitor, so that essentially its primary ongoing operations are the administration of unfunded retirement plans and other post-employment benefits plans including the "Plans" (being private health services plans providing coverage for hospital medical and dental claims for numerous former employees or dependants (collectively the "OPEBs") and registered pension plans (the "Pension Plans").

Proposed transactions

Former employees (and dependants where relevant) will receive under a CCAA Plan one or more payments out of the available cash pool of Canco on account of their claim for termination of coverage under the Plans in an amount equal to their pro-rata share of the aggregate settlement amount – except that claims under a Life insurance plan will be paid separately. They will be advised by the court-appointed counsel acting on their behalf that "that for purposes of calculating the non-refundable medical expense tax credit under section 118.2, neither [they] nor their spouse or common-law partner can include any amounts that would otherwise be qualifying medical expenses until such time as their cumulative medical expenses incurred since the termination of the Plans exceed the amount of the Payment received."

Ruling

The settlement payments "will not be taxable under the Act in accordance with CRA's previous administration of the rules regarding lump-sum amounts received in lieu of health and dental coverage as described in the CRA's questions and answers relating to the 2011 Federal budget," and no withholding under s. 153 or reporting on an information return is required.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 118.2 - Subsection 118.2(3) - Paragraph 118.2(3)(b) lump sum settlements of CCAA claims under private health services plans denied future credits 119

S2-F1-C1 - Health and Welfare Trusts

Employer contributions

1.32 An employee does not receive or enjoy a benefit at the time the employer makes a contribution to the health and welfare trust. To determine if and when an employee receives or enjoys a benefit provided through a health and welfare trust, each individual plan administered by the trust must be looked at separately. Contributions made by the health and welfare trust to the individual plans are treated in the same manner as if the contributions were made by the employer....

18 November 2014 External T.I. 2012-0457981E5 - Restorative payment to registered plan

employer restorative payment to RRSP or RPP to compensate for tort

Employer accidentally missed contributing, to a group RRSP or defined contribution pension plan, the Employer's portion on behalf of an employee for a time period, and will now make a restorative payment to the accounts of the employee under the Plans to compensate for the lost income from the missing contributions. Does a taxable benefit result? CRA responded:

Where a payment made by an employer into a registered plan of an annuitant is reasonable compensation for an employee's financial loss and the payment is the result of a wrongdoing or tort in the administration of the plan…the payment would not be viewed as employment income to the employee.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(q) employer restorative payment to RRSP or RPP to compensate for tort 159
Tax Topics - Income Tax Act - Section 204.1 - Subsection 204.1(2.1) employer restorative payment to RRSP or RPP to compensate for tort 83
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(i) employer restorative payment to RRSP or RPP to compensate for tort 159

6 November 2014 External T.I. 2014-0528521E5 F - Payment of management fees by employer

taxable benefit on employer payment of RRSP (including LIRA) and TFSA fund management fees but not those of DPSPs or SERPs

The payment of the reasonable expenses of a DPSP or SERP (that is an SDA or RCA), such as management fees and brokerage, by the employer will not give rise to a taxable benefit. However, the payment of such expenses of a group RRSP (including an LIRA) or TFSA generally will give rise to a taxable benefit to the employees who are beneficiaries under the plans.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 146 - Subsection 146(1) - Retirement Savings Plan LIRA treated as RRSP 126

S3-F9-C1 - Lottery Winnings, Miscellaneous Receipts, and Income (and Losses) from Crime

voluntary payments

1.5 …]S]ometimes individuals receive a voluntary payment or other valuable transfer or benefit by virtue of an office or employment from an employer, or from some other person. In such cases, the amount of the payment or the value of the transfer or benefit is generally included in employment income pursuant to subsection 5(1) or paragraph 6(1)(a). (See also Guide T4130, Employers' Guide - Taxable Benefits and Allowances.)

Employer-promoted contests

1.25

Where an employer accustomed to awarding employees with a bonus establishes a scheme or giveaway contest in which the bonus or some amount in lieu of a bonus is divided among the employees as prizes following a draw, the scheme is not a lottery. The prizes are considered to be employment income taxable under subsection 5(1). However, there may be circumstances in which the value of an employer-promoted prize won by chance will not be treated as employment income but will be considered a win from a lottery scheme. In these situations, paragraph 40(2)(f) and subsection 52(4) will apply. To qualify for this treatment, the employees and their families:

  • must account for only a small percentage of the participants in a scheme,
  • must not be given a favoured position in relation to the other participants, and
  • must be subject to the same contribution requirements (if any) towards the scheme as other participants.

11 September 2014 External T.I. 2013-0495091E5 - Reimbursement of employee's foreign tax

taxable benefit from foreign tax reimbursement

Under the tax laws of Country A (a non-Treaty country), Canadian resident employees of a Canadian employer who are working there are considered by Country A to be resident there, so that they are required to remit income tax payments to Country A in respect of their worldwide income on a monthly basis. Would reimbursements by the Canadian employer for such Country A taxes be taxable benefits? Before citing Gernhart, CRA stated:

The reimbursement of an employee's foreign taxes would be a taxable benefit…under subsection 5(1), or more specifically under paragraph 6(1)(a)… . This is because the foreign taxes would be a personal expense of the employee and, when reimbursed by the employer, they would constitute a benefit or other form of remuneration stemming from the employment relationship. … [T]he employer would be required to withhold a portion of the reimbursement payments in accordance with [Reg.] 102… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 126 - Subsection 126(1) non-creditable foreign income taxes levied on sources outside that country 114

16 April 2014 External T.I. 2013-0514521E5 - Employer-paid Personal Trainer and Nutritionist

personal trainer/nutritionist not excluded as "counselling"

Where an employer pays, in full or part, for the cost for a personal trainer or nutritionist for its employees, the employees would generally be considered to have received a…benefit…taxable under paragraph 6(1)(a) unless it could be clearly demonstrated that the employer was the primary beneficiary of the services provided by the personal trainer or nutritionist… .[T]he employees, and not the employer, would usually be regarded as the primary beneficiaries where the employees become physically healthier and generally better able to perform their duties (e.g., sick less often, less downtime, remain fit for duty) by using the services of a personal trainer or nutritionist. …

Where counselling services are part of a program provided by a personal trainer or nutritionist, it is our view that the value of any benefit derived from such services would be difficult to separate from the value of any other benefits received or enjoyed under the program. Therefore, clause 6(1)(a)(iv)(A)…likely would not apply... .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) - Subparagraph 6(1)(a)(iv) personal trainer/nutritionist not excluded as "counselling" 157

27 May 2014 Internal T.I. 2014-0521631I7 F - Déductibilité d'un alcoomètre

full personal element if the expense would have otherwise been paid by the employee

An employer pays for the costs of installation and monthly recalibration of an alcohol interlock in the vehicle of one of its employees, which is used 20% for personal use? CRA stated:

[T]he employee would have personally paid those expenses if he were not employed by the employer or if the employer had not paid them.

Accordingly… there is a personal portion of the expenses related to the alcohol interlock and paid by the employer. This portion is probably the full amount paid by the employer since the expense is considered personal.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose not necessary to show that expenditure generated income - and potential deduction where 20% personal use 126

10 April 2014 External T.I. 2013-0514321E5 - Donated vacation

donated vacation/no double taxation

Employees, who are otherwise entitled to convert their vacation leave to cash, may donate a portion of their annual vacation entitlements for use by other employees ("donees") who have exhausted their vacation entitlements due to personal or family hardship. In finding that the donated vacations likely would not be an employment benefit to the donees, CRA stated:

[T]he vacation is not something to which the donee was entitled to by virtue of his or her employment; it arose as a consequence of the actions of the donors who voluntarily gave up a portion of their vacation leave in order to help the donee and his or her family. …

[However] it is the practice of the Canada Revenue Agency not to assess the same income twice. Accordingly, even if it is determined that paragraph 6(1)(a)… does apply, the amount would not be required to be included in the donee's income as long as it was included in the donor's income under subsection 56(2)… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2) donated vacation/no double taxation 202

18 December 2013 Internal T.I. 2012-0472211I7 F - Voyages offerts par une compagnie

Caribbean sales incentive trip provided to incorporated sales reps represents a benefit to them from their corporation

The corporate "Taxpayer" annually offers an annual free trip to a southern location (perhaps a Caribbean resort) to its associated brokers and agents ("Sellers") who have attained specified sales objectives. The qualifying Sellers ("Travellers") must attend some morning briefings on the Taxpayer's products, with the same sessions being offered in Canada to the balance of the Sellers. Group dinners also are organized. Spouses are invited but do not attend the briefings (unless they also are Sellers). The balance of the time at the resort is free time or spent on organized recreational activities. Most of the Seller services are provided through a personal corporation, with the balance being proprietorships.

Respecting the taxability to the sales corporations of the value of the trips if the purpose of the trips was mostly personal, CRA stated (TaxInterpretations translation) that "the value of the trip must be included in the computation of the income of the corporation by virtue of section 9" (and similarly respecting the proprietorships). Respecting whether there would be a corresponding benefit included in the income of a shareholder-employee of the corporation (including expenses of a spouse's trip), CRA stated:

[W]here a person who is both shareholder and employee of a corporation receives a benefit from the corporation which is not provided to other employees ... there is a presumption to the effect that the person benefited as shareholder. However, if a similar benefit is provided by the corporation to all the employees, including those who also are shareholders, the latter will be considered to have received a benefit by reason of their employment. ...If the advantage is conferred by the corporation on the employee-shareholder as employee, the corporation may reduce the amount included in the computation of its income ... by the amount included in the income of the employee by virtue of paragraph 6(1)(a) [and otherwise for s. 15 benefits]. The Taxpayer must...include the value of the benefit included in the computation of income by virtue of paragraph 6(1)(a) on a T4A slip...for Travellers who provide their services through a proprietorship or a corporation.

CRA went on to state "in determining whether the amount of the advantage is included in the computation of income of an individual, we would examine whether the trip occurred mainly for personal or for business reasons."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(2) - Paragraph 67.1(2)(d) Caribbean sales incentive trip provided to incorporated sales reps excluded if s. 6(1)(a) benefit to them qua employee 178
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(4) - Paragraph 67.1(4)(b) Caribbean sales incentive trip is "entertainment" 175
Tax Topics - Income Tax Act - Section 9 - Nature of Income Caribbean sales incentive trip provided to incorporated sales reps was s. 9 income to their corp to extent of personal portion 171

19 February 2014 External T.I. 2013-0508501E5 - Taxable benefit - medical test

employer-paid medical examinations

Before concluding (following 2001-009280) that "any employer-paid medical examination that was not required as a condition of employment will give rise to a taxable benefit," CRA quoted the statement therein that

[W]here the employee can exercise discretion as to whether to take an annual examination by the employer's physician, clearly it is not a condition of employment. As well, unless a medical exam with negative results impacts employment status in some manner, it cannot be said that the medical exam was a condition of employment.

30 December 2013 External T.I. 2013-0501351E5 - Employee award

cash awards to employees

After stating "that a taxable benefit may exist where there is any connection between a benefit and the particular office or employment," CRA found that cash community achievement awards which were available only to employees were connected to their employment and, thus, were taxable.

10 December 2013 External T.I. 2013-0490621E5 - Taxation of gift from parent to teacher

parents' donate to foundation to reduce teachers' ticket prices

A private charitable foundation, associated with a private school, holds a fundraising gala for the benefit of the school. The teachers are urged to attend and purchase tickets. Parents' donations to the foundation further reduce the teachers' cost for the tickets, which becomes apparent to them only on their ticket purchases. CRA stated:

An amount is generally considered to be received in a person's capacity as an individual, as opposed to his or her capacity as an employee, where the amount is: philanthropic; voluntary; not based on employment factors such as performance, position, or years of service; and not made in exchange for employment services. …

[A]ny further reduction in the cost of the ticket to the teachers resulting from the parent donations is likely a windfall or a gift received in the person's capacity as an individual.

26 November 2013 External T.I. 2013-0496251E5 - Workers compensation payments

employer advance against worker compensation award

An advance is provided by the employer to an employee in anticipation of a workers' compensation award. CRA stated:

Where it can be established that [it]… is to be repaid from anticipated future Board awards, the loan or advance is not considered income to the employee and is not a deductible expense to the employer. …[I]t is the CRA's long-standing position that any interest accumulating on those advances/loans will not be considered a taxable benefit to the employee.

18 November 2013 External T.I. 2013-0494891E5 - Taxability Scholarship Funds Received by Employees

3rd-party scholarships to employees with requirement to return to employment

A registered charity (the "Foundation") raises funds for the "Organization". Under the terms of the donation agreement between the Foundation and a donor to it, the Foundation created a scholarship for employees of the Organization pursuing post-graduate degrees in specific areas of study. The scholarship (which is merit based) is available only to employees who agree to continued employment with the Organization following the completion of studies. After noting that whether an economic benefit received by virtue of employment is taxable "will generally depend on whether the primary beneficiary of the educational program funded by the scholarship is the employer or the employee," CRA stated:

[C]ourses taken to maintain or upgrade employment-related skills are for the primary benefit of an employer, provided that the employee is expected to resume his or her employment for a reasonable period of time after completion of the training. It is our view that this policy can be applied to situations where the courses or training taken by an employee are paid for by a person other than his or her employer… .

4 September 2013 Internal T.I. 2013-0497401I7 F - Remboursement partiel de frais d'abonnement

generally a taxable benefit where reimbursement of fitness centre membership fees

As an incentive to improve the physical condition of Employees, a committee of the Employer wants to put in place a program that would provide partial reimbursement of membership fees incurred by Employees at fitness centres. Would there be a taxable benefit to participating employees? CRA stated:

In general … where the employee's overall health improves as a result of physical activity, resulting in an improvement in the performance of his or her duties (for example, the employee uses sick time less often) … the CRA considers that the employee benefits primarily from the payment or reimbursement and receives a taxable benefit for the purposes of paragraph 6(1)(a).

However, it is possible that the nature of the duties of a particular employment/or the particular conditions of an employment contract require an employee to maintain a good level of physical fitness. …

[Here] although a satisfactory physical condition may be an asset to the Employees, it does not appear to be a requirement for them to maintain their employment with the Employer. Therefore, in this case, the CRA would generally be of the view that a taxable benefit should be included in computing the income of Employees.

26 September 2013 External T.I. 2013-0497101E5 F - Avantage imposable consenti par un actionnaire

gift made by shareholder-manager to corporate employee “not received … on a purely personal basis”

Is a gift received by an employee of a corporation from a shareholder manager, that would have been taxable under s. 6(1)(a) had it been provided by the corporation, taxable to the employee? In responding affirmatively, CRA stated:

In order for a gift or benefit received by an employee to come within paragraph 6(1)(a), it is sufficient if there is some connection between the gift received and an office or employment of the taxpayer and that the gift was not received by the employee on a purely personal basis. … [E]verything indicates that the employee received the gift because of the employment held with the corporation.

6 September 2013 External T.I. 2012-0463501E5 - Reduced Interest Rate Credit Cards

The correspondent asked about the tax treatment of an employee of a financial institution who receives a credit card bearing interest on credit balances at interest rates below those charged to non-employee cardholders, but above both the prescribed rate in Reg. 4301(c) and the bank's usual rates for commercial loans. (No reference was made to the credit balances being interest-free until the due date.)

CRA considered that, assuming the advances under the cards were received as a consequence of the individuals' employment (which would be deemed by s. 80.4(1.1) to be the case if the terms, e.g., the interest rate, would have been different but for the employment), s. 6(1)(a) would not apply as the employment benefit was computed by s. 80.4(1) to be nil based on the low prescribed rate.

The words "in respect of" in s. 6(1)(a) are broader than the words "because of or as a consequence of" in s. 80.4(1). If s. 80.4(1) did not apply, the s. 6(1)(a) benefit "would generally be calculated using the interest rate differential between credit cards issued to employees and those provided to the general public (i.e. the FMV interest rate)."

15 April 2013 Internal T.I. 2012-0471161I7 F - Avantage imposable - Taxable Benefit

lifetime transportation passes to retired bus company directors are non-taxable

CRA indicated that:

  1. transportation passes provided by a bus transportation company to a member of its board of directors did not give rise to a taxable benefit;
  2. lifetime transportation passes provided by the bus transportation company when the member of the board of directors leaves office are a taxable benefit where the director “has left employment for a reason other than retirement.”;
  3. taxi service for bus drivers who work early in the morning or late at night, outside of normal transit service hours give rise to a taxable benefit since “travel between an employee's home and the employee’s workplace is generally considered to be a personal trip.”

13 June 2013 External T.I. 2013-0487931E5 F - Repas fournis gratuitement

free meals provided to child care workers in accordance with employer policy aimed at effect on children were taxable

Employees ("Affected Employees") who worked with children during the lunch and snack period in an early childhood centre ("ECC") were required to take the same meals and snacks as those offered to children by the ECC in the course of their regular work in accordance with an ECC policy that the Affected Employees, who were role models, must not consume a meal different from that offered to the children in the presence of the children. Is there a taxable benefit from those meals being received free of charge? After discussing McGoldrick, CRA stated:

[E]ven if the meals were provided free of charge to the Affected Employees in connection with the purposes of the business, their personal benefit in this respect cannot be incidental. Therefore, we are of the view that the value of the meals offered to the Affected Employees should be included in the computation of their income.

17 June 2013 External T.I. 2012-0465031E5 F - Paiements pour publicité sur un véhicule

taxable benefit from being paid to display company logo on car

A corporate employer, in addition to paying its employees an allowance for their use of their automobiles that is based solely on the number of kilometers traveled in performing their duties, calculated according to the limits in Reg. 7306, pays them an annual amount for their agreement to display the company's corporate logo and colours on their automobiles. CRA stated:

[T]he publicity amount should be included in the computation of the employee's income from an office or employment.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(x) being paid separately for displaying company logo on car may render a Reg. 7306 allowance unreasonable 142

12 February 2013 Internal T.I. 2013-0475631I7 - Treatment of Settlement Amounts

It is contemplated that a lump sum would be paid to the individual plaintiffs in a class action suit in settlement of their allegation that monthly long-term disability benefits received by them should not have been reduced by monthly benefits under the Pension Act. Applying the surrogatum principle in Tsiaprailis, CRA found that this amount would be taxable and included in the recipient's employment income in the year received under s. 6(1)(f), and found that a lump sum payment of tax included in the award would be included in the income of the recipient as a taxable employment benefit in the year under s. 6(1)(a).

