Principal Issues: Is there a taxable benefit when an employer provides an apartment to an employee at a special site?
Position: It's a question of fact.
Reasons: There is no taxable benefit in this case because it is the employer who primarily benefits from having the employee at the site.
XXXXXXXXXX 2005-014939
Kathryn McCarthy, CA
November 15, 2005
Dear XXXXXXXXXX,
Re: Employer-Provided Apartment
We are writing in response to your letter dated August 31, 2005, and our telephone conversation on November 9, 2005, concerning the above-noted issue.
You described an employee with a permanent residence in XXXXXXXXXX. The employee works for XXXXXXXXXX in XXXXXXXXXX and has been asked by the employer to take on a new assignment in XXXXXXXXXX. For the new assignment, the employee will work in XXXXXXXXXX for approximately three days a week and the remainder of the week in XXXXXXXXXX. The employer will rent an apartment for the employee's use since hotel rooms are not readily available in XXXXXXXXXX. You inquired as to whether this is a taxable employment benefit under the Income Tax Act (the Act).
Our Comments
Except where the Act provides otherwise, taxpayers are generally taxable pursuant to paragraph 6(1)(a) on the value of lodging they receive by virtue of their office or employment. Where, however, the employer primarily derives the benefit from providing the lodging to the employee, there is no taxable benefit. We are of the view that in this case, the apartment provided by the employer to the employee is not a taxable benefit since the employee continues to maintain a permanent residence in XXXXXXXXXX and is required by the employer to be away from his residence three days a week on site in XXXXXXXXXX.
We trust our comments will be of assistance to you.
Yours truly,
Randy Hewlett
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch