National Post - Financial Post Magazine
Therealcostofgifts
Itcouldsoonbejustasgoodtoreceiveasitistogive
Companiesoccasionallyrewardtheiremployeeswithgiftsonspecial occasions or to recognize certain workplace behaviours. But many managers don’t know that the value of such gift cards, even if only nominal, must currently be reported in the employee’s income as a taxablebenefit.Fortunately,thisseeminglyharshtaxrulemaysoonbe changingiftheCanadaRevenueAgencyrespondsfavourablytoaFebruarysubmissionmadebyTaxExecutivesInstituteInc.
UndertheIncomeTaxAct,employeesmustincludeintheirincome thevalueofanybenefitsofanykindreceivedbytheemployee“inrespectof,inthecourseof,orbyvirtueofhisorheremployment.”There isnoexceptionintheTaxActforemployer-providedgiftsandawards, buttheCRAhasalong-standingadministrativepositionthatemployerscangiveemployeesasmanynon-cashgifts and awards as they like and they won’t be taxable provided the total value of all the gifts and awardstothatemployeeintheyearislessthan $500—anythingoverthatistaxable.Inaddition, items of immaterial or nominal value, such as coffeemugsorT-shirtswithemployerlogos,are neverconsideredtobeataxablebenefit.
The main purpose of the CRA policy is to eliminate the administrative burden placed on employers of reporting small gifts and awards. TheCRAhassaid,however,thatcashor“near-cash”giftssuchassecuritiesorgiftcardsarenotcoveredbythepolicy,whichmeansthe valueofsuchgiftsisalwaystaxable.
In its submission, Tax Executives Institute argued that since the CRAlastupdateditspolicyonemployergiftsin2010,“giftcardshave modernizedthegift-givinglandscapeinCanadaandhavebecomeanincreasinglycommonwayforemployerstorecognizeemployeesinsmall butmeaningfulwaysforemployment-relatedaccomplishmentsorto givegiftstotheiremployeesonspecialoccasions.”TEIalsostatedthat itsees“nosignificantdifference”betweenanemployerpurchasinga giftorawardforanemployeeorprovidingagiftcardtothatemployeeto purchasethosesameorsimilaritemsthemselves.
Asaresult,TEIrecommendedtheCRAamenditspolicytoalsoexclude gift cards and gift certificates from income, subject to three requirements:Thecardsareprovidedtoemployeesforemployment-related accomplishments and in recognition of an employee’s overall contributiontotheworkplaceorasgiftsforspecialoccasions;Theannual totalamountofallgiftsandawardsprovidedtoanemployeedoesnot exceed$500includingtaxes,withanyexcessamountincludedinthe employee’sincome;Thedollaramountpergiftcard/giftcertificatebe limitedto$100(orless.)AsTEIwroteinitssubmission,“Webelievethat giftcardsachievethePolicy’sobjectivetosignificantlyreducetheadministrativeburdenofreportingthenumerousimmaterialitemsgiventoemployeesinayear,providedtheymeettherequirementsofthePolicy.”
APRIL 2016