12 July 2013 External T.I. 2013-0496281E5 - Disaster relief payment to employees

Disaster relief payments from employer to employee will not be considered employment income if "the individual received the Payment in his or her capacity as an individual, as opposed to his or her capacity as an employee." CRA listed criteria under which it would consider a payment not to be employment income, including that:

  • the individual was affected by a disaster (as described by Public Safety Canada);
  • the payment is philanthropic in purpose, voluntary, and at arm's length;
  • the payment is not made to shareholders, connected persons or executives controlling company decisions;
  • the payment is not based on performance, position, lost salary, or services; and
  • the employer has not taken a business expense deduction.

13 February 2013 External T.I. 2012-0443331E5 - Are gifts to elected officials taxable?

In response to the question as to whether gifts over $100 given to an elected official considered a taxable benefit, CRA stated:

Elected officials are subject to the same policies as employees with respect to gifts and awards. Under paragraph 6(1)(a) of the Income Tax Act (the Act), gifts and awards received by employees/officers by virtue of their employment/office are generally included in their income. The CRA's administrative policy regarding gifts and awards, including the exemption for certain non-cash gifts under $500, can be found on our website at the following link: www.cra.gc.ca/gifts.

17 May 2013 CLHIA Roundtable, 2013-0479111C6 - WLRP Reimbursement by Insurance Corp Due to Error

The correspondent wrote that, if an employee receives amounts under a wage replacement plan and the employer and insurer mistakenly believe the amounts not to be a taxable benefit, the employee may subsequently be reimbursed for income tax payable, accounting fees, interest and penalties. CRA stated that such reimbursement would generally be taxable pursuant to s. 6(1)(a) on the basis that income tax, interest and penalties are personal expenses. Whether reimbursement for accounting fees constitutes a taxable benefit was not clear from the correspondent's facts.

28 March 2013 External T.I. 2012-0460031E5 F - Prime pour partager chambre à deux

allowance paid by 3rd-party customer to employees re double-occupancy rooms was taxable

Employees of a construction services company (the “Employer"), who are working at a remote construction facility, are provided accommodation and fed by the client who, in addition, provides a daily allowance to employees who agree to share a double occupancy room. Is there a taxable benefit? CRA responded:

[W]e are generally of the view that there would be a benefit under paragraph 6(1)(a) if the amounts received by the employee have any connection with his or her employment.

Based on the foregoing, it is highly likely that the allowance paid to employees who agree to share a double occupancy room comes within paragraph 6(1)(a) as a taxable benefit, the total amount of which is to be included by the Employer on a T4A slip in the name of the Employee who received these payments.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 200 - Subsection 200(1) T4As to be issued by employer for allowance paid by 3rd-party customer to employees 144

20 November 2012 External T.I. 2012-0466891E5 F - Non-Cash Gifts and Non-Cash Awards

$500 tax-free non-cash gift amount calculated including sales tax

Before confirming the deductibility to the employer of gifts and awards made to employees, CRA stated:

The Agency's policy is to allow an employer to give an unlimited number of non-cash gifts and awards with a combined total value (including taxes) of $500 or less annually free of tax.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose gifts and awards to employee are deductible even if within $500 tax-free amount 98

7 November 2012 External T.I. 2012-0466681E5 F - Frais de gestion environnementale

ecocharges payable on any purchase of electronic goods included in benefit from their gift

The "écofrais," which vendors of various types of electronic products are now required under Quebec law to (at their option) add to or include in the price of such products sold in Quebec and remit to the applicable recycling agency, must be included in the determination of the fair market value of such products for purposes of computing an employee benefit when such products are gifted or awarded to an employee.

CRA stated (TaxInterpretations translation):

It appears that the écofrais are environmental charges which are incorporated in or added to the final sales price of a product, and which the enterprise has the option of making visible or not visible. Furthermore, it appears that they are not required to be presented as an addition to the initial price as, for example, a sales tax.

Consequently, as the payment of these charges is mandatory, taking into account that they are provided for in provincial legislation and regulations, these charges must be added in computing the FMV of gifts or awards.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Other mandatory ecocharges added to cost of electronic goods also included in their FMV 185

26 July 2012 External T.I. 2011-0431681E5 - Taxable Benefits – Recreational Facilities

CRA stated:

[A] taxable benefit would not generally arise in situations where an employer provides an in-house recreational facility and the facility or membership is available to all employees. This exemption applies whether the employer provides the facilities free of charge or for a minimal fee and the facility or membership is principally for the advantage of the employer.

An in-house fitness centre available only to employees from a specific department falls outside this exemption (even where the stated purpose is to reduce sickness and injury resulting from the nature of the work performed in that department).

CRA also noted that it does not consider the employer (rather than the employees) to be the primary beneficiary of a fitness facility or membership program unless "stringent fitness standards" are directly relevant to the requirements of the employment.

26 July 2012 External T.I. 2011-0430971E5 - Employee Discount Program

Groceries are considered "merchandise" for purposes of para. 2 of IT-470R (respecting employeee discount programs).

22 February 2012 External T.I. 2011-0424601E5 F - Scholarships and bursaries paid by a firm

employer-reimbursed tuition not considered for its training benefit if incurred before employment commenced

  1. Does s. 6 or 56(1)(n) apply to a student, who has been hired by a professional firm for the summer, and then is provided with a $2,500 bursary by the firm for the following year of law-school studies after being offered, at the end of the summer, a permanent position to take effect after that year?
  2. Will the reimbursing by a new employer, after the commencement of employment, of tuition fees incurred by a law student before such commencement represent a benefit?

Re Q.1, CRA indicated that:

If the employer-employee relationship was not established at the time of the bursary payment and the amount was not described in subsection 6(3), the bursary would not be an amount received in respect of, in the course of, or by virtue of an office or employment. If none of the other exclusions in subparagraph 56(1)(n)(i) apply, the amount of the bursary would be included under that subparagraph.

On the other hand, if the employer-employee relationship was established at the time of the bursary payment, it would be necessary to determine whether the amount was an s. 6(1)(b) allowance or an s. 6(1)(a) benefit. In the latter regard:

[T]here would be a taxable benefit if the training was undertaken principally for the benefit of the employee, which could be the case if the employee and the employer had an arrangement whereby the remuneration usually paid to the employee was reduced based on the training costs incurred by the employer for that employee. In this context, it is necessary, among other things, to determine whether the training was primarily for the benefit of the employer or the employee.

In finding that the situation in Q.2 gave rise to a taxable benefit, CRA stated:

[T]raining courses taken by an individual before the individual starts a new job cannot be considered as training courses taken to maintain or improve skills related to the activities of the employer, that factor being an essential condition for determining whether courses are primarily for the benefit of the employer.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n) potential qualification under s. 56(1)(n) if bursary paid by employer while student not a summer student or permanent employee 135

29 November 2011 CTF Roundtable, 2011-0425801C6 - Taxable benefit - employee computer equipment

CRA was asked to comment on "bring-your-own-device" programs for employees, under which the employee is provided with a fixed amount to purchase his or her computer equipment and is reimbursed for the lesser of a stipulated maximum amount and the amount actually paid for equipment. CRA stated:

The employee is considered to have received an economic benefit from the employer, as the employee's net purchase cost of the computer owned by the employee is less than it would otherwise have been. The amount of the economic benefit would be equal to the reimbursement received by the employee.

18 September 2012 External T.I. 2011-0423941E5 F - Entreprise de prestation de services personnels

no taxable benefit if cell phone used primarily in employment

Respecting a cell phone provided by a personal services business (PSB) to an employee and used 60% for employment purposes, CRA stated:

Since there is no benefit conferred on the employee, the employer correlatively will not be entitled to a deduction.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(p) - Subparagraph 18(1)(p)(ii) cost of benefit to corp generally equals allowance amount and can be the cost of a non-s. 6 benefit – however no benefit if cell phone used primarily in course of employment 288

30 May 2012 Internal T.I. 2012-0434471I7 F - Remise de prix non monétaires aux employés

distinction between non-cash award for overall contribution to workplace and performance recognition

The Directorate first referenced its policy on non-monetary gifts.

[T]he Agency's policy is to allow an employer to give an unlimited number of non-cash gifts and awards with a combined total value of $500 or less (taxes included) annually, tax-free. In addition to such annual gifts and awards, this policy allows the employer to give an employee a non-cash award valued at $500 or less to recognize years of service or to mark a birthday. In order for it to be tax-free, such an award must be for a minimum of five years' service, and it has to be at least five years since the last long-service award was given.

It then discussed five different types of awards.

Award No. 2 recognizing employees for having made additional efforts beyond the usual requirements of their position was taxable.

Respecting Award No. 1 recognizing the significant accomplishments of employees and teams who have contributed to the achievement of short- and long-term goals beyond the normal requirements of their position, it stated:

[T]his award may be intended to recognize an employee's overall contribution to their workplace or to recognize their performance at work. In the first case, the value of the award would not be taxable up to a combined total value of $500 (taxes included) per year for all gifts and awards (other than Award No.3 or Award No.4 [respecting awards every five years of service, and on retirement) eligible under the Agency's policy.

10 May 2012 External T.I. 2012-0440731E5 F - Employer-provided gifts & Awards

award of points that could be applied to 40 different services were of near-cash items and, thus, taxable

A corporation rewards employees (e.g., for achieving numbers of years of service) by awarding them points that can be applied to purchase 40 different listed services related to work-life-family balance set out in a catalogue, e.g., day care services for school days and spring break; and nutritionist, dietitian, massage therapist, psychologist, financial advisor, and home chef services.

Before finding that the awards would give rise to a s. 6(1)(a) benefit, and after noting that the reason for the CRA’s policy accommodating non-cash gifts to employees was to avoid the valuation burden on the employer for such gifts, so that such policy did not extend to gifts of cash or near-cash items, CRA stated:

The CRA has not established a test as to what is a very limited choice of goods or services in determining whether an employer's award is a near-cash item. However, we are of the view that offering 40 services in a catalogue is not a situation where the employer offers a very limited choice.

14 October 2011 Internal T.I. 2011-0410781I7 F - Repas fournis gratuitement

benefit from free meals delivered on-site

Respecting a proposal that employees would receive a catered meal service during their shifts, CRA stated:

[T]o the extent … the provision of free meals … primarily benefits the employees and not primarily their employer, … the value of that benefit should be included in computing the income of those employees. The amount of the benefit will have to match the value of the meals that are provided to the employees.

7 October 2011 Roundtable, 2011-0411941C6 F - Covoiturage

employees and employer must reasonably allocate benefit from gas carpooling expenses being reimbursed

Under an employer-organized carpooling program, an employee driving another to work receives a 50% reimbursement of properly documented and certified gasoline expenses – or of 100% if two or more other employees are driven. Are the gasoline reimbursements taxable benefits and, if so, how should it be allocated? CRA responded:

[T]he portion of the reimbursement amount that relates to personal expenses of the employees will constitute a taxable benefit to such employees pursuant to paragraph 6(1)(a). Normally, the amount of the taxable benefit should be included in the income of the employee who received the reimbursement. However, the CRA accepts that the amount of that taxable benefit is to be reasonably allocated between the employee who used his or her automobile and the employees who received the transportation. In each situation, the employer and employees should agree among themselves to make a reasonable allocation.

29 September 2011 External T.I. 2011-0405391E5 F - Utilisation d'un aéronef

price charged to customers for flights on company aircraft determined taxable benefit to employees/benefit to majority shareholder was qua employee

A corporation's aircraft makes a commercial flight on which seats are still available, for which the price charged is $XXXXXXXXXX. An employee or shareholder takes a seat for personal purposes. CRA responded:

[T]he price that you charge your customers can be used as the basis for calculating the taxable benefit to be included in computing the income of your employees to the extent that:

  • anyone, not just the corporation's employees or shareholders - can reserve a seat on the corporation's aircraft for $XXXXXXXXXX; and
  • The price of $XXXXXXXXXX represents the price of a regular commercial economy airfare for a regularly scheduled flight to Montreal.

The founder-president of the corporation, who also is its majority shareholder, uses the corporation's aircraft for personal purposes, including for a return trip to Florida.

CRA stated:

[T]he benefit arising from the person's use of the aircraft by the corporation's founder-president should be based on the price of a regular first class ticket for a scheduled flight to the same destination, as the founder-president received the benefit as an employee of the corporation.

(2) When an aircraft is owned or leased primarily for business purposes and it makes a flight the main purpose of which is to provide free or subsidized transportation for the personal benefit of one or more employees or shareholders, the value of the resulting benefit is included in computing the income of the employee or shareholder.

After referencing the position in IT-160R3, para. 9, that a controlling shareholder generally will be considered to have received a benefit qua shareholder where “there is extensive use of the aircraft for personal purposes by the shareholder-employee or … relatives or friends,” CRA stated:

[T]he benefit arising from the person's use of the aircraft by the corporation's founder-president should be based on the price of a regular first class ticket for a scheduled flight to the same destination, as the founder-president received the benefit as an employee of the corporation.

30 September 2011 Internal T.I. 2011-0393171I7 F - Representation or other special allowances

no benefit for excess of rent allowance over cost of comparable Cdn location or where higher class of accommodation is for security reasons

A member of the Canadian armed forces was assigned to the U.S. and occupied an apartment there for several years and did not maintain a residence in Canada. While in the U.S., he received a (i) rent allowance which paid him for the excess of his actual rent expense minus a deduction for the notional cost of accommodation in Canada, but without this deduction having been indexed over the years for inflation, (ii) a similar utilities allowance, and (iii) a Foreign Service Premium to compensate for other financial detriments of a foreign posting.

Before finding that the rent allowance gave rise to a taxable benefit based onthe deduction for comparable accommodation in Canada being understated, the Directorate stated:

[A]n employee does not become economically enriched where the employee’s employer reimburses the employee, on a temporary posting, for the higher cost of housing comparable relative to what the employee occupied in the employee’s region of origin before assignment ("Comparable Housing"). However, there may be situations where an employee occupies a higher class of accommodation during the employee’s assignment than Comparable Housing, for example, due to the employee’s level of security and location in the city. In those situations, the employee’s employer pays the employee more than the cost of Comparable Housing. In those situations, we are of the view that the employee has not been economically enriched if it is the employer who requires the taxpayer to occupy that housing of a higher class.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(iii) foreign service premium received by armed forces member so qualified 182

8 October 2010 Roundtable, 2010-0373451C6 F - Avantages imposables et limite de 100$

computing $100 per employee limit for office parties etc.

When asked to comment on the $100 limit in IT-470R, para. 9 for benefits conferred on employees at social functions or events, CRA stated:

(a) Where an employer provides a social event or other social activity free of charge to all employees, CRA's policy is that there is no taxable benefit to be included in the income of the employees if the cost per employee for the social event or activity does not exceed $100. The CRA confirms that this is a limit per event and that it is possible that more than one event per year offered by the employer to be covered by this policy. … [T]he number of events to which this policy is applied must remain reasonable … .

(b) Where the party or social event is open to all employees and their spouses, the average cost of $100 will be based on the total number of guests and not just the number of employees.

(c) The $100 limit is an average that is based on the total amount paid by the employer for the function or social event, including room rental, food and entertainment expenses. Therefore, it is necessary to include the GST/QST paid by the employer … .

24 September 2010 External T.I. 2010-0366661E5 F - Allocations de repas

criteria for overtime meal allowances to be non-taxable

Where a blue-collar employee of a City works overtime for more than a certain number of hours above the regular hours of work, a meal allowance is paid, with a further meal allowance being paid if there is a further increment in the overtime hours for that period. For particular situations, such as snow removal operations, the employee may be called upon to work overtime more than two times in a week.

A part-time City firefighter responding to an emergency call receives an indexed meal allowance after X hours of continuous work, and to a further allowance following a further increment in the overtime hours.

Are these allowances taxable?

CRA found that the regular blue-collar meal allowances satisfied the following tests and, thus, were not taxable:

[T]he CRA does not consider a meal allowance paid to such an employee working overtime as income if the following criteria are satisfied:

  • the value of the meal or meal allowance is reasonable: in general, an amount up to $17 will be considered reasonable;
  • the employee works at least two hours of overtime immediately before or immediately following the employee's normal scheduled hours of work;
  • the overtime is infrequent or occasional.

With respect to the third criterion, the CRA considers overtime to be of an occasional nature if it is worked less than three times a week. However, that condition can be satisfied where a meal or allowance is provided three or more times a week on an occasional basis to meet ad hoc workload requirements, such as major repairs. …

On the other hand ... a meal allowance to which an employee is entitled after working a certain minimum amount of overtime to be taxable if the payment to the employee is not truly related to whether or not the employee actually takes a meal.

However, the firefighter allowances were taxable as they were “not related to the requirement to work overtime.”

28 September 2010 External T.I. 2010-0357141E5 F - Prix de présence et tirages

promotional prize as income to employee of third party

An insurance company, which pays commissions to a network of independent brokerage offices, awarded a door prize worth $1,500 to one of the employees of a brokerage office (as part of a contest addressed to the owners of the brokerage offices and their employees) and, as part of a promotion, organized draws pursuant to which it paid brokerage office owners and their employees prizes ranging from $500 to $2,500 in cash or in the form of a travel certificate. CRA stated:

[T]he door prize will be required to be included in computing the income of the employee who received it, pursuant to paragraph 6(1)(a). … With respect to prizes awarded to owners of brokerage offices and their employees under draws held over a period of several months … these prizes will be required to be included in the income of the owners and employees receiving them pursuant to subsection 9(1) and paragraph 6(1)(a) respectively.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Nature of Income business income from draw won by brokerage 79

13 April 2010 External T.I. 2010-0382791E5 F - Logement offert gratuitement à un pasteur

occupation of free housing after ceased to be pastor not taxable if not in exchange for services

A pastor occupied, free of charge, housing owned by the church having a monthly market value of $750. The pastor did not receive fixed weekly remuneration but, rather, was remunerated with the voluntary contributions of members of the church or surrounding churches.

In response to queries as to the treatment of the free housing provided during the period that the individual was pastor, and of that for the several months following when another individual had been retained as pastor before the individual moved out, as well as to the tax treatment of voluntary contributions from members and as to the availability of the clergy residence deduction, CRA stated:

2009-0350821E5 … deals with a situation similar to yours and … seems to answer your questions … .

[Respecting] the free occupation of the housing after you ceased to be a pastor for the congregation, it would be necessary to determine whether, for that period, housing is provided to you in return for services rendered or rendered in the course of an office or employment. If that were not the case, the value of the housing would not have to be included in computing your income.

21 June 2010 External T.I. 2010-0355971E5 F - Montants versés à des administrateurs

payment of accommodation, travel and meal expenses for attending directors’ meeting out of the region likely not a benefit, but tickets to events likely taxable

A not-for-profit organization described in s. 149(1)(l) (the “Organization”) operates in two different regions and maintains two establishments, one in each of these regions. Board meetings generally occur every two months, in an evening, and alternate between the two locations. They work full-time in other employment or carry on a business. In addition to their attendance fees (which are taxable under s. 6(1)(c)), the Organization pays a travel allowance to those who must travel between regions to attend meetings.

