Excise Tax Act

Marginal note:Travel and other allowances

174 For the purposes of this Part, where

• (a) a person pays an allowance

  • (i) to an employee of the person,

  • (ii) where the person is a partnership, to a member of the partnership, or

  • (iii) where the person is a charity or a public institution, to a volunteer who gives services to the charity or institution

  for

  • (iv) supplies all or substantially all of which are taxable supplies (other than zero-rated supplies) of property or services acquired in Canada by the employee, member or volunteer in relation to activities engaged in by the person, or

  • (v) the use in Canada, in relation to activities engaged in by the person, of a motor vehicle,

• (b) an amount in respect of the allowance is deductible in computing the income of the person for a taxation year of the person for the purposes of the Income Tax Act, or would have been so deductible if the person were a taxpayer under that Act and the activity were a business, and

• (c) in the case of an allowance to which subparagraph 6(1)(b)(v), (vi), (vii) or (vii.1) of that Act would apply

  • (i) if the allowance were a reasonable allowance for the purposes of that subparagraph, and

  • (ii) where the person is a partnership and the allowance is paid to a member of the partnership, if the member were an employee of the partnership, or, where the person is a charity or a public institution and the allowance is paid to a volunteer, if the volunteer were an employee of the charity or institution,

  the person considered, at the time the allowance was paid, that the allowance would be a reasonable allowance for those purposes and it is reasonable for the person to have considered, at that time, that the allowance would be a reasonable allowance for those purposes,

the following rules apply:

• (d) the person is deemed to have received a supply of the property or service,

• (e) any consumption or use of the property or service by the employee, member or volunteer is deemed to be consumption or use by the person and not by the employee, member or volunteer, and

• (f) the person is deemed to have paid, at the time the allowance is paid, tax in respect of the supply equal to the amount determined by the formula

  A × (B/C)

  where

  A

  is the amount of the allowance,

  B

  is

  • (i) in prescribed circumstances relating to a participating province, the percentage determined in prescribed manner, and

  • (ii) in any other case, the rate set out in subsection 165(1), and

  C

  is the total of 100% and the percentage determined for B.