2019-0806021I7 Automobile Allowance

Principal Issues: Whether XXXXXXXXXX assistance provided to authorized employees under the XXXXXXXXXX is taxable and what elements or factors determine whether this kind of benefit is taxable?

Position: Yes.

Reasons: The XXXXXXXXXX assistance paid under the XXXXXXXXXX Directive appears to be an allowance in respect of personal travel that must be included in the employee’s employment income as an allowance in respect of a personal or living expense.

Author: Witteveen, Tobias
Section: 6(1)(b), 6(6), 81(3.1), 7306 ITR

XXXXXXXXXX                                                                         2019-080602
                                                                                                 T. Witteveen
July 03, 2019

Dear XXXXXXXXXX:

Re:  XXXXXXXXXX Assistance

We are writing in response to your correspondence of April 24, 2019 in which you asked whether the provision of XXXXXXXXXX assistance provided to authorized employees under the XXXXXXXXXX (the XXXXXXXXXX Directive), available at XXXXXXXXXX, is subject to taxation under the Income Tax Act (the Act) and what elements or factors determine whether this kind of benefit is taxable.

Based on the information you have provided, XXXXXXXXXX assistance under the XXXXXXXXXX Directive is provided to XXXXXXXXXX employees’ daily travel to and from regularly assigned work sites and the criteria applied for determining whether XXXXXXXXXX assistance will be provided are that:

*     XXXXXXXXXX transportation is not available between XXXXXXXXXX and the work site; and

*     no XXXXXXXXXX is located within XXXXXXXXXX kilometres from the work site XXXXXXXXXX.

Assistance under the XXXXXXXXXX Directive is provided for XXXXXXXXXX regular commercial transportation fares and privately-owned vehicles. However, by far the assistance most commonly employed, and for which an interpretation is sought, pertains to the use of privately-owned vehicles.

You have indicated that the XXXXXXXXXX assistance provided under the XXXXXXXXXX Directive would not apply in situations where an employee is required to stay at the work location for an extended period beyond the daily commute (e.g., an employee who is required to travel on XXXXXXXXXX business overnight would instead be reimbursed under the XXXXXXXXXX).

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 70-6R9, Advance Income Tax Rulings and Technical Interpretations.

Travel allowance

Paragraph 6(1)(b) of the Act requires that a taxpayer include in employment income all amounts received by virtue of an office or employment as an allowance for personal or living expenses. Subject to certain conditions, subparagraphs 6(1)(b)(v), (vi), and (vii.1) of the Act provide that reasonable motor vehicle allowances received by employees in respect of travelling in the performance of their duties may be excluded from income. Generally, a motor vehicle allowance is considered to be reasonable if all of the following conditions apply:

*     The allowance is based only on the number of business kilometres driven in a year;

*     The per-kilometre rate is reasonable; and

*     An employee is not reimbursed for expenses related to the same use of the vehicle.

It has been the Canada Revenue Agency’s long-standing position that travelling between an employee's principal residence and their regular place of employment, irrespective of the distance, is personal travel and is not considered to be travel in the performance of an employee’s duties.

In addition, even though the kilometre rate provided under the XXXXXXXXXX Directive is based on the number of kilometres driven, generally, in order to be considered reasonable a per-kilometre rate should be designed to cover an employee’s out-of-pocket costs for the use of the motor vehicle. XXXXXXXXXX.

Employment at remote work location

Notwithstanding paragraph 6(1)(b) of the Act, subparagraph 6(6)(b)(ii) of the Act allows an employee to exclude from income the value of free or subsidized transportation, or an allowance (not in excess of a reasonable amount) received for transportation expenses incurred by the employee for transportation between a remote work location and a location anywhere in Canada (or, in the case of an employee working at a remote work location in another country, a location in that country).

However, subparagraph 6(6)(b)(ii) of the Act will only apply where the employee also receives board and lodging, or a reasonable allowance in respect of board and lodging, for a period while the employee was required, because of the duties of their employment, to be at the remote work location for a period of at least 36 hours.

These criteria are discussed in greater detail in Interpretation Bulletin, IT-91R4, Employment at Special Work Sites or Remote Work Locations.

Conclusion

Based on the facts you have provided, and subject to any additional facts that may apply to a particular employee, the XXXXXXXXXX assistance paid under the XXXXXXXXXX Directive appears to be an allowance in respect of personal travel that must be included in the employee’s employment income as an allowance in respect of a personal or living expense. The exception in subparagraph 6(6)(b)(ii) of the Act, which excludes certain transportation benefits from employment income, would not appear to apply as the XXXXXXXXXX assistance is provided for daily travel to a work site for which accommodation assistance is not also provided, and the criteria for a work site to be considered remote do not appear to be met in all instances.

While you have indicated in your correspondence that you are specifically interested in the tax treatment of XXXXXXXXXX assistance provided for the use of an employee’s privately-owned vehicle, the analysis above would similarly apply to assistance provided in respect of XXXXXXXXXX commercial transportation fares under the XXXXXXXXXX Directive.

XXXXXXXXXX

Unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library. After a 90-day waiting period, a severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. You may request an extension of this 90‑day period. The severing process removes all content that is not subject to disclosure.

We trust these comments will be helpful.

Yours truly,

Jason R. Ward, CPA, CA
Acting Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

cc.   XXXXXXXXXX

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