Principal Issues: Whether the comments in paragraph 12 of IT-518R concerning the application of the former paragraph 67.1(2)(e) of the Act, apply in respect of the application of paragraph 67.1(2)(f)?
Position: The CRA will, depending on the facts, apply paragraph 67.1(2)(f) of the Act in a similar manner.
Reasons: It should be noted that now the number of such special events held in a calendar year at a particular place of business cannot exceed six. Therefore, where a special event is only held for a specific division of a very large organization that is located at a particular place of business, that special event would count as one event for the whole organization located at that particular place of business for purposes of paragraph 67.1(2)(f) of the Act. However, where a special event such as a Christmas party is held separately for each division of an organization that is located at a particular place of business because all employees of the organization cannot be accommodated at one venue, the Christmas parties for each division would collectively be considered a single special event for that particular place of business for purposes of paragraph 67.1(2)(f) of the Act.
Randy Hewlett
XXXXXXXXXX 613-941-7239
2005-011607
March 11, 2005
Dear XXXXXXXXXX:
Re: Paragraph 67.1(2)(f) of the Income Tax Act (the "Act")
We are writing in response to your letter of February 9, 2005, wherein you inquired whether the comments in paragraph 12 of Interpretation Bulletin IT-518R, Food, Beverages and Entertainment Expenses, apply in respect of the application of paragraph 67.1(2)(f).
Our Comments
Paragraph 67.1(2)(f) of the Act exempts food, beverages or entertainment expenses incurred by a taxpayer from the 50% rule in subsection 67.1(1) where the amounts are incurred "in respect of one of six or fewer special events held in a calendar year at which the food, beverages or entertainment is generally available to all individuals employed by the person at a particular place of business of the person and consumed or enjoyed by those individuals in respect of amounts for which another person compensates the taxpayer." Paragraph 67.1(2)(f) of the Act is applicable to taxation years ending after July 13, 1990. For taxation years ending prior to that time, a similar exception was contained in the former paragraph 67.1(2)(e) of the Act, which applied in respect of amounts " incurred by the person for food, beverages or entertainment generally available to all employees of the person at a particular location."
The CRA's comments in paragraph 12 of IT-518R indicate that in applying the former paragraph 67.1(2)(e) of the Act, a party or event that was aimed only at employees of one or more specific divisions within a very large organization could qualify for the exemption, provided the event was open to all employees within that division. While we are unable to comment specifically on any situation described in your letter, the CRA will, depending on the facts, apply paragraph 67.1(2)(f) of the Act in a similar manner. We would note, however, that now the number of such special events held in a calendar year at a particular place of business cannot exceed six. Therefore, where a special event is only held for a specific division of a very large organization that is located at a particular place of business, that special event would count as one event for the whole organization located at that particular place of business for purposes of paragraph 67.1(2)(f) of the Act. However, where a special event such as a Christmas party is held separately for each division of an organization that is located at a particular place of business because all employees of the organization cannot be accommodated at one venue, the Christmas parties for each division would collectively be considered a single special event for that particular place of business for purposes of paragraph 67.1(2)(f) of the Act.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch