Generally, if you provide a benefit or an allowance for board and lodging, or transportation to your employee, the benefit or allowance is taxable.

Depending on your situation, the board and lodging, or transportation benefit or allowance you provide to your employee who works at a special work site may not have to be included in your employee's income. Where the benefit must be included in your employee’s income, the value of the benefit will be based on its fair market value (FMV).

What is the fair market value (FMV)

FMV is the highest price that can be obtained in an open market between an informed and willing buyer and an informed and willing seller who are dealing at arm's length.

Generally, the FMV of a benefit is the price that could be reasonably charged for the use of that benefit in an open market (that is, the market price for a similar benefit in the surrounding area).

This determination must be done based on a review of the facts in each specific situation.

GST/HST on the taxable benefit

If the benefit is taxable, the value of the benefit may include the GST/HST or PST that you are required to pay. You must also include any PST that would have been payable if you were not exempt. For example, meals, utilities, travel assistance and short-term accommodations may be subject to GST/HST.

On this page

• Steps
• References

Steps

1. Determine if another exception applies to the benefit or allowance

   If you provide a benefit or an allowance for board and lodging or transportation, your employee may be working at a location that is both considered a special work site and a remote work location. However, the benefit can only be excluded from the employee's income once.

   • If the benefit or allowance is provided at a remote work location, to review the conditions that must be met to exclude this amount from your employee’s income, do not continue to the next step.

     Refer to: Board and lodging, and transportation - Provided to an employee working at a remote work location

   • If the benefit or allowance is provided at a special work site, to review the conditions that must be met to exclude this amount from your employee’s income, continue to Step 2 - Determine if the work location is considered a special work site.

2. Determine if the work location is considered a special work site

   Generally, a special work site is an area where temporary duties are performed by your employee who keeps a self-contained domestic establishment (SCDE) at another location as their principal place of residence for which the work location is not considered reasonable for your employee to return daily.

   What is a SCDE
   

   A SCDE is a house, an apartment, or other similar place of residence where a person usually sleeps and eats.

   It is generally a living unit with restricted access that contains a kitchen, bathroom, and sleeping facilities. The SCDE must be separate from any other living unit in the same building.

   What CRA generally considers to be a special work site

   The CRA considers a location to be a special work site based on the following factors:

   1. Determine if the duties performed by your employee are considered temporary
      

      Generally, the CRA considers that your employee’s duties are temporary (performed on a short-term or interim basis) if it can reasonably be expected that they will not provide continuous employment for your employee beyond a period of more than 2 years. In determining the expected duration of employment, use the facts known at the time your employee started working for you.

      To determine if the work is considered temporary, the CRA considers the following factors:

      • The nature of the duties to be performed by your employee.
      • The total estimated duration of a project or the specific portion of the project for which your employee is hired.
      • The agreed period of time for which your employee was hired according to the employment contract or other terms of the engagement.

      This must be based on a thorough review of the facts in each specific situation.

      • If the duties performed are not considered temporary, continue to: Step 5 - Calculate the value of the benefit.

      • If the duties performed are considered temporary, continue to: Step 2b - Determine if your employee maintained a SCDE as their principal place of residence.

   2. Determine if your employee maintained a SCDE as their principal place of residence
      

      You must determine if your employee maintained, at another location, a SCDE as their principal place of residence.

      • If your employee does not maintain a SCDE at another location, continue to: Step 5 - Calculate the value of the benefit.

      • If your employee maintained a SCDE at another location as their principal place of residence, continue to: Step 2c - Determine if the distance between your employee’s principal place of residence and the work location is not considered reasonable for your employee to return daily.

   3. Determine if the distance between your employee’s principal place of residence and the work location is not considered reasonable for your employee to return daily
      

      Generally, the CRA considers that it is not reasonable for your employee to travel between their principal place of residence and the work location if the distance between those 2 places by the most direct route normally taken is more than 80 kilometres.

