Did you purchase a new Palm Pilot or BlackBerry this holiday season, with the
hope that your employer may pay for part of the cost? Well, you may be
disappointed to learn that any reimbursement you receive will be considered a
taxable employment benefit -- at least according to a Canada Revenue Agency
technical interpretation released last week.
The CRA, responding to a taxpayer inquiry, wrote that if an employer
reimburses employees for the cost of purchasing a Palm Pilot or equivalent type
of device, any amount reimbursed would be considered a taxable benefit from
employment.
Under the Income Tax Act, an employee is taxable on the value of "any benefit
received or enjoyed in respect of his or her employment." The CRA takes the view
that employees are considered to have received a benefit if an employer
reimburses the employee for part, or all, of the cost of an asset purchased and
owned by the employee, regardless of whether or not the asset is used for his or
her job.
The CRA analogized the reimbursement of a Palm Pilot to the situation where
an employer helps an employee pay for the cost of tools that the employee is
required to purchase in order to perform her work. It has always been CRA's
longstanding position that any such reimbursement for employee-purchased tools
is a taxable employment benefit.
What is somewhat troublesome about the CRA's recent opinion is that it seems
to be at odds with intention behind CRA's policy governing employer-provided
personal computers and Internet service. Several years ago, the CRA reviewed
several employer-sponsored programs whereby employers provided their employees
with computers, printers, software, and Internet access "for the purpose of
developing their employees' computer and Internet skills."
At that time, the CRA concluded that the programs were consistent with its
guidelines on employment-related training, which state that "employer-paid
training costs will not result in a taxable employment benefit to the employees
where the primary beneficiary of the training is the employer."
As far as the provision of personal computers to employees goes, this could
be considered a form of training since the employers felt that it was critical
for their future success that all employees become computer literate as soon as
possible and that the most efficient and effective way to develop their
employees' computer and Internet skills was to provide them with computers for
use at home.
Why then should personal handheld computers, such as Palm Pilots, be singled
out for different tax treatment?
In addition, the CRA has previously commented that "it is unlikely that there
is any significant taxable employment benefit as a result of having the Internet
service in (an employee's) home to assist (him) in carrying out (his) employment
duties."
What the CRA seems to be saying is that the provision of home Internet access
primarily benefits the employer, and not the employee, and therefore should not
be taxable.
Following that logic, the same should hold true for a Palm Pilot or
Blackberry which allows an employer to keep in regular touch with its employees
and similarly, allows its employees to keep in regular touch with clients. If
the Palm Pilot is primarily for the benefit of the employer, then it ought not
to be a taxable benefit.
Ultimately, given CRA's recent thoughts on the matter, a judge may have the
final say should the matter end up in Tax Court. In the meantime, employees who
face a taxable benefit inclusion may wish to seek their own, independent
professional tax advice.
GRAPHIC: Black & White Photo: Telus Mobility, Canada Newswire; Employees get a
taxable benefit when they are reimbursed for the cost of a BlackBerry or similar
device, the CRA says.