| 921205 | |
| 24(1) | A. Humenuk |
| (613) 957-2134 |
Attention: 19(1)
July 17, 1992
Dear Sirs:
Re: Automobile Rebate for Employees
We are replying to your letter of April 14, 1992 concerning the application of paragraphs 6(1)(a) and (e.1) of the Income Tax Act in respect of an automobile rebate program to be offered by an employer.
You ask us to consider the situation where an employer has a plan whereby employees who purchase a vehicle from a particular automotive company will receive $1000 rebate on the purchase from the employer in addition to any other rebate which the automobile company may make available to the public at large. One half of the Sl000 rebate is to be funded by the automotive company and could be paid directly to the employee by the automotive company. The employer deals at arm's length with the automotive company and the plan is available to all employees of the employer.
You have asked for our comments on your analysis of the tax consequences. It is your view that:
1. The full amount of the S1000 rebate is a taxable benefit under paragraph 6(1)(a) of the Act.
2. Notwithstanding the fact that the full amount of the rebate is a taxable benefit, it is your view that Revenue Canada should not assess a taxable benefit on the customer component of the rebate where the rebate is paid directly by the automotive company to the employee and no special financial arrangements have been entered into between the employer and the customer to secure and finance the rebate paid by the automotive company.
3. You perceive an anomaly in the interaction between the GST and Income Tax (provided that the draft legislation is enacted in substantially the same form as released December 1991) in that a benefit under paragraph 6(1)(e.1) of the Income Tax Act will be included in an employee's income in respect of the rebate despite the fact, as you point out, that GST is not required to be remitted in respect of the rebate.
In our view an employee who receives a rebate in the above noted circumstances would be in receipt of a taxable benefit under paragraph 6(1)(a) regardless of who pays the rebate. The rebate would be considered received by virtue of the employment since it would not be available to the public at large. If it is the manufacturer or dealer who provides the benefit, it is the manufacturer or dealer who is responsible for the reporting of that benefit on a T4 supplementary.
With respect to your third question, we are not able to provide you with our view on legislative changes that have not yet been passed. However, it is our understanding that the Department of Finance did not intend a GST benefit to be included into an employee's income where the benefit under paragraph 6(1)(a) of the Act was not a supply of service or property within the meaning assigned by the Excise Tax Act.
If you wish to resubmit your question concerning the proposed change to paragraph 6(1)(e.1) after the relevant legislation has been passed, we will be in a better position to provide our views.
We trust our comments will be of assistance to you.
Yours truly,
J.A. Szeszycki for DirectorBusiness and General Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
c.c. Current Amendments and Regulations Division