GIFTS, AWARDS, AND LONG-SERVICE AWARDS
Gifts, awards, and long-service awards are common ways employers recognize and reward their employees. Understanding the tax implications of these benefits is essential for both employers and employees to ensure compliance with Canada Revenue Agency (CRA) regulations.
Key Considerations
- Non-Cash Gifts and Awards:
- Non-cash gifts and awards with a total fair market value (FMV) up to $500 per year are generally non-taxable.
- Any amount exceeding the $500 annual limit is considered a taxable benefit.
- Trivial items, such as coffee mugs, t-shirts, plaques, and trophies, are generally not considered taxable benefits.
- Gift Cards:
- Certain gift cards may be treated as non-cash gifts and can be non-taxable if they meet specific criteria:
- The card is preloaded and cannot be converted to cash.
- It can only be used at a single retailer or a group of retailers identified on the card.
- Employers maintain a log with details of the gift card issuance.
- If these conditions are not met, the gift card is considered a near-cash benefit and is taxable.
- Long-Service Awards:
- Non-cash long-service awards are non-taxable if:
- They are for an employee's service of five years or more.
- At least five years have passed since the employee's last long-service award.
- The FMV of the award does not exceed $500.
- Amounts exceeding the $500 limit are considered taxable benefits.
Employer Responsibilities
- Record-Keeping: Maintain accurate records of all gifts and awards provided, including details of any gift cards issued.
- Reporting Taxable Benefits:
- Include the value of taxable benefits on the employee's T4 slip.
- Withhold and remit the appropriate payroll deductions for taxable benefits.
Additional Resources
