2015-0570251E5 Remote work location

Principal Issues: Factors to consider when determining whether a work location that is within 80 kilometres of an established community, is a remote work location for purposes of subparagraph 6(6)(a)(ii) of the Act.

Position: See response.

Reasons: See response.

Author: Trop, Shiri
Section: ITA 6(6)(a)(ii)

XXXXXXXXXX                                      2015-057025 

June 24, 2015

Dear XXXXXXXXXX:

Re:  Remote work location

We are writing in response to your correspondence of January 29, 2015, wherein you asked for factors to be considered when determining if a work location that is within 80 kilometres of an established community will be considered a remote work location for the purposes subparagraph 6(6)(a)(ii) of the Income Tax Act (the Act). In the situation described, XXXXXXXXXX intends to provide accommodations to workers at XXXXXXXXXX during most of the construction period. Accommodations provided to the workers at XXXXXXXXXX would be the same as typical work camps used for major projects in Canada. XXXXXXXXXX is located within XXXXXXXXXX kilometres of XXXXXXXXXX.

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

Generally, the value of employer-provided board and lodging is included in an employee’s income for income tax purposes under subsection 6(1) of the Act. However, subparagraph 6(6)(a)(ii) of the Act provides an exemption, under specified conditions, for certain benefits received in respect of employment at a remote work location. One of the conditions that must be met is that the employee’s board and lodging must be provided at a location at which, by virtue of its remoteness from any established community, the employee could not be reasonably be expected to establish and maintain a self-contained domestic establishment (“SCDE”). 

The terms “remoteness” and “established community” are not defined in the Act.  Generally, the Canada Revenue Agency (“CRA”) considers a location to be remote when it is 80 kilometres or more from the nearest established community with a population of at least 1,000 people. CRA considers a community to be an established community if it has essential services such as a basic food store, a basic clothing store, accommodations, certain medical services and certain educational facilities. Based on the facts provided, XXXXXXXXXX is the nearest community to XXXXXXXXXX (XXXXXXXXXX kilometres from XXXXXXXXXX) and has a current population of approximately XXXXXXXXXX and appears to have the required essential services. Therefore, XXXXXXXXXX is not 80 kilometres or more from an established community. 

However, it is CRA’s longstanding position, as described in paragraph 16 of Interpretation Bulletin IT-91, Employment at Special Worksite or Special Work Locations, that where a work location is within 80 kilometres of an established community the work location will still be considered to meet the requirements of subparagraph 6(6)(a)(ii) of the Act if the available community services and housing are limited to the extent that the employee could not reasonably be expected to establish and maintain an SCDE in that community. 

The term “SCDE” is defined in the Act as a dwelling house, apartment or similar place of residence where a person generally sleeps and eats. Generally, the CRA considers a “residence” to be an SCDE if it is a living unit with restricted access that contains a kitchen, bathroom and sleeping facilities. It appears that the accommodations at XXXXXXXXXX would not be an SCDE as the living unit will not contain a kitchen. The meals for the workers would be prepared in a central dining facility that is part of the work camp.

Generally, a collective determination cannot be made for a group of workers as a whole when determining whether available services and housing are limited to the extent that a worker could not reasonably be expected to establish an SCDE in that community. Each worker should be able to show that he or she made an attempt to establish an SCDE in the established community or communities that are within 80 kilometres of his or her work location. The worker should have documentation to support that he or she attempted to establish themselves in a house or apartment in any of the surrounding established communities. The worker cannot base the analysis on speculation and use vacancy reports of housing available in the established communities as documentation, as these types of reports do not support that available housing is limited for the particular worker in the established community.  This position is consistent with the Federal Court of Appeal decision in Truemner v. R, 89 DTC 5149.

The application of subparagraph 6(6)(a)(ii) of the Act is a point-in-time determination as the facts could change from year to year or even month to month. Therefore, a worker should monitor the available housing on an annual basis. If an adequate amount of housing subsequently becomes available, it could result in the remote work location exemption no longer being available.

Whether a particular location that is within 80 kilometres of an established community is a remote location for the purposes of subparagraph 6(6)(a)(ii) of the Act, is a question of fact that can only be determined on a worker-by-worker basis. Where a work location is within 80 kilometres of an established community, it is the responsibility of each worker to show the employer that the conditions of subparagraphs 6(6)(a)(ii) of the Act have been met in order for the employer to exclude the value of employer-provided board and lodging from the worker’s employment income. The employer should review the information received from each worker. If the facts provided by a worker turn out to be incorrect, then the employer may be under-withholding and subject to penalties and interest under subsections 227(8) and (8.3) of the Act.  

We trust these comments will be of assistance to you.

Yours truly,

Nerill Thomas-Wilkinson, CPA, CA
Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate

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