tax and relocation allowances
#31
Re: tax and relocation allowances
Stunned of White Rock back again.
Section 62 of the Income Tax Act opens with:
62. (1) There may be deducted in computing a taxpayer’s income for a taxation year amounts paid by the taxpayer as or on account of moving expenses incurred in respect of an eligible relocation,
Section 248 (1) defines an eligible relocation as (my bolding):
"eligible relocation" means a relocation of a taxpayer where
(a) the relocation occurs to enable the taxpayer
(i) to carry on a business or to be employed at a location in Canada (in section 62 and this subsection referred to as “the new work location”), or
(ii) to be a student in full-time attendance enrolled in a program at a post-secondary level at a location of a university, college or other educational institution (in section 62 and in this subsection referred to as “the new work location”),
(b) both the residence at which the taxpayer ordinarily resided before the relocation (in section 62 and this subsection referred to as “the old residence”) and the residence at which the taxpayer ordinarily resided after the relocation (in section 62 and this subsection referred to as “the new residence”) are in Canada, and
(c) the distance between the old residence and the new work location is not less than 40 kilometres greater than the distance between the new residence and the new work location
except that, in applying subsections 6(19) to (23) and section 62 in respect of a relocation of a taxpayer who is absent from but resident in Canada, this definition shall be read without reference to the words “in Canada” in subparagraph (a)(i), and without reference to paragraph (b);
So, unless Tangram was tax resident in Canada BEFORE his move the advice from the CRA doesn't seem to stack up with the ITA.
Section 62 of the Income Tax Act opens with:
62. (1) There may be deducted in computing a taxpayer’s income for a taxation year amounts paid by the taxpayer as or on account of moving expenses incurred in respect of an eligible relocation,
Section 248 (1) defines an eligible relocation as (my bolding):
"eligible relocation" means a relocation of a taxpayer where
(a) the relocation occurs to enable the taxpayer
(i) to carry on a business or to be employed at a location in Canada (in section 62 and this subsection referred to as “the new work location”), or
(ii) to be a student in full-time attendance enrolled in a program at a post-secondary level at a location of a university, college or other educational institution (in section 62 and in this subsection referred to as “the new work location”),
(b) both the residence at which the taxpayer ordinarily resided before the relocation (in section 62 and this subsection referred to as “the old residence”) and the residence at which the taxpayer ordinarily resided after the relocation (in section 62 and this subsection referred to as “the new residence”) are in Canada, and
(c) the distance between the old residence and the new work location is not less than 40 kilometres greater than the distance between the new residence and the new work location
except that, in applying subsections 6(19) to (23) and section 62 in respect of a relocation of a taxpayer who is absent from but resident in Canada, this definition shall be read without reference to the words “in Canada” in subparagraph (a)(i), and without reference to paragraph (b);
So, unless Tangram was tax resident in Canada BEFORE his move the advice from the CRA doesn't seem to stack up with the ITA.
#34
Binned by Muderators
Joined: Jul 2007
Location: White Rock BC
Posts: 11,682
Re: tax and relocation allowances
It's not like the CRA to interpret any ambiguity in the taxpayer's favour, especially as it conflicts with all the other guidance they give.
Still, if you are getting this tax free then good luck to you. Others might want to investigate this apparent loophole if their new employers are going to pay moving expenses.
#35
Joined: Apr 2005
Posts: 9,606
Re: tax and relocation allowances
That makes a bit more sense. I am sure it is not the intention of the act as every other CRA reference (as well as my tax text books) suggest. However, if you have established tax residency in Canada before incurring moving expenses I suppose you could be could be considered as being "absent from but resident in" Canada at the time of your move.
It's not like the CRA to interpret any ambiguity in the taxpayer's favour, especially as it conflicts with all the other guidance they give.
Still, if you are getting this tax free then good luck to you. Others might want to investigate this apparent loophole if their new employers are going to pay moving expenses.
It's not like the CRA to interpret any ambiguity in the taxpayer's favour, especially as it conflicts with all the other guidance they give.
Still, if you are getting this tax free then good luck to you. Others might want to investigate this apparent loophole if their new employers are going to pay moving expenses.
<sorry; been there, have become a little cynical>
#36
BE Forum Addict
Thread Starter
Joined: Feb 2007
Posts: 2,710
Re: tax and relocation allowances
That makes a bit more sense. I am sure it is not the intention of the act as every other CRA reference (as well as my tax text books) suggest. However, if you have established tax residency in Canada before incurring moving expenses I suppose you could be could be considered as being "absent from but resident in" Canada at the time of your move.
It's not like the CRA to interpret any ambiguity in the taxpayer's favour, especially as it conflicts with all the other guidance they give.
Still, if you are getting this tax free then good luck to you. Others might want to investigate this apparent loophole if their new employers are going to pay moving expenses.
