How to deal with gifts received from employment

Gifts from Employment

Publish at: 2021-09-24

Generally, we know that any gift and award to an employee is the employee’s taxable benefit from employment. These taxable benefits must be included on the employee’s T4 slip for the year in which they are received. When gifts and awards are given in the form of cash, the benefits are also pensionable and insurable, meaning CPP and EI have to be deducted at source. In the case of taxable benefits in the form of near-cash or non-cash, only CPP is required to be deducted at source. 

However, there are some exemptions where gifts and awards received are non-taxable to employees. Below we list some common exceptions: 

  1. When a non-cash gift or award is given for a special occasion, such as a birthday, religious holiday, a wedding; or for employment-related accomplishment, such as contribution to the workplace safety, outstanding service, not related to job performance, each employee is allowed $500 aggregate annual threshold (fair market value) as non-taxable benefits. Amounts over the threshold, however, will be taxable;

  2. When social events or activities are provided free to all employees and the cost is $150 or less per person;

  3. Meals provided for work-related purpose such as education or networking sessions;

  4. When a non-cash gift or award is given for long-service or anniversary purposes, and when the award is given at an interval of five (5) or more years, each employee is allowed $500 aggregate annual threshold (fair market value) as non-taxable benefits. Amounts over the threshold, however, will be taxable;

  5. Items of small or trivial value such as T-shirts with logo, mugs, coffee, or tea;

  6. Collected loyalty points such as flyer points or air miles on an employee's personal credit card that are spent on business expenses, even if reimbursed by the employer. 

Additionally, please note that the gifts and awards rules do not apply to non-arm’s length employees such as relatives and shareholders. 

Reference: 

Canada Revenue Agency Website:

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/gifts-awards-social-events/gifts-awards-long-service-awards.html#rlsgfts

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