Canadian Payroll Reporter - sample

3 Canadian HR Reporter, a Thomson Reuters business 2016 Canadian HR Reporter, a Thomson Reuters business 2016 News CPR | September 2016 CRA turns the page on IT-470R New online tax folio replaces agency's long-used technical guide on taxable benefits BY SHEILA BRAWN AFTER CLOSE to 30 years of providing technical interpreta- tion of federal taxable benefit requirements, the Canada Rev- enue Agency (CRA) has retired its Employees' Fringe Benefits In- terpretation Bulletin (IT-470R— Consolidated ). As of July 7, the agency re- placed it with a new Income Tax Folio chapter called Benefits and Allowances Received from Em- ployment (S2-F3-C2). The CRA began replacing its Interpreta- tion Bulletins with Income Tax Folios a couple of years ago. The new benefits and allow- ances chapter is part of a folio called Employment Benefits in Series 2, which covers issues re- lated to employers and employ- ees. The agency says this new way of classifying information should make it easier for people to find what they are looking for. Like Information Bulletins, folios provide the CRA's inter- pretation of issues covered un- der the federal Income Tax Act and its regulations. However, the new benefits and allowances chapter does not simply repeat the content of IT-470R in a new format. Instead, it provides more background information on tax- able benefit and allowance rules, including citing relevant sec- tions of the Income Tax Act and court cases that helped to shape the CRA's interpretation of in- come tax requirements. For instance, the basis for tax- ing benefits comes from para- graph 6(1)(a) of the Income Tax Act: "The value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer, or by a person who does not deal at arm's length with the taxpayer, in the year in respect of, in the course of, or by virtue of the taxpayer's office or employment," are to be included in an individual's income for a tax year unless specifically ex- empted by the act. It also states that paragraph 6(1)(b) includes in an employee's income "all amounts received by the taxpayer in the year as an allowance for personal or living expenses or as an allowance for any other purpose," except for allowances specifically excluded under the act. The CRA says the paragraphs and their subsequent interpre- tation by the Supreme Court of Canada allow for a broad range of benefits and allowances to be taxable. The chapter also sets out factors the CRA considers when determining if a benefit or an allowance is taxable, such as an individual's relationship to the employer. Is he an employee or a self-employed person? The taxable benefit and allowance rules apply to employees. If the individual is an em- ployee, is he an employee-share- holder? For employees who are also shareholders of a corpora- tion, the employer will have to determine if the benefits and/ or allowances it provided to the individual were given to the per- son as an employee or as a share- holder. This is important because the tax treatment of the benefit/al- lowance can differ depending on whether it was provided to an employee or a shareholder. Another factor the CRA ex- amines is whether the employee receives an economic advantage from a benefit or an allowance see TAXING page 8

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