Directors occasionally participate in events held outside the regions where the Organization operates. In these situations, the Organization reimburses directors for their accommodation, meals and travel expenses. As a way of thanking and encouraging directors to participate in these events, the Organization may provide them with tickets to performances, festivals, or other entertainment during their free evenings at a particular event. The Organization may also invite one or more of its directors and other stakeholders to concerts or a box at hockey games in order to develop business relationships and contacts for the purposes of the Organization's activities. CRA stated:

In this case, it appears to us that meal expenses paid by the Organization for its directors at meetings of its Board of Directors and the reimbursement of travel expenses to directors attending events held outside the regions where the Organization operates may not be taxable benefits to the extent that the payment or reimbursement of the expense is primarily for the benefit of the Organization and the payment or reimbursement of the expense does not constitute a taxable benefit to the employee.

Finally, it appears to us that the value of tickets to shows, festivals or other entertainment activities that the Organization provides to its directors to thank them and encourage them to participate in events or activities could be a taxable benefit under paragraph 6(1)(a) if it results in an economic benefit or profit for them or if it constitutes a form of remuneration for the services they have rendered.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 81 - Subsection 81(3.1) potential exclusion for part-time directors who receive travel allowance for travel to out-of-region board meetings 130

19 May 2010 External T.I. 2009-0342651E5 F - Remboursement de dépenses et allocations

reimbursement for employment-related moving expenses, and reimbursement of accommodation and transportation where employee temporarily assigned away from normal home base, not taxable

A reimbursement for the costs the employee, incurred during a move, to obtain a certificate of location, appraisal or inspection of the employee's new property does not result in a taxable benefit where the move is necessary because of employment.

A reimbursement of accommodation and transportation expenses where an employee is temporarily assigned to a territory other than the employee’s normal home base will generally not be required to be included in the employee's income.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) first $650 of allowance to cover moving costs not taxable 54
Tax Topics - Income Tax Act - Section 6 - Subsection 6(23) reimbursement of expenses to obtain a mortgage is included 35

4 March 2010 External T.I. 2009-0343851E5 F - Remboursement des cotisations à un club

reimbursements of employee fitness facility fees are considered principally for employees’ benefit if membership merely improves their performance through increased health

Before concluding that it appeared likely that there was a taxable benefit from partial reimbursements to employees of fees for the use of recreational facilities for the purpose of engaging in physical activities, CRA stated:

Generally, we do not consider the payment or reimbursement of club dues or membership fees to be principally for the benefit of the employer where the employee's participation in physical activities provides only an indirect benefit to the employer. This is the case when the employee's health improves as a result of the physical activities resulting in an improvement in the employee's job performance (for example, the employee is sick less often). In such a case, the CRA considers that the employee primarily benefits from the payment or reimbursement and receives a taxable benefit for the purposes of paragraph 6(1)(a).

However, it is possible that the nature of the duties of a particular employment and/or the particular terms of an employment contract may require an employee to meet and maintain a certain level of physical fitness.

4 March 2010 Internal T.I. 2009-0337381I7 F - Sens du mot divertissement

gifts of entertainment equipment by taxpayer to an employee of a customer responsible for purchases are includible in that individual’s income

After finding that the s. 67.1 limitation did not apply to gifts of property to an employee of a customer responsible for purchases, the Directorate added:

T]he value of gifts received by the purchasing employee can be included in the employee's income under paragraph 6(1)(a) even if the gifts are given by someone other than the employer.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(1) s. 67.1 limitation does not apply to gifts of equipment used to entertain the recipient 118

23 February 2010 Internal T.I. 2010-0356121I7 F - Avantage imposable - appareils auditifs

hearing aid reimbursement was taxable given that employee owned the devices and primarily benefited

An employee with a hearing loss was prescribed hearing aids by an audiologist, and subsequently submitted an expense claim to his employer under the Policy on the Duty to Accommodate Persons with Disabilities in the Federal Public Service, so that he was reimbursed for the cost of the devices net of amounts received under his group health insurance policy. The Directorate stated:

[A]n employer must take reasonable steps to ensure that its workplaces are accessible and safe for persons with disabilities. Where the employer retains ownership of property needed by employees with disabilities and that property is used by those employees only in the workplace in the performance of their duties, no taxable benefit results.

In the situation you have presented, the employee owns the hearing aids. Although the hearing aids are used by the employee to perform the employee’s duties, it appears that the employee may also use them for everyday activities. Therefore, we consider the employee to be the primary beneficiary of the hearing aids and their reimbursement by the employer to be a benefit that has to be included in the employee's employment income under paragraph 6(1)(a).

30 April 2009 External T.I. 2009-0312171E5 - Taxable Benefits

benefit from employer payment of policy premiums

Where an employer pays the premiums under a policy owned by an employee, such premiums will be considered an employee benefit under s. 6(1)(a).

19 March 2009 Internal T.I. 2009-0306971I7 F - 6801(d): Traitement fiscal pour l'employé

appreciation in DSUs is not a capital gain

Participants in a DSU plan described in Reg. 6801(d) had elected to receive bonuses as credits to their DSU notional accounts based on the then-current market value of the shares of the employer (Pubco) and also received dividend-equivalent credits to their account. Regarding the consequences when they cashed in their DSUs on the termination of their employment for amounts based on the appreciated (or depreciated) share value, CRA stated:

[A] Lump Sum received by a Participant under the Plan in a particular year is an amount required to be included in computing the Participant's income for the year from an office or employment by virtue of subsection 5(1), paragraph 6(1)(a) or paragraph 6(1)(c), as the case may be. Furthermore, we are of the view that even if the market price of Pubco's common shares has fluctuated (up or down) between the date a Participant elects to receive a portion of the Participant's bonus for a particular year in the form of DSUs and the date the Participant receives the Lump Sum under the Plan, the entire Lump Sum constitutes income to the Participant from a source that is an office or employment [and similarly re dividend equivalents].

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 6801 - Paragraph 6801(d) DSU cash-out amount is employment income 95

15 April 2008 External T.I. 2006-0216791E5 F - Frais de déplacement-Personnel VS Aff.

travel of school trustee between home and administrative office where meetings were held was a personal expense, whose reimbursement was taxable

In finding that amounts paid to an elected school trustee to reimburse for mileage to and from the school board's administrative office should be included in the trustee's income, CRA noted that the trustee position was an office for s. 6 purposes, that its longstanding position was that the cost of travel between an employee's residence and the usual place of work (here, the administrative office) is considered a personal expense, and that this position was confirmed in relation to a municipal councilor in Daniels (2004 FCA 125).

5 March 2008 External T.I. 2007-0256291E5 F - Bénévoles

volunteers working regular hours for a charity were not taxable when charity’s automobile made available to them to commute to work or receive a small allowance or meal or car expenses

Workers for a registered charity provide their services in accordance with an established schedule (e.g., three or seven hours a day), are provided with a distinctive uniform, may receive an allowance of $15 to $20 paid to cover certain meal and car expenses based on mileage, and may use the charity’s car not only to source food items but also to travel between the worker’s home and the organization’s workplace.

CRA stated:

[T]he workers are acting as volunteers as they are not providing services in exchange for a salary or other form of remuneration. Furthermore, the amounts paid to the workers as compensation in the form of benefits are minimal.

It is our view that amounts of $15 to $20 per day paid to volunteers to defray the cost of using a car or meals during volunteer activities, even to travel from home to work, would not be considered employment income if they are the only amounts received by them. … In addition, where a worker uses an automobile owned by the organization, not only for volunteer activities, but also for commuting to and from work, we are also of the view that this benefit does not give rise to tax consequences, provided that the cost of the automobile is reasonable and that it is the only personal use made of it.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 200 - Subsection 200(1) requirement to report on T4A amounts paid to service provider greater than $500 inapplicable to charity volunteers who donate the amount back to the charity 114

25 February 2008 Internal T.I. 2007-0243871I7 F - Avantages imposables

unpaid director was a deemed employee, so that payment of his personal expenses was a s. 6(1)(a) benefit

A corporation that was solely owned by the non-resident wife of Mr. A paid various personal expenses of him. Should they be included in his income under s/ 6(1)(a) notwithstanding that he was not an employee otherwise than being an unpaid director? In responding “yes,” the Directorate stated:

According to … IT-113R4, paragraph 12, pursuant to the definitions of "employee" and "office" in subsection 248(1), corporate directors are considered to be employees. Also, in Grohne v. The Queen, it was established that for the purposes of the Act, a director of a corporation is an "employee" of the corporation even though the director does not receive remuneration for the director’s services and does not provide services in the same manner as an ordinary employee. …

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 246 - Subsection 246(1) s. 246(1) only used as a fallback provision 70

23 January 2008 External T.I. 2007-0236051E5 F - Frais de relocalisation

IT-178R3, IT-470R and T4130 should be referenced for question on employee relocation reimbursement and allowance

Regarding whether amounts paid to an employee to compensate for the expenses incurred in a relocation from employment in Seattle to employment in Montreal, as well as financial losses incurred, and for the inconvenience caused by the move, CRA stated that reference should be made to IT-178R3, IT-470R and T4130, Employers' Guide - Taxable Benefits and Allowances.

17 July 2007 Internal T.I. 2007-0241701I7 F - Remboursement de primes versées à un RPAM

refund of premiums when coverage denied did not generate a taxable benefit

A public service employee on leave without pay wished coverage under the Public Service Health Care Plan and the Public Service Dental Care Plan while travelling abroad and paid contributions to those plans. During such travel, the employee's claims under the above plans were denied. Subsequently, in a negotiated settlement, it was agreed that the employee would be reimbursed for the premiums paid. The Directorate stated:

[T]he reimbursement of premiums to the employee did not confer an economic benefit on the employee. Thus … the amount of the premium refund … should [not] be included in the employee's income.

5 June 2007 External T.I. 2006-0174521E5 F - Avantages imposables - Ordinateur et Internet

85% personal use of employer-funded home computer does not generate taxable benefit if computer is essential to performance of employment duties

A school board is planning to computerize the Council of Commissioners. As part of the project, A school board will loan computers worth $1,500 each to each of the commissioners on its School Board and reimburse them for the $50 monthly cost of a high-speed Internet link to their homes, with between 10% and 20% of the Commissioners' computer time being related to the performance of their duties. At the end of their term, commissioners will be required to return the computer to the school board and the school board will cease to reimburse them for the cost of the Internet service. CRA stated:

If the loaned computer and Internet service at home are essential for the performance of the Commissioners' employment duties, we are of the view that this would not result in a taxable benefit for the Commissioners despite the personal use they may make of it, provided that the personal use does not give rise to additional costs to the employer.

If … the use of a computer and/or Internet service at home is not required as part of their job duties … [taking into account] the fact that the residual value of the computer after three years will be negligible … it would be reasonable to include in the employee's income one third of the value of the computer from which the portion equivalent to the employment-related use would be deducted.

20 February 2007 External T.I. 2006-0210291E5 F - Remboursement des billets d'avion

no taxable benefit for business class ticket reimbursement – but benefit if employee is reimbursed for 2 economy tickets for the employee and spouse

A taxpayer's administrative policy regarding the air travel of its executives and directors in the performance of their duties is that air travel is limited to economy class, except for flights of 4 hours or more, where a business class ticket is reimbursable. However, instead of reimbursing the traveller for a business class ticket, the taxpayer will reimburse the employee for the cost of two economy class tickets for the employee and spouse, to the extent that the price paid for the two tickets does not exceed the price of a business class ticket. CRA stated:

The taxpayer's administrative policy for all officers and directors to reimburse the cost of a business class airline ticket in certain circumstances primarily benefits the employer. … [B]usiness class air travel may allow the employer to get better performance from the employee. Consequently … the reimbursement … does not constitute a taxable benefit … .

… [T]he reimbursement of the spouse's ticket is made primarily for the benefit of the employee and … the latter derives an economic advantage from it. That advantage results precisely from the fact that the executive obtains a free ticket for the executive’s spouse. Thus … the reimbursement … is a benefit to be included in the employee's income under paragraph 6(1)(a).

15 December 2006 External T.I. 2005-0159931E5 F - Frais de fonctionnement et allocation automobile

where employee reimbursed for full operating cost of vehicle, personal use portion is a benefit

After confirming that an allowance paid to an employee as compensation for the use of the employee’s personal vehicle in the performance of the employee’s duties was taxable under s. 6(1)(b), CRA indicated that where the employee was reimbursed the full operating costs, the personal use portion of the operating expenses was a taxable benefit to the employee.

24 October 2006 Internal T.I. 2006-0203901I7 F - Avantage automobile

bus stop near the employee’s home does not qualify as a pick-up point regarding the exception for employer-assisted commuting

Under a collective agreement for transit workers, workers who finish work after public transportation has shut down or who must go to work before it has started up again receive free transportation under a collective taxi system between the bus stop closest to the driver's home and the workplace. CRA quoted from the statement in IT-470R, para. 32 that:

“Employers sometimes find it expedient to provide vehicles for transporting their employees from pick-up points to the location of the employment at which, for security or other reasons, public and private vehicles are not welcome or not practical. In these circumstances the employees are not regarded as in receipt of a taxable benefit. …

In finding that this exception to a taxable benefit was inapplicable, CRA stated:

According to the CRA, a pick-up point is a common place specifically designated by the employer for that purpose to which all employees must go. For example, a specific parking lot accessible to all employees, such as a Park and Ride lot or a shopping mall parking lot, could be expected to meet the intended meaning of a pick-up point, depending on the circumstances. To get to this point, the employee will have to use the means of personal transportation that is convenient for him or her. However, depending on the situation, there may be more than one pick-up point. The CRA's administrative position on the pick-up point is that a bus stop near the driver's home is not considered a pick-up point.

20 July 2006 External T.I. 2005-0124101E5 F - Avantages imposables à des employés

a working meal potentially could be excluded

Is the provision or reimbursement of the cost of a meal by the employer, or the payment of a reasonable allowance to defray the cost of meal, a taxable benefit where:

  • the employee decides, on the employee’s own initiative or because the employer requires it, to attend a meeting to deal with a matter for the employer, with the meeting continuing during the mealtime;
  • the meal is consumed either at the employee's regular place of work or within the municipality or metropolitan area of that place of work
  • the employee does not work overtime.

CRA responded:

Paragraph 6(1)(b) does not provide any exclusion for an allowance paid for meal expenses in the above circumstances.

Generally, the reimbursement of meal expenses is for the benefit of the employee and must be included in income under paragraph 6(1)(a). … [W]hether the provision of a meal or the reimbursement of meal expenses is primarily for the benefit of the employer is a question of fact that can only be resolved after an examination of all the facts of each particular situation. In our view, in making such a determination, it is relevant to consider the terms and conditions of employment, the reason for the reimbursement, the particular circumstances that gave rise to the meeting, and the frequency of such situations.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(v) exemption inapplicable where union employee negotiating contract is employed by different union 191
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Office temporary position of unionized employee with union is an "office" 27

17 February 2006 External T.I. 2005-0153931E5 F - Primes d'installation médecins

signing bonuses to medical practitioners to locate in remote areas are a taxable benefit

Regarding a location incentive program of the Quebec government for medical practitioners setting up in designated territories, and after indicating that such amounts were includible under s. 12(1)(x) where the physicians were self-employed, CRA stated:

[L]ocation incentives paid to medical practitioners under the programs put in place by the Quebec government to encourage medical practitioners to establish in remote areas are also taxable to medical practitioners who practise their profession exclusively as employees. They will thus be taxable as income from office and employment pursuant to paragraph 6(1)(a).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x) signing bonuses to medical practitioners to establish in remote areas are taxable 86

6 July 2005 External T.I. 2005-0123311E5 F - paiement à employé pour règlement d'un litige

amount received as compensation for tax on s. 7 benefit that was realized but never available to the employee was a s. 6(1)(a) benefit

An employee was requested by his employer to exercise stock options (giving rise to a s. 7(1)(a) benefit of $5 per share, equaling the $10 FMV of the shares minus the $5 exercise price) and was requested to hold those shares, so that when he ultimately sold them, he received proceeds of $4 per share. He sued and received damages equaling his $6 per share loss or, alternatively, received damages computed as the difference between the purchase price of the shares ($5 per unit) and the sale price of such shares ($4 per share) plus the income tax payable due to the inclusion of the s. 7 benefit.

CRA applied the surrogatum principle to find that the compensation for the foregone capital gain or the loss sustained as compared to the exercise price was on capital account, but applied Gernhart to find that the compensation for taxes imposed on the s. 7 benefit was taxable as being in lieu of a s. 6 benefit.

Words and Phrases
surrogatum principle
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Compensation Payments compensation for capital loss on stock option shares amount was taxed on capital account 175

9 June 2005 Internal T.I. 2005-0115481I7 F - Avantages imposables/voyages

since the particular shareholder-employees who benefited from trips provided by their employer’s supplier were known, the supplier should issue T4As to them

The Corporation sells products to incorporated or unincorporated retailers, awards them dollar-amount points based on their volumes of purchases, with the retailers then rewarding their employees or shareholders (or themselves, if unincorporated) with trips that the Corporation paid for, with the dollar points accumulated in favour of the retailers being reduced accordingly. The Directorate indicated that since the Corporation was aware of the specific individuals taking the trips, i.e., “the Corporation should issue a T4A to the individual taking the trip whether they are a shareholder or an employee,” stating in this regard:

[G]iven that an employee is entitled to the same benefit as a shareholder, it is our opinion that the shareholder taking the trip is receiving a benefit in the shareholder’s capacity as an employee and not as a shareholder.

