Principal Issues: [TaxInterpretations translation] Is the reimbursement by an employer of costs incurred by an employee to purchase hearing aids a taxable benefit to be included in the employee's income?
Position: Question of fact. In this case, yes.
Reasons: Application of the Act.
XXXXXXXXXX 2010-035612
Pierre-Luc Meunier
February 23, 2010
Dear Madam,
Subject: Taxable benefit - hearing aids
This is in response to your email of December 11, 2009 in which you asked our opinion regarding the reimbursement by an employer of costs incurred by an employee to purchase hearing aids at the employee's request.
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
Facts
An employee with a hearing loss was prescribed hearing aids by an audiologist.
This employee subsequently submitted an expense claim to his employer under the Policy on the Duty to Accommodate Persons with Disabilities in the Federal Public Service. The employer reimbursed the net cost of the devices purchased by the employee, which was the total cost of the devices less the reimbursement received by the employee under his group health insurance policy.
The hearing aids have been adapted specifically for the employee and are the property of the employee who is free to use them at all times.
Question
You thus wish to know whether the reimbursement by an employer of the costs incurred by the employee to obtain such hearing aids is a taxable benefit to be included in the employee's income.
Our Comments
Paragraph 6(1)(a) provides that the value of board, lodging and other benefits of any kind received or enjoyed by a taxpayer in the year in respect of, in the course of, or by virtue of, an office or employment is to be included in computing the taxpayer's income unless one of the exceptions listed in subparagraphs 6(1)(a)(i) to (v) is applicable, which is not the case in this situation.
In order to be able to determine whether a taxable benefit is conferred on an employee where the employer reimburses an expense incurred by the employee, it is necessary to establish whether the expense primarily benefits the employer or the employee. If the employee is the primary beneficiary, a benefit should be taxed to the employee.
It could be argued that expenses incurred by a person to acquire several types of property, such as clothing, glasses or contact lenses, are necessary to be able to perform the duties of an employment. However, since these expenses are equally necessary in order for the person to perform daily activities, they are considered to be expenses of a personal nature and a reimbursement of these expenses by the employer is a taxable benefit under paragraph 6(1)(a).
It is generally understood that an employer must take reasonable steps to ensure that its workplaces are accessible and safe for persons with disabilities. Where the employer retains ownership of property needed by employees with disabilities and that property is used by those employees only in the workplace in the performance of their duties, no taxable benefit results.
In the situation you have presented, the employee owns the hearing aids. Although the hearing aids are used by the employee to perform the employee’s duties, it appears that the employee may also use them for everyday activities. Therefore, we consider the employee to be the primary beneficiary of the hearing aids and their reimbursement by the employer to be a benefit that has to be included in the employee's employment income under paragraph 6(1)(a).
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 your client request a copy of this memorandum, the electronic library version can be provided. Alternatively, the client may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Ms. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
Best regards,
François Bordeleau, LL.B.
Manager
Business and Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate.