Principal Issues: [TaxInterpretations translation] Is the reimbursement by an employer of premiums paid by an employee to a PHSP a taxable benefit to be included in the employee's income?
Position: No.
Reasons: The employee did not receive any economic benefit.
July 17, 2007
Montreal Tax Services Office Headquarters Business and Partnerships Division Attention: Martine Proulx François Bordeleau, Advocate
2007-024170
Settlement regarding premiums paid to a private health services plan
This is further to Mr. Christian Lejeune's email of June 20, 2007, in which he wished to know whether the reimbursement by an employer of premiums paid by an employee to a private health services plan ("PHSP") constitutes a benefit to be included in the employee's income. As agreed, in the absence of Mr. Lejeune, we are sending you our reply.
Specifically, you described a situation where an employee of XXXXXXXXXX was on leave without pay and wished to have coverage under the Public Service Health Care Plan and the Public Service Dental Care Plan while travelling abroad. In order to receive that coverage, the employee paid contributions to those plans.
During such travel, the employee's claims under the above plans were denied. Subsequently, in a negotiated settlement, XXXXXXXXXX agreed to reimburse the premiums the employee had paid.
You therefore wish to know whether that reimbursement constitutes a taxable benefit to the employee in question.
Unless otherwise indicated, all statutory references herein are to the provisions of the Income Tax Act (the "Act").
Our Opinion
Paragraph 6(1)(a) requires the inclusion in the income of a taxpayer the value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment. Exceptions to paragraph 6(1)(a) include subparagraphs 6(1)(a)(i) to (v), which list benefits that are not to be included in a taxpayer's income for a year from an office or employment. Similarly, jurisprudence has held that paragraph 6(1)(a) can only apply in situations where there has been a significant conferral of an economic benefit on the taxpayer.
Pursuant to subparagraph 6(1)(a)(i), benefits received by a taxpayer from the taxpayer’s employer's contributions to a PHSP are not included in income. Although the Public Service Health Care and the Public Service Dental Care plans are such plans, we do not believe that this provision is applicable since XXXXXXXXXX reimbursed the employee directly for the premiums paid by the employee.
However, on the facts of this case, we are of the view that the reimbursement of premiums to the employee did not confer an economic benefit on the employee. Thus, we do not believe that the amount of the premium refund by XXXXXXXXXX should be included in the employee's income.
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.
We hope that these comments are of assistance.
François Bordeleau, Advocate
Interim Manager
Business and Partnerships Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.
c.c. Ms. Sylvie Rémillard
Montreal Tax Services Office
Ms. Lyne Meilleur
Montreal Tax Services Office