No T4A would be required to be issued to a sole proprietor “as the amount of the trip constitutes business income that the retailer must include in computing its income.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 200 - Subsection 200(2) - Paragraph 200(2)(g) T4As required to be issued to shareholder-employees of customers who were identifiable as receiving free trips – but not for sole proprietor customers 126

1 April 2005 External T.I. 2004-0097171E5 F - Item gagné lors d'un tirage

prize won in raffle by employee was includible in employee’s income to the extent of the portion of its value that was funded by the employer rather than fellow employees

Prior to the closure of a company division, the social club of that division decided to use up the funds in the club fund (to which the employer and employees had contributed equally) to purchase an item for more than $2,000, and make it the prize in a random draw among the employees. CRA stated:

As indicated in … IT-213R, the amount or value of a prize received by a taxpayer from a lottery scheme is not taxable as either a capital gain or income unless … the prize can be considered, inter alia, to be income from employment. …

[A]lthough the item was won by chance by an employee, it was received by the employee in the course of the employee’s employment since only employees could participate in the draw. Consequently, we believe that the employee who wins the item should include in the employee’s income the proportion of the value of the item that was paid for by a contribution made by the employer to the social club fund. For example, if the employees and the employer each contributed 50% to the fund and the value of the item earned is $2,000, the employee would be required to include $1,000 in computing the individual’s employment income.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) position on exempt lottery winnings did not apply to extent prize was indirectly funded by employer 158

23 February 2005 External T.I. 2004-0093921E5 F - Déménagement d'un employé-Paiement de frais

payment of house-hunting fee for new hire was non-taxable

The corporation hired someone to search for accommodation in Canada of its new president, who was moving to Canada to take up his position, and to take care of the administrative formalities of obtaining a health insurance card, a social insurance number, a driver's licence and opening a bank account. In finding that there was no taxable benefit arising from the related costs being borne by the corporation, CRA stated:

[T]he payment of the house-hunting fee will not represent a taxable benefit to the president of the corporation in the same way as the reimbursement or payment of house-hunting travel expenses. It is our view that the payment of these fees is part of the reasonable moving expenses paid for the employer to benefit from the services of the president at the Canadian location.

Similarly, it is necessary for the president to have a social insurance number in order to be employed in Canada. …

While there may be arguments that the costs of obtaining a health insurance card and opening a bank account are personal costs that do not benefit the employer, there are also arguments for considering these costs as part of the reasonable costs of the president's move to Canada. We could then also consider that the fees for the administrative formalities relating to these two items do not enter into computing the president's employment income.

28 February 2005 Internal T.I. 2004-0103991I7 F - Remboursement de frais de scolarité

payment of tuition fees conditional on a return to extended employment was not a taxable benefit

The taxpayer, who had been employed as a temporary lecturer at a University Department, was hired to work as a professor at the Department upon her completion of doctoral studies at a US university and was paid by the Department various of the expenses incurred by her in connection with such studies including the tuition fees of the US university.

After finding that the tuition reimbursement amounts otherwise would have been employment income pursuant to s. 6(3), but in finding that there was not taxable benefit, the Directorate stated:

[T]raining courses that are taken to maintain or improve skills related to the employer's business are generally considered to be of primary benefit to the employer if it is reasonable to expect that the employee will return to employment for a significant period of time after the course is completed. [Here] the doctoral courses taken were in a field related to the Taxpayer's potential responsibilities with the Employer. Furthermore, the Taxpayer was to return to the Employer's employ for a period at least as long as the number of years she had pursued her doctoral studies and on the date of her submission … she was still employed by the Employer.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n) agreement of employer to pay tuition would have been taxable under s. 6(3) if a benefit 122

8 February 2005 Internal T.I. 2004-0099681I7 F - Remboursement de frais de déménagement

reimbursement of reasonable living expenses incurred until the employee permanently occupies new home in employer’s area is not a benefit

A new employee previously living more than 40 kilometres from the employer’s plant was paid a daily allowance of $50 per day for 28 days, to cover room and board, until the employee's housing was secured. The Directorate stated:

T]he CRA does not consider the reimbursement of reasonable living expenses incurred until the employee permanently occupies the employee’s new home to be a reimbursement of personal expenses. … [T]he 2004-2005 T4130 no longer states that reasonable living expenses are limited to a maximum of 15 days.

27 October 2004 External T.I. 2004-0080191E5 F - Paragraphes 6(1) et 6(2) de la Loi

annual recognition of s. 6(1)(e) standby charges does not reduce quantum of s. 6(1)(a) benefit where subsequent employee bargain-purchase of automobile

An employee, after being subject to a standby charge for four years pursuant to s. 6(1)(e), purchased the automobile from his employer for less than its fair market value at that time.

CRA indicated that the employee received a benefit under s. 6(1)(a) equal to the discount from FMV without any reduction for the standby charges previously included in his income.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(5) benefit from bargain purchase of car from employer not reduced by previous s. 15(5) standby charges 136

4 March 2004 External T.I. 2003-0049831E5 F - Allocation pour l'achat d'ordinateur

reimbursement of internet and modem charges not taxable where internet access is essential to performing employment duties

Employees are required to acquire, at their own expense, a laptop or computer to be used in the course of their work (the "equipment"). This equipment remains the property of the employees and the employees must use it primarily (or in some cases, solely) for work. The employer reimburses employees for the purchase of equipment.

After referring to its positions in Income Tax Technical News No. 13 and 22, and 2001-0100303 regarding the absence of a taxable benefit “where an employer provides a computer to its employees as part of a training program,” CRA found that here there was a taxable benefit, stating:

[I]f the employer reimburses the employees for the cost of the equipment that they have purchased and continue to own, the net cost to the employees of purchasing the equipment is less than it otherwise would have been. … [T]hey are receiving an economic benefit from their employer. Furthermore … this reimbursement is not made in the context of a training program … .

Regarding internet or modem costs reimbursed by the employer, CRA stated:

If the facts show that that internet access is essential for employees to perform their employment duties, we are of the view that it is unlikely that a significant taxable benefit will result to employees from the reimbursement of internet and modem charges.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) monthly home computer allowance was taxable 84

25 February 2004 External T.I. 2003-0042461E5 F - Invalidité d'un actionnaire/admin./employé

taxable continued payment of salary-equivalent payments to disabled employee, but no taxable benefit from employer’s previous payment of premiums on funding disability policy

A corporation, which is the policyholder and beneficiary of an insurance policy protecting it against the disability of its shareholder/director/employee, pays the premiums, and collects the benefits under the policy during the period of the individual’s disability, during which the individual would continue to be paid the equivalent of his salary by the corporation. After noting that, although the employee does not receive any benefits from the insurer, in the event of his disability he “continues to receive an amount from the corporation that could be similar to the employee’s usual salary,” CRA stated:

[T]he employee should include in income the amount the employee continues to receive from the corporation. In addition … the payment of premiums … would not result in a taxable employee benefit … or a taxable shareholder benefit … because the corporation is the recipient of the insurance benefits.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose premiums paid by corporation on disability policy on its principal employee are non-deductible 112
Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) disability benefits received by corporation to fund continuing salary-equivalent payments to its chief employee are not income 116

24 February 2004 External T.I. 2003-0041121E5 F - Avantages imposables-installations récréatives

making employer’s resort recreational facilities available to all employees not a taxable benefit

A resort and conference centre which, in addition to offering accommodation, food, drink and other services, operates a ski centre, golf course and tennis court, offers its employees passes for access to the ski, golf and tennis at very attractive prices. CRA stated:

[T]he case you have submitted to us meets the requirements of [IT-470R, para. 33] provided the recreational facilities are effectively made available to all of the employer's employees. If only some of the employees are able to use the recreational facilities, a benefit will have to be included in the income of each of those employees.

23 January 2004 Internal T.I. 2003-0051931I7 - Damages Paid to RPP and RRSP

Damages in respect of breach of contract or a tort paid by an employer to compensate for investment losses caused by the employer as administrator of a registered plan which has been established for a group of employees are not considered employment income to the employees; nor is the employer or the employee considered to have made a contribution to the plan as a consequence of the payment of the damages.

9 January 2004 Internal T.I. 2003-0031601I7 F - Air Miles :employés/employeurs

business air miles assumed to be used before personal air miles

When a shareholder or employee uses the employee’s credit card both for company business purposes (expenses for which the employee is reimbursed) and for personal purposes, if the employee acquires goods for personal purposes using Air Miles points, should the shareholder or employee be considered to be using business Air Miles points (so that there is a taxable benefit) or personal Air Miles points (so that there is none) first?

CCRA stated:

[I]n the context of the shareholder or employee acquiring goods for personal use using their Air Miles points as in the second and third situations, we have assumed that they will first use Personal Air Miles points and then Business Air Miles points.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 69 - Subsection 69(4) s. 69(4) applicable where corporation acquires property with its Air Miles and distributes the property to a shareholder (but not in the case of an arm’s length employee) 172

12 November 2003 External T.I. 2003-0020275 F - RECOMPENSES

$500 gift policy might apply to points awards if redeemable for very limited range of goods/ policy does not apply to sales awards etc.
Also released under document number 2003-00202750.

Employees are awarded points based on their achievements and their importance, with the accumulation of a certain number of points entitling the holder to receive a predetermined good (the points are non-transferable and are not redeemable for cash). Upon reaching the number of points required to obtain one of the pre-determined goods on a list, the employee may elect to receive that good or to accumulate additional points to receive the pre-determined good for a higher level. Does the CRA policy allowing an employee to receive two non-monetary awards per year for outstanding achievements on a tax-free basis where the total cost to the employer of the awards is less than $500, apply here?

After noting that such policy did not apply to cash equivalent gifts and awards, such as where the employee receives reward points, which are accumulated and can be redeemed for a choice of goods, CRA stated that there could be “arguments that the points may not constitute a cash or cash equivalent award … since the points cannot be converted into cash and the number of goods that the employee can acquire, in exchange for the accumulated points, is very limited.”

Before indicating that there was a lack of particulars in this regard, CRA stated that “the policy does not generally cover goods that serve to thank or recognize good performance, such as completing a task on time, or property received by employees for meeting or exceeding economic goals directly related to the employment, such as a level of sales or productivity.”

2 October 2003 External T.I. 2003-0033415 F - FRAIS D'ACCES INTERNET

reimbursement of high-speed internet access fees to employees who must work from home likely not a taxable benefit
Also released under document number 2003-00334150.

Employees who carry out their work as tutors from home must have access to a high-speed Internet service and will be reimbursed for all or 50% of the costs of such service depending on whether they work full time or part time. CCRA stated:

[T]he reimbursement by the employer of the cost of access to the Internet service is probably not a taxable benefit to the employees pursuant to paragraph 6(1)(a), provided that the reimbursement is reasonable in the circumstances. Indeed, there are arguments in the situation presented that the payment is made primarily for the benefit of the employer and that the economic benefit to the employees is negligible.

10 December 2003 External T.I. 2003-0023335 F - COUT D'UN BIEN REMIS EN RECOMPENSE

$500 gift policy applies where parent incurs the cost (which must include any customs and shipping costs)
Also released under document number 2003-00233350.

After an employee attained 20 years of service with Canco, its US parent, in order to reward him, purchased property for the equivalent of C$500, but it also was agreed that Canco would pay the related customs duties of $200, and one of the corporations paid the transportation costs to the location where the property was given to him. CCRA stated:

[Under] CCRA's position on gifts and awards, employers may give employees two non-monetary awards per year on a tax-free basis in recognition of outstanding achievements, such as reaching a specified number of years of service, meeting or exceeding safety standards, or reaching similar milestones, where the total cost of the awards to the employer is less than $500 per year.

… [W]e would generally be prepared to consider this position in a situation where it is the parent corporation that gives the award to an employee of its subsidiary as long as it is not a means of exceeding the number of awards (and the $500 limit) provided for in the policy. …

[C]ustoms duties and transportation costs, regardless of which corporation incurs them, must be added to the purchase price of the property to be given to the employee to determine if the gifts and awards policy applies … .

24 June 2003 External T.I. 2002-0177145 F - AVANTAGE IMPOSABLE - REPAS

requirement to watch the children did not detract from taxability of free lunch
Also released under document number 2002-01771450.

A daycare centre for children under 6 required staff to eat on site with the children in their group in order to encourage them to consume their food, although they had a 30 minute break that could be taken between 11:30 and 13:30. In finding that the free meals provided to the staff were a taxable benefit, CCRA stated:

[T]he Centre's provision of meals to the educational and administrative staff falls within the scope of paragraph 6(1)(a). The fact that the Centre requires the educational staff to take their meals in the presence of the children or that the administrative staff must perform various tasks during their breaks does not change the fact that a meal constitutes an employee's living expenses and that the payment of those expenses by the employer gives rise to a taxable benefit … .

13 June 2003 External T.I. 2002-0177045 F - BOISSONS OFFERTES AUX EMPLOYES

FMV of free beverages marketed by employer and provided to its employees included in their income
Also released under document number 2002-01770450.

Employees of a company engaged in the manufacturing and marketing of various beverages a provided with quantities of beverages of a brand determined by the employer, with the stated purpose of permitting the employees to become familiar with the products marketed by the employer and of providing useful feedback to the employer.

CCRA indicated that such free provision of the beverages was primarily for the benefit of the employees, so that there would be a taxable benefit based on the beverages’ FMV.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(2) - Paragraph 67.1(2)(d) FMV of free beverages provided to employees included in their income, so that cost of beverages to employer deductible from its income 59

30 May 2003 External T.I. 2003-0182145 F - AVANTAGE IMPOSABLE-VOYAGE

no taxable benefit re free trip for a customer’s employee where employee spends at least 50% of the time on business-related activities
Also released under document number 2003-01821450.

Regarding a corporation which provides trip rewards to customers (so that an employee nominated by a corporate customer goes on the trip along with a spouse), CCRA stated:

The taxable benefit of such an employee of the customer may be reduced if there is sufficient evidence that the employee was engaged in business activities on behalf of the employer during the trip.

On the other hand, if the employer requires the employee's presence during a trip for business purposes and the conduct of the employer's business is the principal purpose of the trip (the employee spends at least 50% of time on business-related activities), no benefit will be provided to the employee in respect of the value of the employee's trip.

Where the customer's employee is accompanied by their spouse on the trip, any payment for the spouse's trip by the Corporation is a taxable benefit to the customer's employee unless the spouse took the trip at the employer's request and, during the trip, the spouse was primarily engaged in business activities on behalf of the employer, meaning that the spouse's role was primarily to further the business objectives of the trip.

Where the customer was an individual proprietor, “any benefit would form part of the individual's business income.”

Similar principles applied when the corporation’s own employees went on the trip. Benefits to the customer’s employees would be reported on T4A rather than T4 slips.

25 April 2003 External T.I. 2002-0171075 F - AVANTAGE-POLICE D'ASSURANCE

s. 6(1)(a) benefit where employer, as policyholder, pays premiums on policy on life of employee, whose estate is the revocable beneficiary
Also released under document number 2002-01710750.

A corporation is the owner and policyholder of an individual life insurance policy on the life of an employee or shareholder and names the employee's or shareholder's estate as beneficiary. The beneficiaries of the life insurance policy are revocable. The employee or shareholder has no rights of any kind in the policy. The corporation pays the premium for this life insurance policy.

In finding that the payment of the premiums would give rise to a taxable benefit under s. 6(1)(a) or s. 15(1), as applicable, CCRA stated:

The payment of an insurance premium provides protection against the risk during the period covered by the premium. Even if the risk does not occur during that period, there is a benefit in obtaining this protection or coverage. … [T]he coverage of the risk during the period covered by the premium will benefit the employee (or shareholder) if the employee's (or shareholder's) beneficiaries are the beneficiaries of the life insurance policy during that period. We are also of the view that this benefit can generally be measured by the amount of the premium charged for the period.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) s. 15(1) benefit where corporate policyholder pays premiums on policy on shareholder’s life where the revocable beneficiary is the shareholder’s estate 191

14 February 2003 External T.I. 2002-0173195 F - Transfer of Shares

s. 6(1)(a) generally applicable to gift of shares by majority owner to key employee, but not to employee son

Mr. X, who wholly-owned Canco, gifts, at a time that he is withdrawing from Canco’s management, 51% of his shares to his son (Mr. Y), who is a Canco employee. Alternatively, he gifts 5% of his shares to an arm’s length key employee.

CCRA indicated that generally s. 6(1)(a) generally would not apply to the gift to the son if the transfer “were made solely because of the family relationship between Mr. X and Mr. Y,” and s. 69(1)(b) instead would generally be applicable. However, s. 6(1)(a) would apply in the second situation.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(b) s. 69(1)(b) rather than s. 6(1)(a) generally applicable to gift of majority ownership of CCPC to employee son 97

6 March 2003 External T.I. 2002-0166855 F - CADEAU EN QUASI-SPECES

cash equivalent exclusion from accommodation of employee gifts and awards

CCRA indicated that its policy in Income Tax Technical News No. 22 regarding gifts and awards did not extend to cash or cash equivalents, such as a gift certificate for two tickets to a show, of choice, at Theatre X. The cash equivalent exception also extended to reimbursement by the employer for goods purchased by the employee or services paid for by the employee, and a good or service chosen by the employee but purchased by the employer (unless the number of goods or services that could be chosen was very limited).

29 January 2003 External T.I. 2003-0183825 - REIMBURSEMENT OF PERMANENT RESIDENT

Payment of an employee's fees to obtain a permanent residence visa would constitute a taxable employment benefit given that such fees would not be viewed as part of the employee's relocation costs.

23 June 2003 External T.I. 2003-0004795 F - TRANSPORT AU LIEU D'EMPLOI

mandatory employer-provided transport from staging area along difficult road to remote mine was not a taxable benefit
Also released under document number 2003-00047950.

Employees were required to assemble in a staging area about 60 kilometres from their employer’s mine in order to be transported there in employer-provided pick-up trucks or buses, given that the driving conditions on the road could be quite fraught. In finding that this generally would not generate a taxable benefit, CCRA stated:

[E]mployees do not appear to have the choice of using employer-provided transport from the assembly point to the place of employment. …

Furthermore … the reason the employer rents an assembly area and provides transportation is to reduce the cost of maintaining the gravel road and the cost of damages it would incur if the employees' or independent contractors' cars were damaged due to the condition of the road. In addition, it may be to ensure the safety of employees when the gravel road is in poor condition due to ice or snow melt.

It added the proviso that where executives only were given the option of travelling by pickup truck rather than bus, the reason for this would need to be examined to determine whether it gave rise to a taxable benefit to them.

7 January 2003 External T.I. 2002-0173245 F - REMBOURSEMENT DEPENSES ET ALLOCATIONS

no benefit on reimbursement of snacks provided to clients

Reimbursements for snacks that employees were required to provide in meetings with clients of the employer were not taxable.

25 November 2002 External T.I. 2002-0126825 F - AVANTAGE CONFERE A UN EMPLOYE

reimbursing employee-tenants for time spent in upgrading their units beyond normal rental industry practice would generate a taxable benefit

Employees you rent housing units from their employer are reimbursed by it for their expenses and time in carrying out approved landscaping work or improvements (e.g., fencing, patios, siding, painting). Regarding whether this generated a taxable benefit under s. 6(1)(a), CCRA stated:

[E]xpenses incurred by the employee to improve the employee’s housing unit that are not within the scope of those normally assumed or reimbursed by a landlord should not … reduce the value of the benefit … . However … where the expenses incurred by the employee are expenses that are normally borne by a landlord, the amount of this benefit could be reduced by a reasonable amount, which represents the disbursements made by the employee for work related to the employee’s housing unit that primarily benefits the employer/landlord. … Furthermore, we disagree that the value of the benefit computed for the purposes of paragraph 6(1)(a) should be reduced to take into account the time spent by the employee in carrying out the renovation work on the employee’s housing unit.

