In an age when remote working and team events have become the norm, the CRA has recently updated their taxable benefit policies to reflect this evolving way of working.
Employers who make service awards, subsidize parking, or provide in‑person and remote social events for their staff should review these updated policies to ensure that they are not inadvertently providing taxable benefits.
Gifts, awards and long-service awards
Gifts and awards to employees made in cash or “near‑cash” (for example, a prepaid card or something easily convertible into cash) are generally taxable.
However, the CRA has an administrative policy that considers “non‑cash” gifts and awards to not constitute a taxable benefit in certain circumstances.
The total value of non-cash gifts to an employee must not exceed $500 in one year (other than trivial items and long‑service awards), and the gift must be in relation to a special occasion (for example, a birthday) or a general recognition of the employee’s contributions. The amount must not be given for performance-related reasons.
CRA’s recent policy addition in relation to gifts and awards treats gift cards as “non‑cash” if certain requirements are met.
The gift card must be pre‑loaded with the amount of the gift, and the card must only be able to be used to purchase goods or services from a single retailer (or group of retailers) identified on the card.
The terms and conditions of the card must prohibit the value being converted to cash, and the employer must keep a log with certain information, including the name of the employee, the reason for providing the card, and details of the card amount and the retailers where the card may be used.
If the gift card does not meet all required conditions, it will be treated as near‑cash, and a taxable benefit.
The CRA has added an administrative policy regarding ‘scramble’ parking offered to employees (i.e., where there are fewer spaces available than employees who want parking).
The provision of this type of parking will not be considered a taxable benefit where certain requirements are met.
There must not be more than two parking spaces for every three employees who want parking. Also, the spaces must not be assigned to any employee (their use must be random or uncertain). The spaces must be offered to all employees who want parking.
This concession eases the burden of employers calculating benefits where parking use is sporadic. This is particularly helpful when remote working and in‑person schedules vary week to week.
The CRA’s administrative policy for social events has also been updated to cover events where the cost of virtual attendance is covered by the employer.
In-person social events will not constitute a taxable benefit where the event is available to all employees and the cost per employee is $150 or less (including taxes). Where there are virtual attendees, there is a further requirement that any gift cards provided for meals etc., must meet the “non‑cash” requirements, discussed above.
Virtual social events will not constitute a taxable benefit if the event is available to all employees and the cost per employee is $50 or less (including taxes) if the event only includes meals, beverages and delivery services, or $100 or less (including taxes) if the event also includes entertainment.
If amounts are forwarded to the employee in advance, or reimbursed to the employee after the virtual event, receipts must be provided. As with in‑person events, gift cards must meet the “non‑cash” requirements.
In both situations, the maximum annual limit for social events (in-person, virtual, and a mixture of both) is six employer‑paid events. Any events in excess of this number will automatically constitute a taxable benefit.
It is critical to note the lower monetary limits for virtual events, compared to in‑person events. If these limits are exceeded, the full amount will be a taxable benefit.
More information can be found on the Government of Canada website.