      Even if the distance is less than 80 kilometres, the CRA may still consider that it is not reasonable for your employee to make that trip after taking into account factors such as:

      • The number of hours of work required of your employee at the special work site each shift
      • The time your employee would have for rest if they returned home daily
      • The means of transportation available and condition of the route that would be travelled (for example: the quality of roadway, seasonal weather conditions)
      • Your employee’s general physical and mental health
      • The time it takes to travel the distance, and the time of day the travel takes place

      Special situation - Fishers and seafarers

      A ship or vessel may qualify as a special work site when an employee is required to remain on board, whether at port or at sea, for a period of 36 hours or more.

      The duties performed by the employee must be of a temporary nature and all other conditions must be met.

      Time spent at sea may include time on board due to:

      • Quarantine
      • Waiting to dock
      • Loading or unloading cargo when the ship or vessel is in port for a very short period of time before it sets sail again
      • Waiting for immigration or customs clearance

      However, just because an employee works on different employer-owned ships or vessels does not automatically mean they are in various “temporary” employments. This distinction is necessary for the benefit related to a special work site to be excluded from their income.

      Determining if the ship or vessel qualifies as a special work site for your employee depends on the facts of each situation. Each case is unique and requires a thorough review of the facts.

      
      

      • If your employee can reasonably be expected to travel daily between their principal place of residence and the work location, continue to: Step 5 - Calculate the value of the benefit.

      • If the distance is not considered reasonable and the work location meets all conditions in steps 2a, 2b and 2c, the work location may be considered a special work site.

        Continue to: Step 3 - Determine if the benefit or allowance must be included in your employee’s income.

3. Determine if the benefit or allowance must be included in your employee’s income

   Generally, if you provide a benefit or an allowance for board and lodging, or transportation to your employee, you need to include the value or the benefit or allowance in your employee’s income.

   Depending on the situation, if the benefit or allowance is provided to your employee working at a special work site, the amount may be excluded from your employee’s income under the Income Tax Act (ITA).

   1. Benefit or allowance: Board and lodging
      

      If you provide for board and lodging or an allowance (not more than a reasonable amount) for board and lodging to your employee, the value of the board and lodging or allowance can be excluded from their income if all of the following apply:

      • Your employee’s duties required them to be away from their principal place of residence or to be at the special work site.
      • Your employee had to work at a special work site where the duties performed were of a temporary nature (step 2a).
      • Your employee kept, at another location, a SCDE as their principal place of residence (step 2b) and all of the following apply:
        
        • Throughout the period, the SCDE was available for the employee’s occupancy and your employee did not rent the SCDE to any other person.
        • Your employee could not reasonably be expected to return daily from the special work site because of distance (step 2c).
      • The benefit or allowance (not more than a reasonable amount) for board and lodging you provided to your employee had to be for a period where the employee had to be at the special work site for at least 36 hours, including time spent to travel between your employee’s principal place of residence and the special work site.

      • If all of the above conditions are not met, the benefit or allowance for board and lodging is included in your employee’s income.

        Continue to: Step 5 - Calculate the value of the benefit.

      • If all of the above conditions are met, the benefit or allowance for board and lodging is excluded from your employee's income.

        If you also provided a benefit or an allowance for transportation to your employee, continue to: Step 3b - Transportation benefit or allowance you provide to your employee.

   2. Benefit or allowance: Transportation
      

      If you provide free or subsidized transportation or an allowance (not more than a reasonable amount) for transportation to your employee who works at a special work site, the benefit or allowance can be excluded from their income if all of the following apply:

      • The transportation must be for travel between the special work site and your employee’s principal place of residence.
      • Your employee’s duties required them to be away from their principal place of residence or be at the special work site for a period of at least 36 hours (including time spent to travel between your principal place of residence and the special work site).
      • You (or a third party) provided your employee with board and lodging or a reasonable allowance for board and lodging for that period.

      • If all of the above conditions are not met, the benefit or allowance must be included in your employee’s income.

        Continue to: Step 5 - Calculate the value of the benefit.

      • If all of the above conditions are met, the benefit or allowance is excluded from your employee’s income.

        Continue to: Step 4 - Fill out Form TD4 Declaration of Exemption - Employment at a Special Work Site.

4. Fill out Form TD4 Declaration of Exemption - Employment at a Special Work Site

   You and your employee must fill out Form TD4 Declaration of Exemption - Employment at a Special Work Site to exclude the amounts from your employee’s income.

   You should fill out the form when one of the following apply:

   • Your employee begins their employment at a special work site
   • Your employee’s situation at a special work site changes

   Once you fill out Form TD4, do not include these amounts on the T4 slip using code 30 or box 14 (or code 028 on a T4A slip if you are not their employer).

   You must keep the completed Form TD4 with your employee’s records. Do not send the CRA a copy.

   Special situation: Excluded board and lodging, and transportation provided at a special work site in a prescribed zone

   If you provided the excluded benefit or allowance to your employee at a special work site in a prescribed zone and your employee kept their principal place of residence outside a prescribed zone, you must report the exempt part that is related to work sites:

   • Within 30 kilometres from the nearest urban area
   • With a population of at least 40,000 persons

   You must include the amount on the T4 slip using codes 31 (or code 124 on the T4A slip if you are not the employer of the employee).

   Your employee will use this amount to calculate the Northern Residents deduction on their income tax and benefit return.

   Example
   

   Situation

   The employer paid the employee $4,000 for board and lodging at a special work site in a prescribed zone.

   The employer and the employee completed Form TD4, Declaration of Exemption – Employment at a Special Work Site.

   Of the $4,000 the employer paid, $1,200 relates to a special work site that was located 27 kilometres from a town with a population of 43,000 people (the 30-kilometre part).

   Result

   The employer must enter $1,200 using code 31 of the T4 slip, even though it was not entered using code 30.

   The employee will enter $1,200 on their Form T2222, Northern Residents Deductions.

5. Calculate the value of the benefit

   If the benefit must be included in your employee’s income, the value of the benefit is equal to:

   Board and lodging

   • FMV of the board and lodging, including any applicable GST/HST and PST
   • minus Any amounts your employee reimbursed you
   • equals Value of the benefit for board and lodging to be included on the T4 slip using code 30 and box 14 (or code 028 on the T4A slip if you are not the employer of the employee)

   Transportation

   • FMV of the transportation, including any applicable GST/HST and PST
   • minus Any amounts your employee reimbursed you
   • equals Value of the benefit for transportation to be included on the T4 slip using code 40 and box 14 (or code 028 on the T4A slip if you are not their employer)

   If the allowance must be included in your employee’s income, the amount paid for the allowance is the value of the benefit.

   The amounts must be included in the pay period they were received or enjoyed.

6. Withhold payroll deductions and remit GST/HST

   The withholding and remitting requirement depends on the type of remuneration: cash , non-cash , or near-cash .

   If the benefit is taxable, you must withhold the following deductions:

   • Non-cash and near-cash: Option 1

     Withhold:

     • Income tax
     • CPP
     • EI (do not withhold)

     Remit:

     • GST/HST in certain situations

   • Cash: Option 2

     Withhold:

     • Income tax
     • CPP
     • EI

     Do not remit:

     • GST/HST (do not remit)

   The amounts must be included in the pay period they were received or enjoyed.

   Learn how to calculate deductions and the GST/HST to remit: How to calculate - Calculate payroll deductions and contributions

7. Report the benefit on a slip

   If the benefit is taxable, you must report the following on a T4 or T4A slip:

   • T4 slip - Employer

     • Non-cash and near-cash: Option 1

       • Box 14 - Employment income
       • Box 26 - CPP/QPP pensionable earnings
       • Code 30 - Board and lodging (taxable, step 5)
       • Code 31 - Special work site (excluded, step 4)
       • Code 40 - Other taxable allowances and benefits, including transportation (taxable, step 5)

     • Cash: Option 2

       • Box 14 - Employment income
       • Box 24 - EI insurable earnings
       • Box 26 - CPP/QPP pensionable earnings
       • Code 30 - Board and lodging (taxable, step 5)
       • Code 31 - Special work site (excluded, step 4)
       • Code 40 - Other taxable allowances and benefits, including transportation (taxable, step 5)

   • T4A slip - Payer

     • Code 028 - Other income
     • Code 124 - Board and lodging at special work sites (excluded, step 4)

   Learn how to report the benefit on a slip: Fill out the slips and summaries - File information returns (slips and summaries)

References

Legislation