29 October 2002 External T.I. 2002-0135815 F - BONI CADEAUX RECOMPENSES

bonus received by employees under a profit-sharing program not covered by gifts exclusion in ITTN No. 22

Is a bonus received by employees under a profit-sharing program covered by the gifts or rewards policy set out in Income Tax Technical News No. 22? CCRA indicated that a bonus paid to an employee does not come within this policy.

3 October 2002 External T.I. 2002-0133525 F - CADEAUX QUASI-MONETAIRES

awards of gifts certificates that could be exchanged for under $500 of the employer’s goods were taxable benefits

Xco will encourage excellence by offering rewards to employees in the form of gift certificates which can be exchanged for goods produced or sold by Xco with a total value less than $500. In finding that such gift certificates did not come within the accommodation in Income Tax Technical News No. 22 of non-cash gifts under $500, CCRA noted that such gift certificates were quasi-cash awards since their use was similar to cash and they could easily be assigned a value.

6 August 2002 Internal T.I. 2002-0130897 F - RECOMPENSES ES QUASI-MONETAIRES

gift cards and smart cards with spendable balances do not come within the ITTN 25 gifts policy

CCRA indicated that the following types of gifts would not come within its new policy in Income Tax Technical News No. 22 regarding gifts and awards given by an employer to employees as they were near-cash gifts, i.e., their use was similar to cash and it was easy to assign a value to them: (a) non-refundable gift certificates; (b) non-refundable gift certificates whose balance following a purchase was converted into a second gift certificate; and (c) smart cards with a predetermined value.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(2) - Paragraph 67.1(2)(d) s. 67.1(2)(d) exclusion inapplicable to meal or show ticket gifts within ITTN 25 gifts policy 97
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(l) - Subparagraph 18(1)(l)(ii) s. 18(1)(l)(ii) applies irrespective whether the membership is an employer gift within the ITTN 25 gifts policy 109

3 May 2002 External T.I. 2001-0110145 F - avantage imposable-vetements

reimbursing a professor for a briefcase needed in connection with work would be non-taxable

Where a professor is reimbursed by the university for the cost of a briefcase used to carry documents when travelling in connection with work, for example, giving lectures on behalf of the University, CCRA was generally prepared to accept that the payment was made primarily for the benefit of the employer, so that there would be no taxable benefit to the extent the amount was reasonable in the circumstances. However, reimbursement of clothing costs did not come within the exception for uniforms and special clothing, and would be taxable.

20 March 2002 External T.I. 2001-0113815 F - TVQ SUR PRIMES D'ASSURANCE - SALAIRE

employee would not be credited with a contribution on paying Quebec sales tax on wage loss plan premiums/ the employer paying them would not be a contribution

Under a wage-loss insurance plan whose premiums are paid in full by the employees, the employer pays the 9% Quebec sales tax on those premiums. CCRA stated:

[T]he employer's payment of sales tax on insurance premiums [is] a taxable benefit to the employee pursuant to paragraph 6(1)(a) … .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(f) employee would not be credited with a contribution on paying Quebec sales tax on wage loss plan premiums/ the employer paying them would not be a contribution 234

14 December 2001 Internal T.I. 2001-0114320 F - CADEAUX ON RECOMPENSES

new gift policy does not apply to gifts made to shareholders or their family members

CCRA indicated that the new rules governing employer-provided gifts or awards “do not apply in situations where closely-held corporations give gifts or awards to their shareholders or family members as those gifts or awards are normally considered to be received by those individuals in their capacity as shareholders.”

30 October 2001 External T.I. 2000-0052765 F - CAISSE D'ENTRAIDE DE DIOCESE

reimbursements of priests’ dental expenses out of gift fund, and one-off gifts, were not taxable benefits

A fund was made up of sums donated by priests, sums donated by other donors through special collections, investment income and certain funds from diocesan revenues. Regarding amounts paid as reimbursement of dental and optometry expenses, living expenses, and one-time donations, the Directorate did not disagree with the finding of the Tax Services Office that those amounts were not a taxable benefit. However, it noted that “among the one-off gifts and living expenses, there may be sums that constitute social assistance benefits made on the basis of a means, needs or income test” which would be includible in their income under s. 56(1)(u) and deductible under s. 110(1)(f).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Superannuation or Pension Benefit amounts voluntarily paid to improve the retirement income of priests who did not have 35 years of service was pension income to them 98

22 May 2001 Internal T.I. 2001-0083987 F - EMPLOYEUR PAYE IMPOT POUR EMPLOYÉ

employers’ reimbursement of employees’ reassessments for participating in employer’s scheme were a taxable benefit

Employees paid amounts to a charitable foundation for which they received charitable receipts and the Foundation used those amounts to pay for the acquisition by the employer of computers which were provided to the employees for their home use. The employer proposes to reimburse the employees for the taxes payable by them as a result of CCRA denying their claimed charitable credits.

The Directorate stated:

[W]here an employer pays an employee's taxes directly to the Receiver General for Canada or reimburses the employee for them, the amount so paid constitutes a benefit received by the employee that must be included in computing the employee's employment income pursuant to subsection 5(1) or 6(1).

26 March 2001 External T.I. 2001-0069095 - INTERNET PAID BY EMPLOYER

The payment of ISP fees by a college for home Internet use by a senior employee likely would not give rise to a taxable benefit.

31 July 2000 External T.I. 1999-0009445 - Tax Equalization Payments

A gross-up payment made by an employer to an employee to compensate the employee for the additional Canadian tax payable on a tax equalization payment would be considered to be income from employment which is wholly attributable to the employee's duties performed in Canada.

May 1999 CALU Conference No. 908430, Q. 6

General guidelines for determining whether benefits are provided to a recipient in his or her capacity of shareholder or employee.

30 June 1999 Internal T.I. 9916907 - EMPLOYEES - FREE RECREATIONAL PASSES

The giving of free recreational passes to the employees of a ski resort (but not to the family members) would not give rise to an employment benefit given that knowledge of the resort and ski hill was essential for the performance of their employment duties (i.e., the employer was the primary beneficiary of the free recreational passes).

8 December 1998 External T.I. 9827545 - EMPLOYER-PROVIDED PARKING.

Discussion of RC's position that employer-provided free parking gives rise to a taxable benefit.

15 July 1998 External T.I. 9817945 - TAXABLE BENEFITS - AIRLINE PASSES

Stand-by airline passes provided to an employee do not give rise to a taxable benefit.

Income Tax Technical News, No. 15, "The Tax Consequences of the Adoption of the 'Euro' Currency"

7 May 1998 Income Tax Technical News, No. 13

"Employer-Paid Educational Costs".

14 September 1996 External T.I. 9629825 - PHSP CVRGE FOR SAME SEX LIFE PRTNER OF AN EMPLOYEE SECTION 6(1)(a)

Following the HRC decision in Moore & Akerstrom, RC has determined that a plan which provides coverage for same sex couples can meet the definition of a "private health services plan".

23 July 1996 External T.I. 9618085 - COMMISSIONS EARNED BY SECURITIES

A commissioned securities salesperson would be considered to be taxable on commissions "earned" (i.e., not charged by the employer) in trading securities for his or her own account.

1996 Tax Executives Round Table, Q. XI (No. 9639070)

A benefit under s. 6(1)(a) will be assessed where a mortgage interest subsidy is provided to a relocated employee, unless the following conditions are met:

  1. the subsidy is limited to only that portion of the mortgage charges that relate to the increase in interest charges on the cost of the home in the new location up to the maximum allowed by a valid market price differential, and to any increased interest charges stemming from increased mortgage interest rates for the remaining term of the previous mortgage;
  2. no principal is subsidized; and
  3. there is no change in the employee's equity in the residence.

5 July, 1995 Memorandum 950882 (C.T.O. "Taxable Benefits - Bus Passes and Parking Costs")

"Where an employer chooses to pay or subsidize the cost of an employee's bus pass, a taxable benefit is conferred on the employee."

5 January 1995 Income Tax Technical News, No. 6

Although leave to appeal the Hoefele case to the Supreme Court of Canada has been sought, Revenue Canada accepts, having regard to the Splane case (92 DTC 6021) "that where an employee incurs a higher interest rate on a mortgage as a result of an employer-requested relocation... the mortgage interest rate differential payments for the remaining term of the mortgage are not taxable".

12 April 1995 External T.I. 9431385 - TUITION FEE REIMBURSEMENT - TAXABLE BENEFIT

The reimbursement of employee tuition fees expended by the employees for certain professional development courses gave rise to a taxable benefit notwithstanding that the employer provided time during the normal business day, as required, for study time and to write examinations, and notwithstanding that the courses were undertaken after business hours only when they were not offered during the day. "... Where an employee undertakes a course of studies as a means of enhancing his chances of a promotion in the short term or enhancing his overall career opportunities in the long term, then the primary benefit is considered to be derived by the employee even though the employer may also benefit from the employee's higher level of education".

9 March 1995 External T.I. 9431825 - EMPLOYEE BENEFIT OF TREATMENT OF ADDICTION

Fees paid to a licensed private hospital for accommodation, meals, and medical treatment including the cost of any medication as well as psychological, family and follow-up counselling would not be exempt under s. 6(1)(a)(iv) because more than a counselling service would be provided. However, the payment or reimbursement by an employer of the fees for such services would be exempt where the benefit is provided under a private health services plan.

26 May 1995 External T.I. 9501715 - SELF-FUNDED PRIVATE HEALTH SERVICES PLANS

A self-funded dental care plan can qualify as a private health services plan.

5 April 1995 External T.I. 9433045 - MOVING REIMB FOR DISABILITY-REL MODIF TO EMPL NEW HOME

The reimbursement by an employer of the costs of disability-specific renovations or alteration to a home that an employee moves to on a relocation normally would not give rise to a taxable benefit. Other items which are not disability-specific, such as air conditioners, humidifiers and swimming pools would give rise to a taxable benefit if reimbursed.

2 August 1994 External T.I. 9415465 - EMPLOYMENT BENEFITS - REIMBURSEMENT OF MOVING EXP

In determining whether a reimbursement of moving expenses by an employer gives rise to a taxable benefit to the employee, RC generally will look to the criteria described in s. 62 as a guide. Where the distance of the move is substantially less than 40 kilometres, the onus will be on the employee to show that the primary reason for the move is the job relocation and the hardship imposed by it.

26 July 1994 External T.I. 9412155 - HEALTH AND WELFARE TRUSTS

RC would expect that temporary accumulations of cash in a health and welfare trust would be placed in relatively liquid short term investments rather than higher risk and longer term investments, in order that funds will be available to meet expected claims experience. Where there is a relatively permanent surplus, and its reduction through a premium holiday is not effected within a reasonable time, the level of annual contributions by participating employers may be seen as being in excess of that which is needed to meet their obligations under the plan and, as a result, may jeopardize the deductibility of contributions to the trust by the participating employers.

26 July 1994 External T.I. 9415455 - EMPLOYMENT BENEFITS - SPECIAL CLOTHING

Although the provision of special clothing (such as uniforms and safety footwear) would not constitute a taxable benefit, a non-accountable personal grooming allowance would constitute a taxable benefit.

21 July 1994 External T.I. 9412065 - REIMBURSEMENT OF PHYSICAN FEE TO RENEW DRIVER'S LICE

Respecting the reimbursement of the amount charged by a physician to fill out forms to renew an employee's Class A driver's licence, RC stated that:

"Where the facts show that the employee is required to pay a physician's fee as a condition of employment either directly or indirectly (i.e., as a requirement to fulfill the job-related requirement to hold a Class A driver's licence), the reimbursement of that fee will not be considered a taxable benefit to the employee."

24 June 1994 940101B - EMPLOYEE SERVICE AWARDS

Where an employer provides an employee with a long term service award of jewellery, the quantum of the benefit received will be not less than the expense incurred by the employer. The "money's worth" valuation approach in Wilkins v. Rogerson, 39 TC 344 and in Heaton v. Bell, [1968] 1 All E.R. 857 is not relevant for purposes of s. 6(1)(a) as indicated in Waffle v. MNR, 69 DTC 5007.

12 April 1994 External T.I. 9403005 - RPP EMPLOYER CONTRIBUTIONS

S.6(1)(a) will apply to include in an employee's income benefits derived from past service contributions made by the employer in respect of the employee's obligation to make such contributions to a registered pension plan. However, if the employer is not required by the terms of a plan to make a particular contribution but agrees to do so as a result of an election by an employee to purchase past service, such a contribution generally would not be considered an employer contribution.

22 February 1994 External T.I. 9322395 - COMPUTERS AND EMPLOYEE BENEFITS

An arrangement whereby employees, who carry out their employment duties primarily at their homes and at customer premises, purchase computers at a discount from their employers, with the purchase price payable over a 24-month period by way of deduction from their monthly salaries, but with the employees entitled to monthly reimbursements over the same period totalling 75% of the purchase price, gave rise to benefits under s. 6(1)(a). RC's policy on chainsaws was distinguished on the basis of the short life of a chainsaw.

1994 A.P.F.F. Round Table, Q. 45

"A payment made by a Canadian employer to an employee to compensate for additional tax in Canada compared to the tax that would otherwise have been payable in his usual country of residence is an economic benefit that the employee receives from his employer, in the same capacity as the benefit in The Queen v. Phillips and, as a result, is a taxable benefit for the employee."

16 December 1993 Income Tax Severed Letter 9323725 - Same Sex Partner Coverage for Health Care Plan

The type of expenses which may be provided under a private health services plan are limited to those which qualify as medical expenses for purposes of the credit in s. 118.2(2) and, therefore, are limited to expenses incurred in respect of an individual, the individual's spouse or a dependant of the individual. Accordingly, coverage for same-sex spouses (who are not "spouses" for purposes of the Act) will jeopardize the status of the plan as a private health services plan.

1993 Administrative Letter 9334736 F - Employer Reimburse GST on New Home Upon Relocation

Since the GST payable on the purchase of a new home forms part of the cost of that new asset, any reimbursement thereof by the employer in connection with an employee relocation will be included in income in the same manner as other costs of acquiring a new residence, such as decorating, appraisal fees, new home warranty fees and finder's fees.

Revenue Canada Round Table TEI Conference, 7 December 1993, (C.T.O. "Splane & Reimburs of Increased Loan Costs on Relocation")

Comments on method of calculation of benefits where an employer pays relocation reimbursements to transferred employees in respect of increased housing costs in the new location.

Revenue Canada Round Table TEI Conference, December 1993, Q. 15, (C.T.O. "Accrued Vacation Pay")

Where an employee retires effective December 31, 1993, the amount of the accrued vacation pay at 31 December 1993 is required to be included in her income for the year that is the earlier of the year in which the accrued vacation pay is paid to her and the year she has constructively received payment thereof. The amount of the accrued vacation pay would be regarded as being constructively received in 1993 where the amount was available to her in the year, but she chose not to receive it physically until the following year.

3 December 1993 External T.I. 9323925 F - General Comments on a Flex Plan

Although a benefit which will be non-taxable if offered outside a flexible benefit plan will ordinarily retain its non-taxable status if it is offered as an option under the plan, in order to maintain the non-taxable status of such benefits, any option to receive cash in exchange for the "flex credits" could only be available pursuant to an irrevocable election made before the beginning of the plan year and not as an option within a particular option or plan. In addition, the conversion of taxable remuneration to flex credits would result in the value of those credits being included in income at the time the conversion is made.

11 August 1993 T.I. (Tax Window, No. 33, p. 9, ¶2645)

Where the payment of insurance premiums gives rise to an employee benefit, the amount of the benefit will include sales tax on the premiums.

9 August 1993 T.I. (Tax Window, No. 33, p. 4, ¶2638)

A plan will not qualify as a private health services plan if some employees can carry forward flexible credits and others are allowed to carry forward eligible medical expenses. A plan which provides for a carry-forward period in excess of twelve months also will not qualify.

28 June 1993 Income Tax Severed Letter 9307365 - Directors Liability Insurance

A taxable benefit will not be conferred on a director or officer of a corporation as a result of the corporation paying insurance premiums or her receiving a settlement from the insurance company where the risks covered by the policy are inherent and normal occurrences in carrying out the duties of the insured. A taxable benefit also will not arise where the corporation assumes the liability of the officer or director where the indemnification does not exceed that permitted under s. 124 of the CBCA or a similar provision of a Provincial Corporations Act.

15 June 1993 T.I. (Tax Window, No. 32, p. 9, ¶2601)

Where a business is extended to take advantage of the lower airfare offered for a trip that is over a weekend, then provided the business trip was not extended to provide a vacation for the employee and the costs incurred were reasonable, a taxable benefit will not normally arise.

11 June 1993 T.I. (Tax Window, No. 31, p. 10, ¶2519)

Where an employee surrenders her rights under a phantom stock plan and receives an option to acquire shares of the employer company for an exercise price equal to the fair market value of the shares at the time the option was granted minus the value of the units under the phantom stock plan that were surrendered, there was considered to be a disposition of property (the surrender of rights under the phantom stock plan) the value of which will be included in income.

10 June 1993 T.I. (Tax Window, No. 31, p. 24, ¶2550)

The amounts paid by a corporation to hire a clothing consultant in order to help certain executives to improve their image would be included in their income under s. 6(1)(a) or s. 15(1).

4 June 1993 Memorandum (Tax Window, No. 32, p. 9, ¶2602)

Where an employee is dismissed, receives an arbitration award and is reinstated to his former position, any amounts received as part of the settlement which are in respect of out-of-pocket expenses incurred by the individual will be considered to be a taxable benefit.

5 May 1993 T.I. (Tax Window, No. 31, p. 13, ¶2526)

Where the costs of providing health care are taken into account by the employer in determining an employee's compensation, the amounts paid into the private health services plan will be considered to have been paid by the employee, with the result that the supposed payments to the private health services plan by the employer will be included in the employee's income under s. 5 or s. 6(1)(a).

11 March 1993, T.I. (Tax Window, No. 30, p. 13, ¶2465)

Where an employee is required to work at least three hours of overtime in a day, public transportation is not available or the physical safety of the employee is at risk at the time of travel, and the occurrence of such overtime is occasional, RC will not treat reimbursements for the cost of the employee's meals and travel (e.g., a mileage allowance) to be a taxable benefit.