It's not like the CRA to interpret any ambiguity in the taxpayer's favour, especially as it conflicts with all the other guidance they give.
Still, if you are getting this tax free then good luck to you. Others might want to investigate this apparent loophole if their new employers are going to pay moving expenses.
Just working out if there is any way we can get ours tax free..
Gryph
#37
Re: tax and relocation allowances
OK so does this mean that so long as we get the expenses after we arrive that we are OK? Surely everyone gets expenses after the event don't they? Do your expenses have to occur after your move? ie is this because Tangram shipped well after his move to canada? But what about flights as by deifinition these can't occur after your move to canada?
Just working out if there is any way we can get ours tax free..
Gryph
Just working out if there is any way we can get ours tax free..
Gryph
I guess I made the claims and got reimbursed after I was resident for tax, but again I'm no expert and am only going off what I have been told by RC and the other people I work with who have done the same.
#38
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Thread Starter
Joined: Feb 2007
Posts: 2,710
Re: tax and relocation allowances
Have spoken to two other colleagues who relocated from outside of Canada and neither had the relocation expenses declared on their T4 forms by the employer.
I guess I made the claims and got reimbursed after I was resident for tax, but again I'm no expert and am only going off what I have been told by RC and the other people I work with who have done the same.
I guess I made the claims and got reimbursed after I was resident for tax, but again I'm no expert and am only going off what I have been told by RC and the other people I work with who have done the same.
Well we may have to take pot luck anyway as it is looking less and less likely we will be out before the end of the tax year
Gryph
#39
Binned by Muderators
Joined: Jul 2007
Location: White Rock BC
Posts: 11,682
Re: tax and relocation allowances
OK so does this mean that so long as we get the expenses after we arrive that we are OK? Surely everyone gets expenses after the event don't they? Do your expenses have to occur after your move? ie is this because Tangram shipped well after his move to canada? But what about flights as by deifinition these can't occur after your move to canada?
Just working out if there is any way we can get ours tax free..
Gryph
Just working out if there is any way we can get ours tax free..
Gryph
It doesn't sound right does it? But the phrase "absent from but resident in" is the only exception given in S 248 (1).
The only way I can see this happening is if someone is deemed resident for the whole year under the 183 day rule but would be absent from Canada before they came under the work permit. If this interpretation is right they would then be subject to Canadian tax on their world-wide income for the whole year, but would be eligible for all allowable deductions. However, this still doesn't seem right the person would be tax resident in the UK until they moved to Canada.
I would love to see a written explanation.
#40
Forum Regular
Joined: Mar 2007
Location: Calgary
Posts: 109
Re: tax and relocation allowances
we got a relocation allowance from our employer here and i have asked the question to our HR about being taxed on them, she says no-one she's brought in from the UK has been taxed on there relocation, and she's brought 6 or 7 in in the last 2 years.
#41
Re: tax and relocation allowances
I never mentioned my name or the name of my company.....if they trace calls I'm screwed, but otherwise I'm free.
#42
Re: tax and relocation allowances
Oh I don't know...... only thing I know is my company are not putting it on my T4.
#43
Forum Regular
Joined: Mar 2007
Location: Calgary
Posts: 109
Re: tax and relocation allowances
sorry prob didn't make myself very clear, our allowance was refund based, we got it paid out as we handed in reciepts. but they were for flights, hotels, shipping etc..., so if we didn't have enough reciepts we wouldn't have got the full amount as happend to one of the lads here.
#44
Re: tax and relocation allowances
sorry prob didn't make myself very clear, our allowance was refund based, we got it paid out as we handed in reciepts. but they were for flights, hotels, shipping etc..., so if we didn't have enough reciepts we wouldn't have got the full amount as happend to one of the lads here.
#45
Binned by Muderators
Joined: Jul 2007
Location: White Rock BC
Posts: 11,682
Re: tax and relocation allowances
Working on the principle of, "if you don't know then ask someone who does," I asked a Chartered Accountant in public practice who specializes in tax and this is what he said:
The correct answer is taxable benefit to employee and moving expenses are not deductible. The cases that you've heard of usually revolve around the employer making a payment out of the country before employment, then not reporting it on the T4's in Canada. The employee doesn't report it in the foreign jurisdiction, because they don't live there. However if the tax department knew all the facts the payment was made on account of employment, and is a taxable benefit to the employee.
I know it doesn't jive with what the CRA told Tangram ...
The correct answer is taxable benefit to employee and moving expenses are not deductible. The cases that you've heard of usually revolve around the employer making a payment out of the country before employment, then not reporting it on the T4's in Canada. The employee doesn't report it in the foreign jurisdiction, because they don't live there. However if the tax department knew all the facts the payment was made on account of employment, and is a taxable benefit to the employee.
I know it doesn't jive with what the CRA told Tangram ...