In light of the COVID-19 pandemic, the Canada Revenue Agency (CRA) recognizes that for many employers and employees, there have been changes in the way that work is being conducted. Consequently, employers may provide certain benefits, allowances, or reimbursements to ensure that their employees are not unduly subject to harm when performing their employment duties.
- A benefit is a good or service an employer gives, or arranges for a third party to give, to their employee such as free use of property that you own. A benefit also includes an allowance or a reimbursement of an employee’s personal expense.
- An allowance or an advance is any periodic or lump-sum amount that an employer pays to their employee on top of salary or wages, to help the employee pay for certain anticipated expenses without having to account for the use of the funds. An allowance or advance is:
- usually an arbitrary amount that is predetermined without using the actual cost
- usually for a specific purpose
- used as the employee chooses, since the employee does not provide receipts
- An accountable advance is an amount an employer gives to an employee who has to account for their expenses by producing receipts and return any amount they did not spend.
- A reimbursement is an amount an employer gives to their employee to repay expenses he or she paid while carrying out their duties of employment. The employee has to keep detailed records (including receipts) to support the expenses and give them to their employer.
If an employer provides benefits to their employees, they always have to go through the same steps:
- determine if the benefit is taxable
- calculate the value of the benefit
- calculate payroll deductions
- file an information return
For more information on employer-provided benefits and allowances, see Guide T4130, Employers’ Guide – Taxable Benefits and Allowances.
Under these extraordinary circumstances, the CRA has adopted the following positions for employer-provided benefits pertaining to commuting and home office costs. These positions are effective from March 15, 2020 to December 31, 2020.
Commuting costs (including parking)
It is the long-standing position of the CRA that travel between an employee’s home and a regular place of employment is generally personal travel, and any expenses related to that travel are personal expenses. An employee’s parking costs at a regular place of employment are also considered personal expenses.
When an employer pays for, reimburses, or provides an allowance to an employee for such transportation and parking expenses (collectively, commuting costs) or provides an employee with a motor vehicle that is used for such travel, the employee generally receives a taxable benefit.
However, the CRA acknowledges that employees who are required to commute to their regular places of employment to perform employment duties may incur additional commuting costs to minimize their risk of exposure during the COVID-19 pandemic. Employees may also incur costs to commute to their regular place of employment to pick up equipment that enables them to perform employment duties from home. The following tax treatment applies in these situations:
- Employee continues performing their employment duties at their regular place of employment
The CRA will not consider an employee to receive a taxable benefit where their employer pays for, reimburses, or provides a reasonable allowance for additional commuting costs incurred by that employee during the COVID-19 pandemic, that are over and above their normal commuting costs. This position is extended to the use of employer-provided motor vehicles for such travel, provided the employee did not normally commute to work using an employer-provided motor vehicle before the COVID-19 pandemic.
- Employee is performing their employment duties at home because their regular place of employment is closed
The CRA will not consider an employee to receive a taxable benefit where their employer pays for, reimburses, or provides a reasonable allowance for normal or additional commuting costs incurred by the employee to travel to their regular place of employment for any purpose that enables them to perform their employment duties from home (for example, to pick up equipment). This position is extended to the use of employer-provided motor vehicles for such travel.
Similarly, when a regular place of employment is closed due to the COVID-19 pandemic, the CRA will not consider an employer-provided parking spot at that place of employment to be available for an employee’s use. As such, the employer-provided parking will not result in a taxable benefit.
In both situations, employers are expected to maintain appropriate records to demonstrate that any allowances provided are reasonable in relation to the commuting costs incurred by the employee. Employees are expected to maintain appropriate records to account for their use of the employer-provided motor vehicles, including the total kilometers driven when commuting between home and their regular place of employment.
Home office equipment
The CRA recognizes that the COVID-19 pandemic has resulted in many employees having to work from home, where they may not have the necessary computer or home office equipment (desk, office chair, etc.) to perform their employment duties. In this particular context, the CRA will not consider an employee to receive a taxable benefit where their employer pays for or reimburses up to $500 of computer or home office equipment to enable the employee to carry out their employment duties, provided the employee submits receipts to the employer. This position is extended to accountable advances provided to an employee, but does not apply to allowances provided for this purpose.
It should be noted, however, that the $500 reimbursement amount is in respect of each employee rather than each piece of computer or office equipment that an employee may purchase. For example, if an employee purchases a computer for $400 and an office chair for $250, an employer can reimburse the employee up to $500 without the employee receiving a taxable benefit under the administrative position. By contrast, if the employer reimburses the employee the full amount for these purchases, the amount over $500 (that is, $150) must be included in the employee’s income.
The CRA’s existing policies recognize that an employer may pay for or reimburse the cost of an employee’s cell phone service plan, or Internet service at home to help carry out their employment duties. The portion used for employment purposes is not a taxable benefit. For more information, go to Cellular phone and Internet services.
Where an employer pays for, reimburses, or provides a reasonable allowance for meals to employees working at their regular place of employment during regular hours of work, the amount must be included in their employment income as a taxable benefit. However, the CRA’s existing policies maintain that there are certain circumstances where an employer can provide an overtime meal or allowance, or a subsidized meal, without the employee receiving a taxable benefit.