9 March 1993 Memorandum, (Tax Window, No. 30, p. 22, ¶2469)

A reimbursement of expenses incurred by an employee as a result of a requirement on the part of the employer to travel out of town on business should not give rise to a taxable benefit.

93 C.P.T.J. - Q.23

Where a vehicle (whether owned by the employee or the employer) is regularly required to be used during business hours in the carrying out of employment duties, the value of a parking facility provided by the employer for the vehicle is not considered to be a taxable benefit.

25 February 1993 T.I. (Tax Window, No. 29, p. 21, ¶2447)

If amounts received by employees of registered financial institutions pursuant to the International Financial Business (Tax Refund) Act (B.C.) are characterized under that Act as a reduction in the amount of tax otherwise payable by an individual under the Income Tax Act (B.C.) rather than as a reimbursement of expenses, their amount will not be included in the employee's income for purposes of the Act.

8 February 1993 T.I. (Tax Window, No. 29, p. 6, ¶2427)

Discussion of a disability plan where the annual premiums required to be paid for the first ten years are in excess of what is required to insure the employees.

20 January 1993 T.I. (Tax Window, No. 28, p. 15, ¶2392)

Where an employee is required to provide tools as a condition of employment, any reimbursemet by the employer of the cost of purchasing replacement tools will be a taxable benefit.

13 January 1993 T.I. (Tax Window, No. 28, p. 16, ¶2364)

A health and welfare trust which accumulates a surplus jeopardizes its status as such. A surplus should be absorbed by a reduction in the amounts to be contributed by the employer.

8 January 1993 T.I. 923191 (November 1993 Access Letter, p. 488, ¶C5-223)

Where an employee is awarded the permanent possession of an item of jewellery, he will be regarded as being the beneficial owner thereof. For purposes of assessing the benefit received, the fair market value of the article of jewellery ordinarily will be considered to be no less than the expense incurred by the employer, and would not necessarily be equal to the amount that would be realized by the employee in an open market sale of the item.

December 1992 B.C. Tax Executives Institute Round Table, Q. 4 (October 1993 Access Letter, p. 477)

A benefit can be required to be included in an employee's income in respect of employer-paid dues or fees that are not deductible to the employer under s. 18(1)(l)(ii). This is not considered to result in double taxation as a benefit is only considered to arise where it cannot be demonstrated that membership is principally for the employer's advantage.

15 December 1992 T.I. (Tax Window, No. 27, p. 18, ¶2334)

The payment of insurance premiums on policies covering risks associated with inherent and normal occurrences in carrying out the duties of individual directors and officers of a corporation, nor the receipt of the insurance proceeds, will give rise to taxable benefits. The assumption by the corporation of director's or officer's personal liability to the extent permitted by s. 124 of the Canada Business Corporations Act also will not give rise to a benefit.

24 September 1992 T.I. (Tax Window, No. 24, p. 4, ¶2226)

Where employees of a company in a clothing business acquire items of clothing from the company at below cost, they will realize a benefit even if the merchandise displays the company's logo and the merchandise was not for sale to the general public. The amount of the benefit will be the difference between the real or fair market value of the merchandise acquired and the amount paid by the employee.

22 September 1992 T.I. (Tax Window, No. 24, p. 21, ¶2207)

The retroactive reduction by a public corporation of the face value of an employee share purchase loan so as to correspond with the fair market value of the shares will give rise to a benefit under s. 6(1)(a) or s. 15(1).

6 August 1992 T.I. (Tax Window, No. 23, p. 19, ¶2148)

$500 per month paid to an employee to cover the difference between the cost of renting a home in a location to which he was required to relocate, and the amount received by him from renting his home in the previous location (no purchaser having been found for his previous home) will be included in his income under s. 6(1).

23 July 1992 Memorandum 922191 (April 1993 Access Letter, p. 128, ¶C5-188)

re taxability of relocation allowances paid equally by the individual's employer and Agriculture Canada.

21 July 1992 Memorandum 921671 (March 1993 Access Letter, p. 64, ¶C5-184)

A description of a permissible policy for reimbursing employees for moving expenses resulting from the employer's relocation.

17 July 1992 T.I. 921205 (January - February 1993 Access Letter, p. 6, ¶C5-181)

A plan under which employees of an employer will receive rebates directly from the manufacturer upon their purchase of a vehicle gives rise to an employment benefit because such rebate is not available to the public at large. The manufacturer is responsible for reporting the benefit on a T-4 Supplementary form.

13 February 1992 Memorandum (Tax Window, No. 16, p. 1, ¶1748)

Discussion of determination of taxable benefit where individual brokers (and companions) attend off-shore "conferences" as part of an incentive package offered by mutual fund dealers.

28 January 1992 T.I. (Tax Window, No. 13, p. 20, ¶1611)

Although employer reimbursements of child care costs of an employee generally are taxable benefits, there is no taxable benefit where an employer reimburses child care costs incurred by an employee as a result of a requirement of the employer for the employee to travel out of town on business.

9 January 1992 Memorandum (Tax Window, No. 15, p. 20, ¶1692)

The onus is on the employer to provide convincing evidence that the payment of club dues on behalf of an employee is primarily for the employer's benefit.

Where the fair market value of free parking cannot be determined (e.g., in a shopping centre, or where the number of parking spaces is less than the number of employees), the employee will not be assessed for the taxable benefit.

30 November 1991 Round Table (4M0462), Q. 2.5 - Meal Allowance (C.T.O. September 1994)

RC does not consider a meal allowance paid to an employee working overtime to be income if the employee works at least three hours of overtime immediately after his normal hours of work, the allowance is reasonable (not exceeding the value or cost of a normal meal), and the overtime is infrequent or occasional.

30 November 1991 Round Table (4M0462), Q. 2.2 - Automobile (Car Rental) (C.T.O. September 1994)

Where an employee signs a lease directly with a garage and the employer agrees to pay the garage for so long as the employment continues, the payments by the employer will be considered to be part of the employee's remuneration under s. 5(1) or 6(1)(a). S.6(1)(e) and s. 6(2) will not apply because the employer (or a related person) will not have made an automobile available to the employee, given that the employer is not a party to the lease.

20 August 1991 T.I. (Tax Window, No. 8, p. 16, ¶1396)

Where a corporation grants a stock option to a spouse of an employee and the spouse subsequently exercises the option, the employee will be considered to have received a taxable benefit in the year of exercise if the fair market value of the share exceeds the option price.

91 C.R. - Q.46

The reimbursement or allowance for a payment of an employee's tax liability is taxable under s. 6(1)(a) or (b).

91 C.R. - Q.45

Although RC will not assess club dues as a taxable benefit where it is clearly advantageous to the employer's business for employees to be members, this policy does not extend to incidental benefits, such as the employee being healthier and better able to perform his duties by virtue of using the facilities of an athletic club.

Dath and Fuoco, "Flexible Employee Benefit Arrangements", 1991 Corporate Management Tax Conference Report, c. 6

Discussion of flexible employee benefit arrangements or "cafeteria plans".

28 June 1991 T.I. (Tax Window, No. 4, p. 19, ¶1322)

Discussion of benefits paid under private insurance and under workers' compensation laws.

10 June 1991 T.I. (Tax Window, No. 4, p. 28, ¶1293)

Employees are required to include in their income their share of premiums paid by their employer to an insurer in respect of legal services to be provided to employees; and the employer is entitled to a deduction for such premiums.

3 June 1991 T.I. (Tax Window, No. 4, p. 27, ¶1275)

There is a presumption that courses taken during normal working hours with employees being given time off with pay for that purpose, are primarily for the benefit of the employer, with the result that there is no taxable benefit to the employees.

14 May 1991 T.I. (Tax Window, No. 3, p. 12, ¶1233)

Although a group policy which provides automatic coverage of dependents of an employee is not within the definition of a "group term life insurance policy", where the dependent coverage is optional the employee's selection of that option effectively creates a separate policy in respect of the dependent coverage, and the portion of the premium which relates thereto is added to the employee's income.

24 April 1991 T.I. (Tax Window, No. 2, p. 20, ¶1212)

Payments which an employer makes to help offset the cost of tools which the employees were required to have will be included in the employee's income when received, and without any corresponding deduction being available.

22 April 1991 T.I. (Tax Window, No. 2, p. 13, ¶1209)

Payments made by a health and welfare trust on behalf of its members for various counselling services would be considered to be payments out of an employee trust which are included in the income of the employee under s. 6(1)(a), rather than as being exempted under s. 6(1)(a)(iv).

18 April 1991 T.I. (Tax Window, No. 2, p. 21, ¶1194)

Employees covered by a training trust fund do not enjoy a benefit at the time the contributions or grants were made to the trust, nor at the time they received training sponsored or funded by trust.

28 March 1991 T.I. (Tax Window, No. 1, p. 16, ¶1176)

Where employees have personally funded disability insurance policies and assigned their policies to a Health and Welfare Trust estblished by their employer which then pays the premiums, the plan is not a "group plan", with the result that premium payments made by the employer will be included in the income of the employees.

18 February 1991 T.I. (Tax Window, Prelim. No. 3, p. 21, ¶1121)

Description of circumstances in which an allowance paid to an employee for the purpose of purchasing protective clothing and safety accessories constitutes a non-taxable reimbursement of expenses.

22 January 1991 Memorandum (Tax Window, Prelim. No. 3, p. 20, ¶1101)

A 50% discount on automobile insurance is a taxable benefit given its extraordinary size.

18 January 1991 T.I. (Tax Window, Prelim. No. 3, p. 28, ¶1095)

A former employee who seeks damages for wrongful dismissal is not required to include in his income any pre-judgment interest awarded, and no tax is required to be withheld on the pre-judgment interest paid to him.

17 December 1990 T.I. (Tax Window, Prelim. No. 2, p. 12, ¶1055)

Retirement counselling, which unlike financial counselling does not give rise to a taxable benefit if provided without charge to employees, should be a non-recurring service for employees within 15 years of retirement where the prime emphasis is on retirement issues.

19 November 1990 T.I. (Tax Window, Prelim. No. 2, p. 16, ¶1075)

Description of circumstances under which no benefit will be included in employees' income under a supplemental pension arrangement under which a trust meeting the definition of a retired compensation arrangement obtains letters of credit in favour of each employee included in the plan.

14 November 1990 Memorandum (Tax Window, Prelim. No. 2, p. 22, ¶1043)

Commissions earned by securities salespeople on transactions for their own account effected through their employer will be included in their employment income; as will commissions earned by real estate salespersons in similar circumstances.

21 September 1990 T.I. (Tax Window, Prelim. No. 1, p. 17, ¶1006)

An arrangement under which a corporation agrees to reimburse its sole shareholder/employee for receipted medical expenses does not qualify as a private health services plan.

90 C.R. - Q1

The employment benefit from the use of a residence owned by an arm's length employer is normally based on the fair market rent that would have been paid had the employee rented from a third party.

90 C.R. - Q2

RC is appealing the Splane case.

11 June 1990 T.I. (November 1990 Access Letter, ¶1508)

In order to qualify as a "health and welfare trust" a plan must cover two or more employees. Where the only person covered is the sole shareholder and employee, RC generally will consider that the benefit is received by him as an s. 15(1) benefit by virtue of being a shareholder.

23 May 1990 T.I. (October 1990 Access Letter, ¶1447)

Where an employer establishes an in-house child care facility, defrays all operating expenses and makes the facility available to all employees gratuitously or for a minimal fee, the employee is not in receipt of a taxable benefit. An in-house facility includes leased premises.

25 April 1990 Memorandum (September 1990 Access Letter, ¶1405)

Tuition fees refunded by a school which had a continuing education program for its regular teachers who were required to obtain a diploma as a condition for the renewal of their employment contracts, constituted a taxable benefit in their hands.

7 March 1990 T.I. (August 1990 Access Letter, ¶1367)

Where an employee of a corporation is entitled to use a ski pass purchased by his employer, a taxable benefit will be deemed to have been drawn by the employee.

15 January 1990 T.I. (June 1990 Access Letter, ¶1255)

Discussion of when a benefit is conferred on a shareholder-manager by virtue of his participation in a universal life insurance policy.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) 23

15 January 1990 T.I. (June 1990 Access Letter, ¶1246)

Employer-provided parking is a benefit under s. 6(1)(a).

12 January 1990 T.I. (June 1990 Access Letter, ¶1247)

If an employer is involved in the administration of a wage loss plan, the plan will not be a Health and Welfare trust.

10 January 1990 T.I. (June 1990 Access Letter, ¶1262)

Detailed listing of various categories of expenses incurred in connection with a move which may be reimbursed by the employer without giving rise to a taxable benefit in the hands of the employee.

11 December 89 T.I. (May 1990 Access Letter, ¶1202)

Discussion of types of financial counselling that will qualify as being in respect of the retirement of an employee.

2 November 89 T.I. (April 90 Access Letter, ¶1191)

Reimbursements received by employee groups from the B.C. government for up to 1/2 of the costs of negotiating, evaluating and implementing an ESOP or an EVCP do not constitute an employee benefit. Following Ransom, such payment "puts nothing in the pocket but merely saves the pocket."

2 October 89 T.I. (March 1990 Access Letter, ¶1139)

No benefit arises where the employer establishes a child care facility and makes it available to all employees free of charge or for a minimal fee.

25 September 89 T.I. (February 1990 Access Letter, ¶1096)

The value of the benefit from free or low-cost day care services provided by an employer is calculated by dividing the operating costs of the services by the number of children benefitting from them, or through comparison with the market value of similar services provided by private businesses.

88 C.R. - "Automobile Rules" - "Employee Benefits"

The cost of employer-paid repairs resulting from an accident suffered by the employee is considered to form part of the total operating costs of the automobile for the purpose of calculating the operating cost benefit under s. 6(1)(a)(iii).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(2.2) 17

88 C.R. - F.Q.27

Repair costs incurred by the employer to restore a vehicle which was damaged while the employee was travelling on business are viewed as replacing annual insurance premiums which otherwise would have been included in the total operating cost of the vehicle. Such repair costs must be included in the total operating costs of the automobile for benefit calculation purposes under s. 6(1)(a).

88 C.R. - F.Q.28

RC's policy to include the cost of repairs in the operating portion of the employee benefit calculation does not extend to the cost of a replacement vehicle where the previous company car must be written off due to a serious accident.

86 C.R. - Q.62

It is unlikely that RC would attempt to assess a benefit where a corporation guarantees a bank loan to a shareholder or employee, unless he is unable from the outset to repay.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) 79

86 C.R. - Q.77

The cost of insurance and repairs for accidents forms part of the operating cost for an employer-provided vehicle. When there is a fleet policy, the cost of the policy must be prorated over the fleet.

86 C.R. - Q.78

The benefit to an employee from having his tax return prepared is taxable.

ATR-8 (12 May 86)

"Self-insured health and welfare trust fund".

85 C.R. - Q.35

Frequent flyer points applied to personal travel are taxable.

84 C.R. - Q.92

Audit procedures re assessment of unreported tip income.

81 C.R. - Q.44

s. 6(1)(a) is applicable where financial counselling fees and fees for tax return preparation are paid by a corporation for the benefit of a shareholder-employee in his capacity as an employee.

80 C.R. - Q.46

Where an employee loan, previously made in order to enable him to acquire shares, is forgiven s. 6(1)(a) rather than s. 80 will apply. TR-91 will apply where the circumstances are identical to those described therein.

80 C.R. - Q.15

Where an employee is paid in gold coins having a value greater than their legal tender amount, their value is their amount for purposes of s. 6(1)(a).

Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Shares 26

IT-85R2 "Health and Welfare Trusts for Employees"

IT-470R "Employees' Fringe Benefits"

Forms

T4130 Employers' Guide - Taxable Benefits and Allowances

Taxable benefit where employees purchase at less than cost

we consider discounts to be taxable in all the following situations:

  • You make a special arrangement with an employee or a group of employees to buy merchandise at a discount
  • You make an arrangement that allows an employee to buy merchandise (other than old or soiled merchandise) for less than your cost
  • You make a reciprocal arrangement with one or more other employers so that employees of one employer can buy merchandise at a discount from another employer

Articles

Peter Lee, Paul Stepak, "PE Investments in Canadian Companies", draft 2017 CTF Annual Conference paper

Difficulty of determining FMV of management’s optioned shares where they rank lower in the waterfall (pp.20-21)

[S]tock options are typically priced at a specific point in time (that is, when issued). This point in time pricing can be difficult to reconcile with the "waterfall" return that PE investors expect, whereby they are entitled to a repayment of their original investment plus a specified hurdle rate of return before other stakeholders (including management, through their management incentives) begin to participate in profits. To account for the waterfall, the pricing of stock options would ideally need to be based on the fair market value of the shares at the time the options are granted, net of the value, discounted back to that time, of the anticipated return of PE investors' original investment and the hurdle rate. However, there is some uncertainty as to whether this pricing approach is justified as a valuation matter, since the waterfall is not normally incorporated into the terms of the shares and hence may not justify a discount in value of the Holdco shares or options. Also, from a practical perspective, it is also not possible to know in advance how many years will elapse before an exit….

An alternative approach is to price the options without taking into account the waterfall. In principle, this is reasonable, since the waterfall normally does not directly affect the value of the Holdco shares. However, the options would need to be re-priced once the original investment and the hurdle rate have been extracted from Holdco and distributed to the PE investors, since this extraction will reduce the value of the shares.

In principle, such re-pricing of stock options is permitted (on a tax-deferred basis and without resulting in a denial of the paragraph 110(l)(d) deduction for employees), provided among other things the "in-the-money amount" of the options does not increase. [fn 99: See subsections 7(1.4) and 110(1.7).]

Kevin Bianchini, Reuben Abitbol, "Taxation of Stock Appreciation Rights", Taxation of Executive Compensation and Retirement (Federated Press), Vol. 24 No. 8, 2015, p.1655

Safe harbour until SAR vesting (p. 1656)

[T]he CRA has taken the position that until the employee has a right to exercise and cash in the SARs, the SDA rules would not apply. [f.n…. 9422835 …]

In other words, once the SAR units become fully vested it would have be determined whether the executive is postponing the exercise of the SARs in order to avoid the immediate tax consequences (i.e., the employment income). As stated by the CRA, this is a question of fact… .

Alternative application of constructive receipt (“CR”) at time of vesting (p. 1657)

[I]n the context of the recognition of employment income, the Canadian jurisprudence has yet to develop guidance with respect to the doctrine of CR

…[T]he CRA addressed its position with respect to CR in the context of SDAs in… 1999-0007315… .

