Principal Issues: The taxable status of payments received by an individual volunteering overseas with a charitable international organization, in respect of expenses incurred to move household effects into storage for the duration of the volunteer assignment, to open the household on return to Canada after the volunteer assignment, and miscellaneous living expenses incurred between volunteer assignments or until the individual resumed employment.
Position: Not Likely taxable.
Reasons: An individual who is a volunteer is generally considered to be in a position of "employment" and payments received from a volunteer organization must be determined with regard to the provisions of the Act that tax employment income and benefits. Where, however, an employer covers reasonable expenses incurred to relocate an employee for employment-related reasons, a taxable benefit will generally not result. These payments seem to fall into this category and are likely not taxable on this basis.
XXXXXXXXXX Randy Hewlett
2005-011898
April 14, 2005
Dear XXXXXXXXXX:
Re: Payments Received By A Volunteer
We are writing in response to your request of March 1, 2005, wherein you asked for our opinion on the taxable status of certain payments you received as a volunteer from the charitable international organization, "XXXXXXXXXX".
You indicated that in 2004, you severed employment with your employer and signed a volunteer contract with this organization for a placement in the XXXXXXXXXX. The placement lasted for approximately four months. You were not paid any salary or wages but your cost of living expenses were paid for while you were on the volunteer assignment. You inquired about the taxable status of payments, totaling approximately $XXXXXXXXXX, which you received to cover expenses incurred to move your household effects into storage for the duration of your volunteer assignment and to open your household on return to Canada after the volunteer assignment, and miscellaneous living expenses incurred between volunteer assignments or until you resumed employment.
Our Comments
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following comments.
An individual who is a volunteer is generally considered to be in a position of "employment" under the Income Tax Act (the "Act"). "Employment" is defined in subsection 248(1) of the Act to mean "the position of an individual in the service of some other person (including Her Majesty or a foreign state or sovereign) and "servant" or "employee" means a person holding such a position". Therefore, payments received by an individual from a volunteer organization must be determined with regard to the provisions of the Act that tax employment income and benefits.
Subsection 5(1) of the Act includes in an individual's employment income amounts received in the year that are considered salary, wages and other remuneration, and subsection 6(1) will include in income certain employment benefits received or enjoyed in the year. Where, however, an employer covers reasonable expenses incurred to relocate an employee for employment-related reasons, a taxable benefit will generally not result. In our view, the payments you received from the volunteer organization that are described above seem to fall into this category and are likely not taxable on this basis.
We trust our comments are of assistance.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch