2021-0887711E5 CERS - Employer Rented Home

Principal Issues: Whether a home rented by an employer for its employees at a remote work location is a self-contained domestic establishment.

Position: Question of fact.

Reasons: It is a question of fact as to whether such a rented home is a self-contained domestic establishment. However, the fact that multiple employees are living in the rented home would not, in and of itself, preclude that rented home from being a self-contained domestic establishment.

Author: Koh, Kah Foo
Section: 125.7

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                                                                                     2021-088771
                                                                                     Kah Foo, Koh

March 21, 2022

Dear XXXXXXXXXX:

We are writing in response to your inquiry regarding the rent subsidy under subsection 125.7(2.1) of the Income Tax Act (the “Act”). You requested our views on whether a residential property purchased or rented by an eligible entity (the “Residential Property”) for use by its employees in remote communities is a “self-contained domestic establishment” (“SCDE”) that would be excluded from the definition of “qualifying property” in subsection 125.7(1) of the Act.

You referenced our guidance in paragraph 7 of Interpretation Bulletin IT-91R4 – “Employment at Special Work Sites or Remote Work Locations” (“IT-91R4”) about how a “room (or rooms) in a hotel, dormitory, boarding house or bunkhouse would not ordinarily be a self-contained domestic establishment”, which you consider pertinent to the issue raised in your inquiry.

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.

In order to apply for the rent subsidy pursuant to subsection 125.7(2.1) of the Act, an “eligible entity” that is also a “qualifying renter” must have “qualifying rent expense” in respect of a “qualifying property” in respect of a “qualifying period”. Definitions for purposes of the rent subsidy, including the aforementioned terms, are contained in subsection 125.7(1) of the Act.

A qualifying property of an eligible entity for a qualifying period is defined in subsection 125.7(1) of the Act to mean a real or immovable property in Canada used by the eligible entity in the course of its ordinary activities. However, property that is a SCDE used by the eligible entity or by a person not dealing at arm’s length with the eligible entity (“NAL person”), or part of such a SCDE, the land subjacent to the SCDE and such portion of any immediately contiguous land as can reasonably be regarded as contributing to the use and enjoyment of the SCDE as a residence is precluded from being qualifying property. This exclusion applies whenever a SCDE was used by the relevant eligible entity or by a NAL person for any purpose, and is not limited to situations where the SCDE was used as a residence by the eligible entity or a NAL person.

Pursuant to subsection 248(1) of the Act, a SCDE means a dwelling-house, apartment or other similar place of residence in which place a person as a general rule sleeps and eats. Whether a particular property is a SCDE is a question of fact. The CRA would need to consider all relevant facts and circumstances of the particular situation, including the provision of the Act being applied, before making any determination as to whether a property would be a SCDE.

The fact that the owner or lessee of the Residential Property does not live in the property, and that multiple individuals reside there, would not preclude the property from being a SCDE. The comments from paragraph 7 of IT-91R4 pertain to the issue of whether rooms in hotels, dormitories, boarding houses, or bunkhouses are SCDEs, and do not address the question of when, or whether, a residential property with multiple tenants is a SCDE.

Based on the limited facts presented in the inquiry, it appears that the Residential Property is a SCDE as it may be reasonably concluded that it is a dwelling-house, apartment or other similar place of residence in which a person (i.e., the relevant employee(s)) as a general rule sleeps or eats. As such, it does not appear that it would be a qualifying property for purposes of the rent subsidy under subsection 125.7(2.1) of the Act.

We trust our comments will be of assistance.

Yours truly,

Amanda Couvrette CPA, CA
Manager
Business Income and Capital Transactions
Income Tax Rulings Directorate

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