…As can be seen…the CRA adopts a very broad approach and leaves open the possibility that even if the SDA main purpose test is met, the rules with respect to the doctrine of CR may still be rendered applicable. Hence, in light of the above-mentioned, it seems likely that the SARs would be taxed at the moment they become fully vested regardless of when exercise occurs.

Gabrielle St-Hilaire, "When Free Parking is not Really Free", Canadian Current Tax, Vol 22, No. 10, July 2012, p. 1

Includes a discussion of "Kleinwächter's conundrum" (re a palace Flügeladjutant who detests opera and hunting).

Kim Brooks, "Delimiting the Concept of Income: The taxation of In-Kind Benefits", 2004 McGill Law Journal, Vol. 49, No. 2, p. 255.

Lyne Gaulin, "Tax-Free Compensation: An Overview of Non-Taxable Employment Benefits", Taxation of Executive Compensation and Retirement, Vol 10, No. 10, June 1999, p. 151.

Gold, "The Taxation of Health and Welfare Trusts in Canada", Taxation of Executive Compensation and Retirement, Vol. 8, No. 10, June 1997, p. 307.

Wolff, Leia, "To the Editor: Re: The Facts in Splane v. The Queen", 1995 Canadian Tax Journal, Vol. 43, No. 6, p. 2280.

Arnold, Li, "The Appropriate Tax Treatment of the Reimbursement of Moving Expenses", 1996 Canadian Tax Journal, Vol. 44, No. 1, p. 1.

Brown, Newton, "Tax Considerations in the Design of a Flexible Benefits Plan", Taxation of Executive Compensation and Retirement, Vol. 7, No. 2, September 1995, p. 22.

Lee, "Relocation Payments: The Continuing Search for the Tax-Free Zone", Taxation of Executive Compensation and Retirement, December/January 1995, p. 67.

Snider, "Employee Share Purchase Loans and the Predicament of Declining Share Values", 1993 Canadian Tax Journal, No. 5, p. 1001.

Dunbar, "Travel Expenses of Spouse May Not Give Rise to Taxable Benefit", Taxation of Executive Compensation and Retirement, November 1991, p. 526.

Bernstein, "Fringe Benefits and Equity Participation", 1991 Corporate Management Tax Conference Report, c. 5.

Baston, "Tax Planning for Executive Hiring and Firing", 1991 Corporate Management Tax Conference Report, c. 10.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1) 6

MacKnight, "Indemnities for Officers and Directors - Adding Insult to Injury", Canadian Current Tax, August 1991, p. P41

Discussion whether directors' indemnity payments are an employment benefit.

Summerville, "Employee Discounts on Promotional Merchandise May Not be Taxable Benefit", Taxation of Executive Compensation and Retirement, October 1990, p. 349.

"Owner-Managers May Be Eligible for Tax-Free Reimbursement of Medical Expenses", Taxation of Executive Compensation and Retirement, June 1990, p. 299.

Dunbar, "Revenue Canada Sets Down the Ground Rules for Flexible Benefit Plans", Taxation of Executive Compensation and Retirement, May 1990, p. 278.

Summerville, "Tax Treatment of Parking Benefits May Be Contested", Taxation of Executive Compensation and Retirement, May 1990, p. 281.

Finley, "Revenue Canada Recognize Few Exceptions to Rule that Relocation Assistance is Taxable in Employee's Hands", Taxation of Executive Compensation and Retirement, February 1990.

Dionne, "Employers Who Waive Commissions on the Sale of Goods or Services May Confer Taxable Benefit on Employees", Taxation of Executive Compensation and Retirement, February 1990.

Finance

1996 A.P.F.F. Round Table No. 7M12910 (Item 4.3.1.): Critical commentary by Finance representative on the Splane and Hoefel cases, and a statement that Finance has not yet made a decision as to whether to seek an amendment to s. 6(1)(a).

Subparagraph 6(1)(a)(i)

Administrative Policy

3 May 2022 CALU Roundtable Q. 10, 2022-0928901C6 - 2022 CALU – Q10 – Private Health Services Plan

single shareholder/employee HSA does not qualify

S. 6(1)(a)(i) excludes a taxable benefit from the employer’s funding of a private health services plan (PHSP) for its employees, including in the case of a health spending account (HSA) (under which an employer agrees to reimburse its employees’ hospital and medical expenses incurred during the year up to a pre-determined limit).

However, CRA considers that an HSA established for a single shareholder/employee (and family members) likely does not qualify as a PHSP. This is based on its view that “for a plan to be a PHSP … the plan must be a plan of insurance” and, here, “[e]ffectively, the sole employee-shareholder is paying for the personal hospital and medical expenses for themselves and their family members through their solely owned corporation without any risks being assumed by the corporation.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Private Health Services Plan a health spending account for a single shareholder/employee likely does not qualify as a PHSP 152

26 January 2021 External T.I. 2020-0857841E5 - HCSA

extension during COVID of the period for carrying forward unused HCSA credits

In 2020-0846751E5, CRA noted that health care spending accounts (“HCSA”) that comply with IT-529 generally provide that the HCSA can permit the carry-forward of either unused credits or eligible medical expenses (but not both) for a period not exceeding 12 months, so as to not disqualify the HCSA from the exemption in s. 6(1)(a)(i) for private health services plans (“PHSPs”). CRA further announced in 2020-0846751E5:

In these extraordinary [COVID] circumstances, a HCSA that qualifies as a PHSP and which has unused credits expiring between March 15 and December 31, 2020, could temporarily permit the carry forward of those unused credits for a … period of up to six months [which] would generally … not, in and of itself, disqualify the HCSA from being a PHSP. [emphasis added]

In generally extending these periods, CRA now stated:

In light of the severity of the second wave of the COVID-19 pandemic, the CRA will allow a HCSA that qualifies as a PHSP and which has unused credits expiring between March 15, 2020 and March 16, 2021, to temporarily carry forward those unused credits for a period of up to 12 months. … However, since a HCSA must involve a reasonable element of risk to qualify as a PHSP, it is our view that any further extension of the temporary carry-forward period beyond 12 months, would likely disqualify the HCSA from being a PHSP. [emphasis added]

Summary of 26 January 2021 External T.I. 2020-0857841E5 under s. 248(1) - private health services plan.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Private Health Services Plan further COVID-related extension of the period for carrying forward unused HCSA credits 272

25 May 2020 External T.I. 2020-0846751E5 - HCSA unused credits

unused HCSA credits can be carried forward for up to an additional 6 months during COVID-19

Due to the curtailment of services during the COVID-19 pandemic, plan members of a health care spending account (“HCSA”) may not be able to use the credits allocated to the HCSA before they expire, so that they will be forfeited. The terms of the HCSA would in most cases comply with IT-529, which provides that a HCSA can permit the carry-forward of either unused credits or eligible medical expenses (but not both) for a period not exceeding 12 months without generally disqualifying the HCSA from being a private health services plan, for purposes of the exemption in s. 6(1)(a)(i). CRA stated:

In these extraordinary circumstances, a HCSA that qualifies as a PHSP and which has unused credits expiring between March 15 and December 31, 2020, could temporarily permit the carry forward of those unused credits for a reasonable period to allow members to access services that were otherwise restricted during the COVID-19 outbreak. A carry-forward period of up to six months would generally be considered reasonable and would not, in and of itself, disqualify the HCSA from being a PHSP.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Private Health Services Plan relaxation of 12-month carryforward limitation in IT-529 during COVID-19 277

24 January 2019 External T.I. 2016-0651291E5 - Revised PHSP position - Self-insured plan

employee allocated ceiling amounts do not affect application of 90% METC-eligible expense test where a self-inusred plan

Under CRA’s revised policy on insured private health services plans (PHSPs), all or substantially all of the premiums paid under the plan must relate to medical expenses that are eligible for the medical expense tax credit (METC). CRA confirmed that this means a test of whether 90% or more of the annual premiums paid under the plan relate to METC-eligible expenses, and it would be irrelevant if, for example, only 88% of the benefits paid in the year were METC-eligible. However, in the case of a self-insured plan, the test is one of whether all or substantially all of the benefits paid to all employees in the calendar year are for METC-eligible expenses.

Where a health care spending account (HCSA) sets a ceiling on the amounts that can be claimed under the plan, the employees’ allocation of the ceiling amount to the various expense categories is not considered, so that if the portion of the benefits paid in the year for METC-eligible benefits was, say, 92%, it would not matter that the total ceiling amounts allocated to METC-eligible expenses was only 80%. In the rare case where there was determined to be a separate HCSA plan for each employee, this same test would be applied to each such separate plan.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Private Health Services Plan measuring compliance with the 90% METC-eligible expense test 297

22 January 2019 External T.I. 2016-0645581E5 - Health and welfare trusts (HWTs)

HWT can administer a plan that is funded only with union or employee contributes where it also has employer-funded plans

Can a health and welfare trust (“HWT”) which is jointly established by a union and multiple employers, provide benefit coverage to non-unionized employees of participating employers, retired employees, and individuals who are not employees (i.e., dependants or survivors of current or retired employees (“non-employees”)). Can an HWT administer a plan for retired employees that is not funded by any participating employers, or a plan that provides drug or alcohol rehabilitation services as part of an employee assistance program? CRA responded:

A HWT may only administer a group sickness or accident insurance plan (“GSAIP”), a private health services plan (“PHSP”), a group term life insurance policy (“GTLIP”), or a combination thereof.

…[T]here is no condition in Folio S2-F1-C1 which requires that all employees be in the same employee group. Accordingly … the provision of benefit coverage to non-unionized employees, in and of itself, would not disqualify the trust as a HWT. …

[T]he provision of benefit coverage to retired employees or non-employees would not disqualify a trust as a HWT where the underlying plan or policy (i.e., a GSAIP, PHSP, or GTLIP) allows for the provision of benefit coverage to such individuals. …

[A] GTLIP may only provide benefit coverage to current and former (including retired) employees. …

…Folio S2-F1-C1 … clarifies that a trust funded only with contributions made by employees or an employee union would not qualify as a HWT. However … there is no explicit requirement that an employer be legally obligated to make contributions in respect of each plan or policy administered by a HWT.

[W]here is it established that retired employees may be provided benefit coverage through a GSAIP, PHSP, or GTLIP, and none of the participating employers have a legal obligation to pay any premiums or contributions in respect of the particular plan or policy, it would appear permissible for a HWT to administer such a plan or policy provided that the trust also administers other employer-funded plans or policies. …

A HWT may administer a plan that offers drug and alcohol rehabilitation services, provided the plan qualifies as a PHSP. …

[A] plan that otherwise meets all of the conditions in paragraph 3 of … IT-339R2… is considered a PHSP as long as all of the expenses covered under the plan are medical or hospital expenses (“medical expenses”) or expenses incurred in connection with and within a reasonable time period following a medical expense, and all or substantially all (generally 90% or more) of the premiums paid under the plan relate to the coverage of medical expenses that are eligible for the medical expense tax credit (“METC”).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Private Health Services Plan extension to non-employees/employee or union funded plan/requirements for rehab plan 295

12 December 2018 External T.I. 2017-0718661E5 - Private health services plan

coverage for U.S. expenses of METC type generally eligible

CRA indicated that premiums paid by an employer under a Blue Cross plan, that would reimburse an employee for certain medical and health care costs incurred while in the U.S., would not be a taxable benefit (based on the exemption for private health services plans) provided that “‘all or substantially all’ of the premiums paid under the plan relate to medical expenses that are eligible for the medical expense tax credit (METC).” CRA further indicated that such “eligible medical expenses are not restricted to those paid in Canada or for medical services provided in Canada” – and that the insurer of the plan should determine whether this test in fact was being met.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Private Health Services Plan coverage for employee's U.S. medical expenses would qualify if they were substantially METC-type expenses 154

14 September 2017 Roundtable, 2017-0703871C6 - CPA Alberta 2017 Q9: PHSP for owner-managers

sole employee-shareholder unlikely to qualify for PHSP

CRA considers that:

In a situation where a corporation provides a self-insured HCSA for its only employee who is also its sole shareholder … , it is likely that the sole employee-shareholder would be reimbursed for the full amount allocated to him or her annually.

On this basis, CRA would view the arrangement as not being a plan of insurance and, thus, not a private health services plan, so that there would be a taxable benefit to the employee-shareholder, even where the benefits were comparable to those available to non-shareholder employees performing similar services for similarly-sized businesses.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Private Health Services Plan a self-insured health care spending account (“HCSA”) for a sole employee-shareholder likely will not qualify as a private health services plan 303

May 2017 CPA Alberta Roundtable, ITA Q.9

HCSA for sole shareholder-employee unlikely to operate as insurance plan

A small business only having one or more employees who are also shareholders, establishes a notional health care spending accounts (“HCSA”) (a type of “private health services plan” under s. 248(1)) under which the corporation administers the accounts for its employees as part of their contract(s) of employment. After noting that as per IT-529 “if the plan or arrangement is such that there is little risk that the employee will not be reimbursed for the full amount allocated to that employee annually, then the arrangement is not a plan of insurance and therefore, not a private health services plan,” CRA stated:

In a situation where a corporation provides a self-insured HCSA for its only employee who is also its sole shareholder …it is likely that the sole employee-shareholder would be reimbursed for the full amount allocated to him or her annually.

CRA also indicated that the “general presumption that a sole employee-shareholder receives a benefit or an allowance in his or her capacity as a shareholder … may not apply if the benefit or allowance is comparable (in nature and amount) to benefits and allowances generally offered to non-shareholder employees of similar-sized businesses, who perform similar services and have similar responsibilities.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Private Health Services Plan private health service plan rules generally are not available for a sole shareholder-employee 180
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) general presumption that employee-shareholder receives health care spending account benefits as shareholder 128

11 January 2017 External T.I. 2016-0635351E5 - Employee-shareholder private health services plan

a qualifying PHSP could encompass the only two employees of a corporation who are the sole shareholder and spouse

A corporate employer pays private health services plan premiums (e.g., Blue Cross) under individual policies respecting its two employees (being all its employees): its sole shareholder; and a related individual. CRA stated:

CRA…generally accepts that medical and hospital insurance plans offered by Blue Cross are considered PHSPs….

After referring to its statement in S2-F3-C2 that the “general presumption that an employee-shareholder receives a benefit or an allowance in their capacity as a shareholder when the individual can significantly influence business policy” may not apply if “all of the employees are shareholders or individuals related to a shareholder, and the benefit or allowance is comparable (in nature and amount) to benefits and allowances generally offered to non-shareholder employees of similar-sized businesses, who perform similar services and have similar responsibilities,” CRA stated:

Where PHSP benefits (e.g., premiums paid by the employer) are received by virtue of employment, such amounts are excluded from employment income by subparagraph 6(1)(a)(i)…. [W]hen an employer makes a payment to an employee for PHSP premiums, the amount is only excluded from the employee’s income if the payment is a reimbursement.

If there were a taxable benefit, both the shareholder’s premiums and the spousal premiums would be included in the shareholder’s income under s. 15(1) or 56(2).

New position on private health services plans - Questions and answers 25 November 2015

The CRA now considers that a plan is a PHSP as long as all or substantially all of the premiums paid under the plan relate to medical expenses that are eligible for the medical expense tax credit (METC). The plan must also meet all other conditions…of…IT-339R2… . The CRA's old position was that all medical expenses covered under a plan had to be [so] eligible… . The new position came into effect January 1, 2015.

All or substantially all generally means 90% or more. Therefore, in most cases, 90% or more of the premiums paid under a plan have to be for coverage of medical expenses that are eligible for the METC.

For example, Company ABC pays $100 a month for its group employee insurance plan. … $70 relates to coverage for prescription drugs that an employee lawfully buys, as prescribed by a medical practitioner and recorded by a pharmacist;…$20 relates to coverage for dental services paid to a dentist;…$8 relates to coverage for medical tests such as electrocardiograms, urine analysis, and x-rays; and…$2 relates to coverage for non-prescription vitamins. Since the first three items are eligible for the METC and total more than 90% of the entire premium, the CRA would consider the plan to be a PHSP (assuming that all other conditions have been met).

24 November 2015 CTF Roundtable Q. 5, 2015-0610751C6 - PHSP update

substantially all test for PHSPs

Effective January 1, 2015, CRA has only been requiring that substantially all (rather than all) of the premiums paid under a private health services plan relate to medical expenses that are eligible for the medical expense tax credit. CRA "did not want plans to be considered offside on the basis of nominal or incidental non-METC coverage," and this change "provides more flexibility in designing plans to handle incidental or nominal non-METC expenses."

25 September 2014 External T.I. 2014-0528211E5 F - Cotisation payée par l'employeur

negotiated wage reduction in exchange for increased contributions to group sickness or accident insurance plan

A new collective agreement provides that the share of collective insurance premiums originally paid by the employees would be assumed by the employer in exchange for a wage reduction. Would CRA treat the premiums paid by the employer in such a situation as those of the employees? CRA responded:

[T]he tax consequences of a negotiated wage reduction in exchange for an increase in contributions to a group sickness or accident insurance plan under a labour contract will depend on the rights and obligations of the contracting parties under the new employment contract.

4 December 2013 External T.I. 2012-0465891E5 F - Primes d'assurance / Premiums

sub plan with only one employee of particular employer could be a group plan if benefits similar to those for employees in other sub plans

The employees of Corporation A were members of four basic insurance plans respecting health insurance, salary insurance and accidental death and dismemberment insurance available to employees of employers in a particular industry. Mr. A was the only member of Plan A as a result of also being a director (with other employees being members of Plans B, C or D). In addressing whether Plan AQ was a group insurance plan for purposes of s. 6(1)(a)(i), CRA stated:, CRA stated:

Where an organization establishes an insurance plan with an insurer for certain members of the organization, the insurance plan could be considered a group insurance plan if there are more than two members, even if the members are not employed by the same employer.

Furthermore, an employee can be considered to be covered by a group plan if the level of benefits and the ratio of contributions shared by the employer and employee are similar to those for other employees covered by the plan.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) insurance premium benefits qua shareholder 117

13 September 2012 Internal T.I. 2012-0442671I7 F - Dédommagement pour la perte de bénéfices

damages received after 2011 by employees of an insolvent company for cancellation of their medical plan have become taxable

The former employees and retirees of a bankrupt corporation (the "Employer") received a lump for the cancellation of their rights in a group insurance plan and respecting legal costs incurred to recover the lump sum. The lump sum received for the Plan cancellation included compensation for the loss of medical and dental coverage and hospitalization coverage for themselves and their dependents (respecting the "Medical Plan"), as well as the loss of life insurance coverage (the "Coverage"). Damages also were claimed for the amounts owing under the Employment Standards Act (the "Dismissal Amount").

