Happy Holidays from Fulcrum Group! If you are considering giving your employees a gift this Christmas, it is important to ensure your gifts meet the criteria set out by CRA, so that it is not considered a taxable benefit to the employee.
In order for a gift or award to your employee to be tax-free, it needs to meet the following criteria:
- It cannot be more than $500.00 including all applicable taxes
- It cannot be given to non-arm’s length employees such as shareholders or any person directly related to a shareholder
- The gift must be for a special occasion like a holiday, birthday, wedding, or the birth of a child
- The award must be for overall contribution to the workplace, and not performance-based, such as yearly reviews
- If the gift or award was provided by manufacturers and other payers to your employees, provided through prize draws, loyalty or other points programs, or social events and hospitality functions, it is not included in the $500
- The gift or award cannot be cash or a cash equivalent. This includes cash, cheques, bonds, securities, and until recently, all gift cards. These items are considered to be taxable benefits to the employee.
Changes for Gift Cards
Prior to this update, CRA always deemed gift cards to be a taxable benefit when gifted or awarded to employees. Under recent changes, gift cards will not be considered a taxable benefit if all of the following apply:
- It comes with money already on it and it can only be used to purchase goods or services from a single retailer, or a group of retailers identified on the card.
- The terms and conditions of the gift card clearly state that amounts loaded onto the card cannot be converted into cash
- A log is kept to record gift card information that includes all of the following:
- Name of employee
- Date the gift card was provided to the employee
- Reason for providing the gift card
- Type of gift card
- Amount of the gift card
- Name of retailer(s)
This includes gift certificates, chip cards, and electronic gift cards. If the gift card meets all these conditions, it is considered non-cash for the purpose of the CRA’s administrative policy and is not a taxable benefit to the employee. If the card does not meet these conditions, it is considered a near-cash benefit and is taxable.
For more information visit: CRA Policy on Gifts and Awards