14 December 2001 Internal T.I. 2001-0101967 - DUTIES OF A TEMPORARY NATURE

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

In view of the CCRA's position on subsection 6(6) in IT-91R4, concerning the requirement in the provision that the duties must be of a temporary nature (paragraphs 5 and 6), would housing and travel allowances paid to employees (or employer payment of such expenses) in this factual situation be excluded from income as a taxable benefit, where the employment contract can be for a period of up to XXXXXXXXXX years, but other facts of the case indicate that the duties of employment are indeed of a temporary nature.

Position: Yes.

Reasons:

Subsection 6(6) & IT-91R4 - The position in IT-91R4 that subsection 6(6) will not exclude such allowances (or employer paid expenses) from employment income where the duration of the contract is beyond two years is a general guideline. There are situations where, if facts other than the duration indicate that the duties are of a temporary nature, subsection 6(6) may exclude such amounts from employment income.

		December 14, 2001

	Revenue Collections Directorate	Income Tax Rulings
	Andre Potvin	  Directorate
	Director		Randy Hewlett, B.Comm.
	Trust Accounts Division	957-8973

	Attention:  Lorraine Maisonneuve
			2001-010196

		Technical Interpretation Request - Allowances At A
Special Work Site Subsection 6(6) of the Income Tax Act

We are writing in response to your request of September 18, 2001, for our opinion on whether certain allowances received by employees of XXXXXXXXXX or the payment of certain expenses by XXXXXXXXXX on the employee's behalf, should be excluded from income as a taxable benefit by virtue of subsection 6(6) of the Income Tax Act (the Act). The facts, as we understand them, are as follows:

(a) The employees of the XXXXXXXXXX parent corporation of XXXXXXXXXX are on a secondment to XXXXXXXXXX at a work site in XXXXXXXXXX. The employees' substantive employment positions with the parent corporation are maintained in their absence from XXXXXXXXXX.

(b) XXXXXXXXXX.

(c) XXXXXXXXXX provides an allowance to the employees (or directly pays their expenses) for housing while they are on secondment in XXXXXXXXXX. In addition, XXXXXXXXXX will pay the travel costs for each employee to have one return trip per year to XXXXXXXXXX.

(d) The employees maintain a self-contained domestic establishment in XXXXXXXXXX.

(e) The employees maintain social benefit coverage in XXXXXXXXXX until their return.

(f) The employees file tax returns in Canada and XXXXXXXXXX.

(g) The employees sign XXXXXXXXXX contracts with the parent corporation agreeing to be seconded to XXXXXXXXXX. However, the term of the contract can be changed, or the employee can be reassigned to another project elsewhere in the world. In fact, XXXXXXXXXX of the XXXXXXXXXX employees' secondments to XXXXXXXXXX were terminated early.

(h) Some of the employees have taken their families with them to Canada and enrolled their children in school in XXXXXXXXXX.

You have a concern that the duties may not be of a temporary nature as required by subsection 6(6) of the Act, and in light of comments outlined in Interpretation Bulletin IT-91R4 Employment at Special Work Sites or Remote Work Locations, dated June 17, 1996. You are satisfied that the employees meet all other conditions of the provision. You seek our views on whether the duties are of a temporary nature in view of the comments in IT-91R4 concerning duties of a temporary nature.

Our Comments

Generally, the value of employer-provided board and lodging or transportation to and from a particular work location is included in the employee's income pursuant to subsection 6(1) of the Act. However, by virtue of subsection 6(6) of the Act, an exception is provided in limited circumstances for employment at a special work site or remote work location.

Subparagraph 6(6)(a)(i) of the Act provides for an exclusion from an employee's income, for the value of employment benefits received or enjoyed, or a reasonable allowance in respect of, expenses incurred by the employee for board and lodging at a special work site. Subparagraph 6(6)(b)(i) of the Act would provide such an exclusion for a reasonable allowance or actual expenses in respect of transportation to and from the special work site. For these exclusions to apply the provisions, in part, require that the duties performed by the employee be of a "temporary nature."

Paragraphs 5 and 6 of IT-91R4 contain comments on whether employment duties at a special work site will be considered temporary. The term temporary, while not defined in the Act, generally refers to situations where continuous employment is not beyond a period of two years. There may be situations where the employment period extends beyond two years, in which it will be appropriate to consider the duties to be of a temporary nature.

In our view, the facts of this case indicate that the duties are of a temporary nature, even though the contract may extend beyond two years. The employment contract is for a duration of up to XXXXXXXXXX years. It is apparent, however, that an employee can be readily reassigned to another work location in or outside of Canada, or returned to his or her substantive position with the parent company in XXXXXXXXXX. As well, employees maintain a principal residence in XXXXXXXXXX; social benefits are maintained in their absence; their substantive employment position is with the XXXXXXXXXX parent; and they file tax returns in XXXXXXXXXX. Therefore, in our view, it would be appropriate to exclude the amounts from the employee's income by virtue of subsection 6(6) of the Act, on the basis that all other requirements of the provision are met for each individual employee.

We trust our comments are of assistance.

Marc Vanasse, CA
Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch