EMPLOYEE GIFTS

🎄✨Another challenge to support local when gifting to employees ✨🎄

Did you know that if you gift your employees cash or gift cards at Christmas time, you are creating a taxable benefit for them (meaning they will have to pay tax on the amount you gift!)

Any gift that is cash, near cash, or non cash is a taxable benefit to employees. However CRA has created a policy which allows employees to receive certain gives for certain holidays/events without creating a taxable benefit.

So let's first discuss the 3 types of gifts that are in the policy so you have an understanding how each play out.

• Cash - This is as it states, cold hard cash!
• Near Cash - This would be anything that is considered to be almost as good as cash and provides your employee with choice; the easiest example is a gift card.
• Non Cash - This would be an actual gift (a book, or a toaster) or a voucher for a specific event. For example tickets to a set concert, or a voucher for a turkey at a grocery store.

Okay, I know the voucher part is confusing, how isn't that a near cash gift. The reason is because the voucher doesn't allow any choice for the employee, they can go get a turkey and that is it. 

To give another example, a movie voucher would be considered near cash as the employee can go see whatever movie they choose. However if you give them a ticket to one specific movie at a designated time, this would be considered non cash.

Now, when does a gift become a taxable benefit for the employee and when are the situations that it is not?

Let's get the cash and near cash gift out of the way first...if you gift an employee cash or near cash, regardless of the reason or amount it is taxable to your employee. You must add the amount to their T4 at the end of the year. There are no exceptions to this.

The rules change however when you are gifting something that is non-cash. 

You are able to gift an employee non-cash items under a total value of $500 for special occasions like a religious holiday, birthday, wedding, or birth of a child. 

The $500 total is for the entire year, so you can gift an item valued at $500 for each event, it is the combined total. if you gift anything above and beyond the $500 it would then become a taxable benefit for the employee. However only the amount beyond the $500 would be a taxable benefit (Gifted items valued at $650, $150 becomes a taxable benefit).

The $500 value is also based on fair market value, which means if a supplier gifted you an item (costing you $0) and you in turn gifted it to your employee (let's say it is a coffee pot that retails at $200) then you have gifted your employee $200 in value.

Items of small or trivial value are not included in this totals, these would be items such as:

• coffee mugs
• t-shirts with employee logos
• Coffee
• Pens

I hope this little explanation helped you understand the gifting policy with CRA and you are well equipped to buy your employees gifts without creating a taxable benefit for them 🎅

For more details on the policy you can visit the CRA website at:
https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/gifts-awards-social-events/gifts-awards-long-service-awards.html

Jennifer H.
Xo