Principal Issues: [TaxInterpretations translation] Is the transportation cost paid by the employer to transport, during after hours when public transportation is unavailable, its employees between the bus stop closest to the driver's home and the workplace, a taxable benefit to the employees?
Position: The distance to the bus stop closest to the driver's home according to a predetermined schedule is a personal expense of the employee and the transportation paid by the employer must be included in the employee's income.
Reasons: Position expressed in paragraph 32 of IT-470R
XXXXXXXXXX 2006-020390
October 24, 2006
Dear Sir,
Subject: Request for technical interpretation
Benefit relating to the use of a motor vehicle
This is in response to your letter of August 31, 2006, in which you requested our opinion on the above subject. Specifically, your request is in response to a written request dated XXXXXXXXXX which in turn is in response to a first opinion from the Canada Revenue Agency ("CRA") dated July 7, 1998.
In November 1997, an opinion was sought on an employer's policy of providing transportation between an employee's workplace and home. Following collective bargaining negotiations, the driver staff made certain demands that could change the transportation service. XXXXXXXXXX therefore wishes to validate whether the current application of the employee motor vehicle benefit remains unchanged or not.
Unless otherwise indicated, all statutory references herein are to provisions of the Income Tax Act (the "Act").
Facts
The facts submitted are as follows:
- Under the envisaged situation, XXXXXXXXXX would offer the transport of driver personnel via a collective taxi system following pre-determined routes from the bus stop closest to the driver's home to the operations centre.
- The transport service would be on a pre-determined schedule.
- This system makes it easier for drivers to get to work as the public transport service is not in operation at the time the drivers would like to use it.
- This transport service offered to drivers is available between 00:30h and 01:45h for the return of drivers who work until the end of the service and between 04:50h and 06:20h in the morning to allow the entry to work of drivers who ensure the first departures of services.
- The driver who uses the service can only use it once a day, either to go to work or to return home, so he or she must use another mode of transport for the other trip.
- The service is available to drivers who request it.
Questions
XXXXXXXXXX wishes to know whether the transportation costs paid by the employer, for the transportation of its employees between the bus stop closest to the driver's home and the workplace after the hours during which public transportation was available, is considered a taxable benefit to the employees.
Our Comments
As stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, it is the practice of our Directorate not to issue written opinions on proposed transactions otherwise than by way of advance rulings. Furthermore, when it comes to determining whether a completed transaction has received appropriate tax treatment, that determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments which may not apply in full to the situation you have submitted to us.
Travel between an employee's home and workplace is generally considered to be travel of a personal nature. Consequently, where the employer provides transportation between those locations, a taxable benefit is generally attributed to the employee under paragraph 6(1)(a) or 6(1)(e), depending on the circumstances.
The CRA does, however, provide an exception to this general rule where the travel is from a staging point other than the home to the workplace in the circumstances described in paragraph 32 of Interpretation Bulletin IT-470R which reads as follows:
“Employers sometimes find it expedient to provide vehicles for transporting their employees from pick-up points to the location of the employment at which, for security or other reasons, public and private vehicles are not welcome or not practical. In these circumstances the employees are not regarded as in receipt of a taxable benefit. However, a reimbursement or allowance paid to the employee for transportation to and from the location of employment must be included in income. Subsection 6(6) provides an exception to this latter rule. …”
According to the CRA, a pick-up point is a common place specifically designated by the employer for that purpose to which all employees must go. For example, a specific parking lot accessible to all employees, such as a Park and Ride lot or a shopping mall parking lot, could be expected to meet the intended meaning of a pick-up point, depending on the circumstances. To get to this point, the employee will have to use the means of personal transportation that is convenient for him or her. However, depending on the situation, there may be more than one pick-up point. The CRA's administrative position on the pick-up point is that a bus stop near the driver's home is not considered a pick-up point.
In addition, it should be noted that the pick-up point test is not in itself determinative of whether there is a taxable benefit in the circumstances. Paragraph 32 of IT-470R also refers to security reasons. Our administrative position is to generally consider security measures to be primarily for the benefit of the employer and not the employees. (See technical interpretations F 2003-0004795 and F 9730995). In a particular situation, one should examine all the relevant facts in order to reach a definitive conclusion. It is the analysis of all the criteria that allows us to answer this question.
In the present situation, we are of the view that the general rule applies as the exception is not satisfied.
Thus, in circumstances as described, we are of the view that there is a taxable benefit to employees in respect of employer-provided transport from the bus stop closest to the driver's home on a pre-determined schedule to the place of employment. In our view, this is not consistent with the purpose and spirit of this policy. It is our view that transportation to the place of employment is primarily for the benefit of the employee.
In view of the above, our opinion is the same as previously stated and we are of the view that employees will be required to include in their employment income a taxable benefit in respect of the value of the transportation received.
These comments are not advance income tax rulings and do not bind the Canada Revenue Agency with respect to any particular factual situation.
We hope you will find these comments of assistance.
Best regards,
Phil Jolie
Director
Business and Partnerships Division
Income Tax Rulings Directorate