As an advisor, you may have participated in a conference trip, perhaps to a sunny locale such as Mexico or the Dominican Republic. Whether the value of that trip is taxable depends on your role on the trip: as an employee of the trip sponsor, an advisor selected for the trip, or an employee of a supplier.
This distinction played an important role in a recent tax case in the Court of Quebec, involving a BMO Insurance (BMO) employee who was assessed a taxable employment benefit by Revenu Québec (RQ) of $1,872 in respect of a business trip he took in 2015.
The taxpayer’s duties were to manage relationships with managing general agents (MGAs), work with dealers and advisors, train them on BMO products and generally encourage them to sell BMO products to their clients.
In August 2015, BMO was approached by an MGA to sponsor an “Elite Congress” to be held in Cancun. The conference brought together the MGA’s top performing brokers and advisors. The sponsorship included airfare for one person and a week’s hotel stay. By sponsoring the conference, the sponsor was entitled to make a presentation about its products.
BMO’s decision to participate in these types of conferences is based on the business volume (or potential volume) of a given MGA. BMO participates in approximately five conventions per year, with each MGA hosting one convention every two to three years.
Since this particular MGA had been a major business partner of BMO’s for many years, BMO saw this as a good opportunity to gain visibility with brokers and agreed to sponsor the conference. It decided to send the taxpayer — the BMO employee — to Cancun to represent BMO. This conference was the only conference the taxpayer attended in 2015.
The conference included a number of activities, some directly related to work, such as a company booth and training sessions, and others were various leisure activities. At the conference, the taxpayer gave a presentation about BMO’s products. In addition, he participated in as many activities as possible with clients during the conference, including a catamaran outing, and various meals with brokers and advisors. In the meantime, he continued to carry on his normal employment activities, including responding to e-mails and returning phone calls.
Upon his return to Canada, the taxpayer sent a “very detailed email” describing all the meetings he had had with advisors or brokers, and the potential that resulted from them. His boss expressed appreciation for the development work he did in Cancun.
The following year, the MGA was the subject of a taxable benefit audit related to the Cancun conference. RQ divided the attendees into three categories: MGA employees, brokers and advisors who earned their place by qualifying in a sales contest, and representatives of the insurance companies, including the taxpayer.
RQ concluded that, since the MGA employees were sent on the trip in the course of their normal employment activities, the trip did not constitute a taxable employment benefit for them. Conversely, for the winning advisors, the trip constituted “entertainment,” RQ determined, and it assessed a taxable benefit equal to 100% of the trip value.
However, for employees attending on behalf of the sponsors, RQ took the position that only 37.5% of the trip was for business purposes, and the remainder was a taxable benefit. As a result, in May 2018, RQ reassessed the taxpayer for a taxable benefit for 62.5% of the value of the trip, or $1,872.
The taxpayer objected to the assessment and took the matter to court, arguing that his attendance at the Cancun conference should have been treated, in its entirety, as a business trip, and not classified in any way as a taxable benefit.
The judge reviewed the facts of the case and noted that prior case law recognizes that, while certain activities on these types of business trips may indeed be “entertaining in nature,” this does not prevent the primary purpose of the trip being business development.
As a result, the judge concluded that no portion of the cost of the trip should have been a taxable benefit to the BMO employee, as his participation on the trip was neither an award nor a prize.
Jamie Golombek, CPA, CA, CFP, CLU, TEP, is the Managing Director, Tax & Estate Planning with CIBC Private Wealth in Toronto.