Principal Issues: Does providing free meals to employees constitute a taxable benefit to employees?
Position: Question of fact. In this case, yes, since this benefit primarily benefits employees.
Reasons: The Income Tax Act.
October 14, 2011
Laval Tax Services Office Headquarters Client Services Income Tax Rulings Directorate
Attention: Danielle Gélinas 2011-041078
Meal entitlements granted to employees
This is in response to your e-mail of June 17, 2011 regarding the above subject.
Unless otherwise indicated, all statutory references herein are to the provisions of the Income Tax Act (the "Act").
In particular, you have provided us with an agreement between XXXXXXXXXX under which XXXXXXXXXX will provide meals to certain employees by means of a delivery service for the supply and catering of XXXXXXXXXX food services during their work shifts.
You wish to know if those meals are a taxable benefit to be included in computing the income of those employees.
Our Comments
Paragraph 6(1)(a) provides, among other things, that the value of any benefits received or enjoyed by a taxpayer in the year in respect of, in the course of, or by virtue of an office or employment are to be included in computing the income of a taxpayer.
Generally, a benefit will have to be included in computing an individual's income from an office or employment if the following requirements are satisfied:
- The benefit confers an economic benefit on the individual. To make this determination, it must be determined whether the individual was reinstated in the situation where the individual was before realizing the benefit;
- The benefit conferred on the individual is measurable and quantifiable;
- The benefit provided to the individual benefits primarily the individual and not primarily the employer.
Paragraph 28 of Interpretation Bulletin IT-470R, Employee Benefits, provides that subsidized meals provided to employees will not be considered to confer a taxable benefit provided the employee is required to pay a reasonable charge. A reasonable charge is generally defined as one that covers the cost of food, its preparation and service. Where less than a reasonable charge is paid, the value of the benefit is that cost less the amount paid by the employee.
In this situation, to the extent that it can be determined that the provision of free meals to certain employees of XXXXXXXXXX primarily benefits the employees and not primarily their employer, we are of the view that 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.
Access to Information
For your information, 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. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should the taxpayer request a copy of this memorandum, they may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this latter version should be made by you to Ms. Celine Charbonneau at (613) 957-2137. In such cases, a copy will be sent to you for delivery to the taxpayer.
We hope that these comments are of assistance.
François Bordeleau, LL.B.
Manager
Business and Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate