12 January 2004 External T.I. 2003-0051065 - EMPLOYEE SALES INCENTIVE

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: What is the CCRA's policy regarding the taxable status of sales incentive trips?

Position: Question of fact. The position is outlined in paragraphs 10 to 13 of IT-470R.

Reasons: The position is outlined in paragraphs 10 to 13 of IT-470R.

Randy Hewlett, B.Comm.

XXXXXXXXXX 613-957-8973
2003-005106
January 12, 2004

Dear XXXXXXXXXX:

Re: Employee Sales Incentive Trips

We are writing in response to your letter of November 28, 2003, wherein you inquired about the policy of the Canada Revenue Agency (the "CRA") as it pertains to sales incentive trips provided to employees.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments.

Paragraph 6(1)(a) of the Income Tax Act (the "Act") includes in a taxpayer's income "the value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment". The general position of the CRA with respect to taxable benefits relating to holiday trips, other prizes, and incentive awards is described in paragraphs 10 to 13 of Interpretation Bulletin IT-470R (Consolidated) Employees' Fringe Benefits. In general terms, when an employer provides a sales incentive trip to an employee, the trip is considered personal and its value must be included in the employee's income pursuant to paragraph 6(1)(a) of the Act.

As noted in paragraph 12 of IT-470R, there may be instances where an employee is required to perform business functions on a sales incentive trip. In such a case, the employee will not be considered to have received a taxable benefit if he or she is "engaged directly in business activities during a substantial part of each day". Otherwise, the trip is viewed as personal and a taxable benefit must be included in the employee's income pursuant to paragraph 6(1)(a) of the Act, subject to a reduction in the value of the benefit for the portion of the trip that relates to any actual business activity.

We trust our comments will be of assistance to you.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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