Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Herb Dhaliwal, Minister of National Revenue, has asked me to reply to your letters of January 22 and February 23, 1999, concerning the tax treatment of airline employees who benefit from reduced airfares or free airfare from their employers. We are also in receipt of facsimile of May 11, 1999, to a departmental official, Mr. Don MacKenzie.
In your correspondence, you refer to section 3.3 of the Employers’ Guide to Payroll Deductions (T4130), which is in the chapter entitled “Housing and Travel Assistance Benefits Paid in a Prescribed Zone”. This section, which deals with travel assistance benefits of employees generally and northern residents specifically, states that if an employee is provided with travel assistance by his or her employer, the benefit is taxable unless it is for business travel. This statement reflects the principle that, to the extent that a benefit can be valued, all employees are generally taxed on the value of benefits they receive by virtue of employment. However, if the employee is in a prescribed northern zone or prescribed intermediate zone, as a relieving measure, the employee may qualify for the northern residents travel deduction.
The Department’s position with respect to airline employees’ transportation passes is set out in paragraph 42 of Interpretation Bulletin IT-470R, Employees’ Fringe Benefits, a copy of which is enclosed. This bulletin explains that airline passes available to airline employees will be taxable if the employee travels on a space-confirmed basis and is paying less than 50 per cent of the economy fare available on that carrier for that trip on the day of travel. The value of the benefit will be the difference between 50 per cent of the economy fare and any amount reimbursed to the carrier for that trip. However, when airline employees, travelling for personal reasons, occupy what would otherwise be a vacant seat on the plane, the value of the pass is significantly less than the fair market value of the fare. As a result, and in view of the difficulty in calculating the amount of employee benefit under the circumstances, there is no taxable benefit to the employee.
You have also asked if the Department has commenced audits on these benefits based on information available from airlines, hotels, and cruise companies. The confidentiality provisions of the Income Tax Act do not permit me to provide information with respect to specific audits of the airline and similar industries. However, I can assure you that the Department’s overall compliance strategy is one built on a balanced approach. It includes educating taxpayers with respect to their obligations and entitlements, promoting the self-assessment system, and implementing an enforcement methodology based on risk assessment criteria.
I appreciate the opportunity to address your concerns.
Yours sincerely,
Bill McCloskey Assistant Deputy Minister Policy and Legislation Branch
Attachment
Gwen Moore
952-1506
April 29, 1999