In finding that the portion of the lump sum allocable to the termination of the Medical Plan was taxable (and before going on to similarly conclude respecting that allocable to the lost Coverage), the Directorate stated:

At the time the trustee [in bankruptcy] paid the lump sum, the CRA's position was not to tax lump sums received by active or retired employees in lieu of a private health insurance plan. According to the CRA, the amounts could be considered as an early reimbursement of medical expenses that did not have to be included in the calculation of the recipient's income. In addition, individuals who received amounts that were not taxable could not claim the medical expense tax credit as long as the total medical expenses incurred did not exceed the lump sum amounts received. This position will generally no longer apply to amounts received from 2012 onward. …

Since a portion of the lump sum received in respect of the Medical Plan was received before 2012, that portion does not have to be included in the computation of the Objectors’ income. However, they cannot claim the tax credit for medical expenses incurred as long as the total medical expenses actually incurred do not exceed the portion of the lump sum received in respect of the Medical Plan.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Death Benefit damages received for loss of life insurance coverage were not rendered a death benefit under the surrogatum principle 319
Tax Topics - Income Tax Act - Section 6 - Subsection 6(3) damages received by former employees of insolvent company for cancellation of their life insurance coverage were received in lieu of remuneration for their employment services 285
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(b) legal fees paid to recover damages for employer cancellation of insurance coverage, and medical plan, qualified and did not qualify, respectively 353

7 October 2011 Roundtable, 2011-0406551C6 F - Régime coll. d'ass. maladie et les accidents

PHSP can include spouses and dependent related persons

Can a group sickness and accident insurance plan (a plan consisting of individual insurance policies) also cover employees’ spouses or persons residing with the employee and with whom the employee is connected by blood relationship, marriage or adoption? CRA responded:

[I]t appears to us that the intention of the legislator is that a group sickness or accident insurance plan may provide benefits to an employee, the employee’s spouse or common-law partner or a person related to the employee who lives at home or is dependent on the employee.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 144.1 - Subsection 144.1(1) - Designated Employee Benefit benefit from a group sickness or accident insurance plan may be paid from a Life and Health Trust to the employee, spouse or dependent child 161

19 May 2011 External T.I. 2011-0405431E5 F - RPDB et feuillet T4

no T4 reporting for employer DPSP contribution

Respecting a question as to whether an employee should be taxed on employer contributions to a deferred profit sharing plan ("DPSP"), CRA stated (before going on to refer to the exception in s. 147(10.3):

A taxpayer is not required under paragraph 6(1)(a) to include in computing income for a taxation year as income from an office or employment the benefits that arise from the DPSP contributions of the taxpayer’s employer. Consequently, the amount of DPSP contributions that the employer pays to the trustee of the plan for the benefit of one of its employees should not be included in Box 14 of the T4 slip … .

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 8301 - Subsection 8301(2) T4 reporting by DPSP employer of pension adjustment 169
Tax Topics - Income Tax Act - Section 147 - Subsection 147(10.3) T4 reporting-treatment of DPSP benefit to s. 147(2)(k.2) persons 126

21 August 2008 External T.I. 2008-0272241E5 F - Régime compl. d'assurance de soins médicaux

a decrease in salary and increase in HCSA flex credits on renegotiation of employment contract does not result in an income inclusion

Regarding employees who relinquish, once at the beginning of the year for their health care spending account, part of their salary increase in order to add additional credits, CRA stated:

IT-529 … states that if an employee forgoes an amount to which the employee is or will become entitled, such as a negotiated salary increase, vacation or bonus, the amount of remuneration forgone is included in income in the year in which the amount is converted to flex credits. On the other hand, when a contract of employment is renegotiated upon the expiry of a former employment contract to incorporate a decrease in the level of salary or wages to be paid to an employee over the term of the new contract and the new contract also provides for additional flex credits, the additional credits will not be required to be included in the employee's income as part of salary and wages. However, if an employment contract is renegotiated during the term of an employment contract to decrease salary and increase the allocation of flex credits, the additional credits so allocated will be included in the employee's income as salary. Also, the benefits acquired by means of the additional credits will be considered to have been provided through employee contributions.

27 March 2007 External T.I. 2006-0217511E5 F - Régime d'assurance collective

payment by employer of all rather than half the premiums for a group insurance plan would not oust the exclusion

If the employer were to pay all (rather than half, as previously) of the premium for the group insurance plan for the employees, would the resulting benefit fall within the exceptions in paragraph 6(1)(a)(i)? CRA responded:

[T]o the extent that the premiums paid by the employer (out of its own funds) relate to a plan or plans as listed in subparagraph 6(1)(a), no taxable benefit is to be included in computing the taxpayer's employment income (subject to subsection 6(4) in respect of a group term life insurance policy). Thus, in the situation presented, whether the premium is paid in full by the employer (as intended by the employer and employees) or only in part (as is currently the case) will not affect the determination of whether a taxable benefit exists.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(f) CRA will not accept a retroactive change to a plan’s tax status 179

12 February 2007 External T.I. 2006-0214141E5 F - Régime d'assurance salaire

a qualifying group disability plan could utilize individual policies, but s. 6(1)(a)(i) exclusion not available where plan restricted to the two shareholder-managers

A and B, who are the two 50% shareholders of AB Inc., also are the two salaried managers of AB Inc. All other employees are non-managers. It is proposed that A and B, will enter into individual salary insurance policies providing for the payment of benefits in the event of incapacity for work due to illness or accident, with AB Inc. paying the premiums and treating it as a group plan.

In discussing whether the payment of the premiums would not give rise to a benefit by virtue of the exclusion in s. 6(1)(a)(i), CRA stated:

The fact that the employer takes out individual disability insurance policies does not in itself prevent those premiums from being considered as part of the same group plan. …

Rather, the plan is the agreement between the employer and its employees or a group or association of employees that provides compensation to an employee for loss of employment due to illness or accident. A plan may include one or more insurance contracts that may be acquired from one or more insurers.

To determine whether an individual disability insurance policy is part of a group sickness or accident insurance plan, it is necessary to determine whether the level of benefits and the ratio of contributions to the plan shared by the employer and the employee are similar to those of other employees covered by the plan.

After indicating that there was insufficient information to apply the above test, CRA then went on to indicate that, in any event, it considered that “the premium paid by AB Inc. for the benefit of A and B constitutes a benefit received by them in their capacity as shareholders,” so that the s. 6(1)(a)(i) exclusion was inapplicable.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) benefit from corporate employer’s payment of premiums under disability plan restricted to the two shareholder-managers was received qua shareholder rather than employee 118

28 August 2006 Internal T.I. 2006-0171141I7 F - Régime d'assurance collective contre la maladie

a qualifying plan can be implemented by individual disability insurance policies taken out for all management employees if there is a similar premium sharing arrangement for all

Could the employer premiums paid for individual disability insurance policies taken out in respect of all the management employees be considered to be premiums paid respecting a group sickness or accident insurance plan?

The Directorate indicated that this turned on whether there was a plan, namely, an agreement between the employer and the employees or a group of employees. If there was a plan, it could include one or more insurance policies. However, in order to determine whether an individual policy was part of the group plan, the level of benefits provided by the policy and the ratio of premium payments as between the employer and the employee must be similar to those of other employees covered by the plan.

9 June 2005 External T.I. 2004-0097451E5 F - Régimes d'assurances collectives

employees can potentially pay top-up amounts for further benefits or receive taxable compensation for opting for lower benefits

Although the employer undertakes to pay the full premium for basic life, health and dental insurance under a group plan, the employee may choose to opt for more comprehensive coverage, in which case the employee will have to pay the additional cost of the premiums beyond the basic coverage. Alternatively, the employee can opt for less comprehensive coverage, in which case the employer would pay the employee an amount equal to the difference between the cost of the premium for the basic coverage and the cost of the premium for the selected coverage. CRA stated:

[T]he fact that some employees contribute amounts to the various plans to increase beyond the basic level of coverage offered by the employer and that other employees receive amounts to compensate for the fact that they choose less insurance coverage than that offered by the employer does not in itself invalidate the fact that the contributions made by the employer to those various plans may meet the exceptions provided for in paragraph 6(1)(a).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(f) CRA criteria for determining whether there are 2 separate plans (one of which is fully employee-funded) 359

8 October 2004 APFF Roundtable Q. 11, 2004-0090791C6 F - Maladies graves et soins de longue durée

sickness plan can comprise individual critical illness policies

Regarding the availability of the s. 6(1)(a)(i) exclusion regarding premiums paid by corporations for individual critical illness policies provided to senior executives (non-shareholders) as the beneficiaries, CRA stated:

Critical illness insurance is generally equivalent to sickness or accident insurance. Even though critical illness insurance is under an individual insurance policy, this does not automatically mean that the insurance policy is not part of a group plan. It is our view that a group insurance plan refers to a plan under which a number of employees are insured either under a single policy between the insurer and an employer or under individual policies that are purchased as part of the plan set up by the employer for the group of insured employees.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose premiums for critical illness policies and individual long-term care policies for senior employees are deductible 106
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(f) periodic payments under long-term care insurance are not taxable 167

13 June 2003 External T.I. 2002-0156435 F - ASSURANCE DE MALADIES REDOUTEES

taxable benefit from critical illness coverage if it is incidental to life insurance coverage
Also released under document number 2002-01564350.

Group insurance contracts included various life insurance benefits as well as a critical illness benefit, which was payable in the event that the insured suffered from one of the covered diseases or medical conditions and was payable in a lump sum.

After stating that “a contract that provides exclusively for a benefit in the event of critical illness is a contract of sickness or accident insurance” and that “a contract that contains a critical illness insurance clause that is incidental to a life insurance contract will be a life insurance contract,” CCRA indicated that “[i]f it is determined that the principal contract is a group critical illness contract so that the contract is a group sickness or accident contract, the premiums paid by the employer would not be a taxable benefit included in income pursuant to paragraph 6(1)(a),” whereas “the premiums paid by the employer in respect of such a life insurance policy would be a taxable benefit… .”

Further, in light of the restrictive definition of the term "group term life insurance policy," a “group life insurance policy that provides critical illness coverage is not a ‘group term life insurance policy’ within the meaning of subsection 248(1),” so that “the premiums paid by the employer in respect of such a life insurance policy would be a taxable benefit.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Group Term Life Insurance Policy group life insurance policy that includes critical illness coverage is not a "group term life insurance policy" 222
Tax Topics - Income Tax Act - Section 148 - Subsection 148(9) - Disposition - Paragraph (e) critical illness benefit paid under a life insurance policy is proceeds of disposition 205

24 May 2002 Internal T.I. 2001-0113597 F - ASSURANCE CONTRE LES MALADIES GRAVES

if a clause providing for the return of premiums on death was ancillary, the policy could still qualify as a group sickness or accident insurance plan

A term to age 75 critical illness policy provided that in the event of the death of the insured during the period of insurance without having been entitled to the payment of a critical illness benefit, the premiums paid would be refunded up to the sum insured. CCRA indicated that if this return of premium on death clause was ancillary to critical illness insurance, the insurance policy would be a sickness or accident insurance policy – in which case, there would be no taxable benefit under s. 6(1)(a) if it were a group sickness or accident insurance plan.

8 February 2002 Internal T.I. 2001-0106197 F - PRIME D'ASSURANCE-VIE

allocation of premium between plan with different components

Where a premium is paid on a 50/50 basis (employer/employee) to an insurer pursuant to a life insurance policy that also includes coverage for illness and long-term disability, the Directorate indicated that an allocation between the three components must be made by the employer in accordance with the insurance contract or employment contract and a taxable benefit, if applicable, will be computed on the basis of this allocation.

Subparagraph 6(1)(a)(ii)

Administrative Policy

21 February 2018 External T.I. 2017-0702061E5 - RCA contributions and taxable inc earned in Canada

s. 6(1)(a)(i) exclusion applied first before s. 4 allocation of income between Canada and U.S.

40% of a non-resident athlete’s $2 million compensation package from a Canadian team was in the form of annual team contributions to his retirement compensation arrangement. Upon retirement or loss of employment, the athlete would receive a lump sum cash-out payment from the RCA that would be subject to 25% Part XIII tax.

After noting that “4(1)(b) requires a reasonable allocation of the employment income between the two countries,” CRA indicated that the $800,000 annual team RCA contribution was excluded from employment income under s. 6(1)(a)(ii) and that the (net) employment income of $1,200,000 should be allocated as to 40% (or $480,000) to Canada based on the higher number of games played in the U.S. Thus a submission that the athlete’s Canadian employment income under s. 115(1)(a)(i) was nil through allocating the s. 6(1)(a)(ii) exclusion wholly to the Canadian income ($2 million x 40% - $800,000) was unsuccessful.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 115 - Subsection 115(1) - Paragraph 115(1)(a) - Subparagraph 115(1)(a)(i) s. 6(1)(a)(ii) exclusion for employer RCA contributions was effectively allocated between Cdn and US employment income of an athlete 241
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(m.2) no deduction permitted where plan provided only for a lump sum payment or where it was excluded from SDA treatment by para. (j) (re athletes) 212

Subparagraph 6(1)(a)(iv)

Administrative Policy

S2-F3-C2 - Benefits and Allowances Received from Employment

Inclusion of substance abuse/exclusion of legal and financial counselling

2.47 ...Generally, the term counselling services refers to guidance and assistance provided by a trained person on a professional basis. This includes counselling services for tobacco, drug, or alcohol abuse, or for stress management.

2.48 The value of employer-paid legal and financial counselling services for an employee is generally not excluded...subparagraph 6(1)(a)(iv).

Example 12 – Personal trainer

An employer pays for the cost of a personal trainer for an employee. ...Some of these services qualify as counselling for the employee’s mental and physical health. Unless the value of any benefit received from such counselling services can be separated from the value of any benefits received from the other non-counselling services, subparagraph 6(1)(a)(iv) would not apply. ...

21 January 2016 Roundtable, 2016-0624811C6 F - Employee Assistance Program

restricted to advice, valued at hypothetical cost

Would the payment of premiums by an employer to an employee assistance program (providing support for issues such as stress, work difficulties, depression, marital problems, chemical dependencies, legal problems, diabetes and obesity) be a taxable benefit. After describing the exception for private health services plans, CRA referred to the exception in s. 6(1)(a)(iv) and stated (TI translation):

“[C]ounselling services” in subparagraph 6(1)(a)(iv)…are consulting or advisory services. The exception in subparagraph 6(1)(a)(iv) does not include a service that entails more than simply advice, or is preventive or curative treatment (as to which it would be necessary to examine any existing private health insurance plan and determine if these treatments occur under the plan). …

[T]he services of the employee assistance program that are counseling or advice respecting areas other than those specified in clauses (A) and (B) of subparagraph 6(1)(a)(iv), would not come within the exception provided by paragraph 6(1)(a)(iv). If these services were not principally for the main benefit of the employer and they were not provided under a private health services plan, such services would constitute a taxable benefit to the employee. Services provided in connection with difficulties at work could be an example of services principally for the benefit of the employer… .

The amount of any taxable benefit resulting from an employee assistance program which should be included in computing the income from an office or employment of the employee would be equal to the fair market value of the service, being the amount that an employee would have to pay for this service if the employee assistance program did not exist.

16 April 2014 External T.I. 2013-0514521E5 - Employer-paid Personal Trainer and Nutritionist

personal trainer/nutritionist not excluded as "counselling"

After finding that the employer-paid provision of the cost for a personal trainer or nutritionist for its employees generally would be considered to give rise to a taxable benefit, CRA stated

The Concise Canadian Oxford Dictionary defines "counselling" as "the act or process of giving counsel; the process of assisting and guiding clients, esp. by a trained person on a professional basis, to resolve esp. personal, social or psychological problems and difficulties." It is a question of fact whether any of the services provided by a personal trainer or nutritionist are counselling services.

Where counselling services are part of a program provided by a personal trainer or nutritionist, it is our view that the value of any benefit derived from such services would be difficult to separate from the value of any other benefits received or enjoyed under the program. Therefore, clause 6(1)(a)(iv)(A)…likely would not apply... .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) personal trainer/nutritionist not excluded as "counselling" 170

24 October 2012 Internal T.I. 2012-0454661E5 F

In respect to a query on financial planning services, CRA stated (TaxInterpretations translation):

...when counselling services are provided or paid by the employer, or reimbursed to the employee on the provision of receipts, respecting the re-employment of employees or their retirement, we are of the opinion that such amounts are not included in the calculation of the income of the employees.

Clause 6(1)(a)(iv)(B)

Administrative Policy

24 October 2012 Internal T.I. 2012-0454661I7 F - Conseils de planification financière

exclusion can extend to reimbursement or payment of fees for financial planning

After noting that “the fees an employer pays to provide financial counselling services to its employees are usually included in the calculation of their income unless they relate to, inter alia, an employee's re-employment or retirement,” CRA stated:

[W]here the consulting services are provided or paid by the employer or are reimbursed to an employee upon presentation of supporting documents relating to the employee’s re-employment or retirement, we are of the view that these amounts are not to be included in computing employee income.

Subparagraph 6(1)(a)(vi)

Administrative Policy

S2-F3-C2 - Benefits and Allowances Received from Employment

Education for family members

2.49 Subparagraph 6(1)(a)(vi) provides that any benefit an employee’s family member receives or enjoys under an educational program offered by an arm’s length employer is not included in the employee’s income. The benefit must not be a substitute for salary, wages, or other remuneration. This generally applies to free or reduced tuition provided to an employee’s family member to attend an elementary, secondary, or post-secondary school (private or public). The benefit is included in the family member’s income under subparagraph 56(1)(n)(i). The scholarship exemption in subsection 56(3) may exclude some or all of the benefit from the family member’s income.

8 February 2012 Internal T.I. 2011-0431581I7 F - Sous-alinéa 6(1)a)(vi) proposé

“studies” are at all levels and bursaries and tuition reimbursements potentially are included

Respecting proposed s. 6(1)(a)(vi):

  • Does it apply to elementary, secondary, as well as to post-secondary studies?
  • Can amounts paid by an employer as reimbursements for tuition or as bursaries also be part of a "program"?
  • Is a T4A required?

CRA responded:

[T]he generic term "studies" used in the proposed legislation refers to elementary, secondary and postsecondary studies. …

[P]ayments such as reimbursements of tuition, bursaries or scholarships paid by an employer to help individuals continue their education can be part of a "program" … .

[T]he employer must include the value of that amount on a T4A slip in the name of the individual who received or enjoyed the benefit as a scholarship.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Effective Date taxpayers can file based on proposed legislation and wait until announcement that it will not be implemented 214
Tax Topics - Income Tax Act - Section 220 - Subsection 220(3.1) no penalties if taxpayer promptly refiles after announcement that favourable amendment will not proceed 99