Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: (1) What the CRA’s views are on employee discount program extended to employee’s family members? (2) Are groceries items excluded from "merchandise"?
Position: (1) If the primary beneficiary is the employer and the discount extended is not considered extra remuneration, it would likely be non-taxable to the employee. (2) No.
Reasons: 1. The law and previously published positions. 2. Dictionary definitions.
XXXXXXXXXX
2011-043097
N. Pulandiran
July 26, 2012
Dear XXXXXXXXXX:
Re: Employee Discount Programs
We are writing in response to your email of December 8, 2011, concerning the administrative policy of the Canada Revenue Agency (“CRA”) on employee discount programs (“EDP”). More specifically, you have asked our views on EDPs that are extended to family members of the employees. You have also asked if grocery items are excluded from “merchandise”.
Employees are generally taxable under the Income Tax Act on the value of all economic benefits received by virtue of their employment, subject to certain exceptions. The CRA’s administrative policy is outlined in Interpretation Bulletin IT-470R, Employees’ Fringe Benefits (Consolidated), dated October 12, 1999. The benefit that an employee may derive from taking advantage of an employee discount is not normally regarded as a taxable benefit if the discount is also available to the general public or to specific public groups. It is our view that no economic benefit will be received by an employee where the price paid by the employee or his/her family member equals the price paid by the public.
If it is determined that an economic benefit is received, it will not be taxable to the employee if it is clearly demonstrated that the employer is the primary beneficiary. However, as stated in paragraph 2 of IT-470R, if the EDP available to the employee and his/her family member is, in fact, a form of extra remuneration, the discount would be taxable to the employee. Therefore, it is always a question of fact whether or not a taxable benefit accrues to employees in any given situation.
Based on the dictionary meaning of the terms “merchandise” and “groceries”, we are of the view that “merchandise” includes retail items such as groceries.
We trust our comments will be of assistance to you.
Yours truly,
Nerill Thomas-Wilkinson
Manager
for Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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