Treatment of travel expenses/allowances under the Income Tax Act

Crown Corporation Issue Note

Issue

Are the travel expenses/allowances of directors of Crown corporations considered to be taxable benefits?

Context

Most directors of Crown corporations receive the following basic remuneration/compensation:

• Initial and/or annual retainer
• Per diem^[1]
• Travel allowance or reimbursement for out-of-pocket expenses, including but not limited to transportation, hotel and meals while attending to Crown corporation business.

Analysis

The Canada Revenue Agency has ruled that holding the position of "director" (regardless of whether considered part-time or full-time) on a Crown corporation board is considered to be "holding an office" for taxation purposes.  Therefore, in general, income or other benefits received by virtue of being a director are potentially taxable under the Income Tax Act, although certain exceptions apply.

However, in the case of directors' travel allowances, such payments are not considered taxable benefits as long as they meet certain criteria: they are a reasonable amount; the payments are received for traveling away from the metropolitan area where the corporation at which the director works/reports is located; and the amounts are received for travel completed in the performance of the directors' duties.^[2] On the other hand, when a spouse accompanies a director on a business trip, payment or reimbursement by the corporation of the spouse's travel expenses is a taxable benefit to the director, unless the spouse was engaged primarily in business activities on behalf of the corporation during the trip.

Similarly, when the out-of-pocket expenses of directors are employment-related and reasonable, the reimbursement amount is not usually taxable.

Conclusion

In most cases, the travel allowances of directors of Crown corporations are not considered taxable benefits.

Further information

For precise information and clarification in regards to any specific circumstances, corporations are encouraged to seek advice from their internal legal counsel and as required, from Revenue Canada. 

• Income Tax Act, sections 5 and 6
• Financial Administration Act
• IT-470R (Consolidated) Income Tax Interpretation Bulletin, Employees' Fringe Benefits
• IT-522 Income Tax Interpretation Bulletin,Vehicle, Travel and Sales Expenses of Employees
• Guide T-4130, Employer's Guide – Taxable Benefits

For General Questions (Canada Revenue Agency):

Employer Inquiries: 1(800)959-5525
Employee Inquiries: 1(800)959-8281

Updated

November 17, 2008

Prepared by

Treasury Board Secretariat
Government Operations Sector
Governance Directorate

Consultation

Income Tax Rulings Directorate, Canada Revenue Agency
Senior Personnel and Special Projects Secretariat, Privy Council Office
Legal Services, TBS