Saying thanks to your employees? You may be giving them a gift they did not bargain for....a tax bill

November 19, 2012 at 12:15 PM

In a May 10, 2012 Technical Interpretation  CRA notes that under certain conditions, gifts and non-cash awards received by an employee may not be a taxable benefit.

However, the policy does not apply to gifts and awards in cash or cash equivalents.

CRA also considers that reimbursements by the employer of any property purchased by the employee, or a service paid by the employee, is a cash equivalent.  This is also the case for a property or service chosen by the employee but purchased by the employer (unless the number of goods or services that can be selected is very limited).

Similarly, CRA generally considers that where an employee can earn points and exchange them for items of a catalogue, this is not covered by the tax-free policy on awards and gifts.  Tax Tips & Traps 2012

From the CRA website:

You may give an employee an unlimited number of non-cash gifts and awards with a combined total value of $500 or less annually. If the FMV (Fair Market Value) of the gifts and awards you give your employee is greater than $500, the amount over $500 must be included in the employee’s income. For example, if you give gifts and awards with a total value of $650, there is a taxable benefit of $150 ($650 – $500).