2016-0662341E5 Airline passes – retired and current employees

Principal Issues: Whether the CRA’s administrative policies concerning standby airline passes provided to current airline employees and standby and space-confirmed airline passes provided to retired airline employees are still valid?

Position: See response.

Reasons: See response.

Author: Trop, Shiri
Section: ITA: 6(1)(a)

XXXXXXXXXX                                                                                                                               2016-066234
                                                                                                                                                       S. Trop

February 17, 2017

Dear XXXXXXXXXX

Re:  Airline passes provided to current or retired airline employees

We are writing in response to your correspondence dated August 18, 2016, in which you asked whether the administrative policies of the Canada Revenue Agency (“CRA”) concerning standby airline passes provided to current airline employees (“current employees”) and standby and space-confirmed airline passes provided to retired airline employees (“retired employees”) are still in effect.  More specifically, you asked whether Income Tax Folio S2-F3-C2, Benefits and Allowances Received from Employment, will be revised to reflect the administrative policies outlined in paragraphs 42 and 44 of cancelled Interpretation Bulletin (IT-470R) Employees’ Fringe Benefits (Consolidated).

Our comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (“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 70-6R7, Advance Income Tax Rulings and Technical Interpretations.

Generally, under paragraph 6(1)(a) of the Act “the value of board, lodging, and other benefits of any kind whatever received or enjoyed … in respect of, in the course of, or by virtue of the taxpayer’s office or employment” is included in an employee’s income.  Based on the interpretation of paragraph 6(1)(a) of the Act and consistent with recent jurisprudence, standby or space-confirmed airline passes used for personal travel by current or retired employees would generally be a taxable benefit, as the employees receive an economic advantage measurable in monetary terms and are the primary beneficiaries of the benefit.  The benefit would be measured at fair market value which would generally be the amount that the current or retired employee would have paid had there been no employment with the airline.

Although IT-470R is cancelled, paragraph 42 of IT-470R still reflects the CRA’s current administrative policy that standby airline passes used by current employees are not taxed.  Please note that the use of space-confirmed airline passes by current employees continues to be a taxable benefit and included in income under paragraph 6(1)(a) of the Act.  However, based on recent jurisprudence, the value of the benefit to be included in income is the fair market value of the pass less any amount paid by the employee.  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.

Additionally, paragraph 44 of IT-470R still reflects the CRA’s current administrative policy concerning retired employees. That is, standby and space-confirmed airline passes used by retired employees are not taxed.

The purpose of Income Tax Folio S2-F3-C2 is to provide CRA’s interpretive positions, not administrative policies.  As such, the Folio will not be updated to include CRA’s current administrative policies on airline passes provided to current and retired employees.  The CRA webpage, Benefits and allowances, will be updated to include these administrative policies.

The CRA’s administrative policies are regularly reviewed to improve the consistency, integrity, and fairness of the policies and the tax system. The CRA is currently reviewing its administrative policies on standby airline passes provided to current employees and standby and space-confirmed airline passes provided to retired employees.  This review is being led by the Employer Compliance Division, Collections and Verification Branch of the CRA.  Any change in administrative policy will take effect on a prospective basis.  Guide T4130, Employers’ Guide- Taxable Benefits and Allowances and the CRA webpage, Benefits and allowances, will be updated to include the administrative policies (including any changes) concerning standby and space-confirmed airline passes provided to current or retired employees.

If you have any questions or would like to provide further comments please contact Lyne Levac, Director, Employer Compliance Division, of the Collections and Verification Branch at (613) 954-1307.

Yours truly,

Pamela Burnley
Acting Director
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

cc: Lyne Levac

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