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) Whether an employer provided social event that is generally available to all employees in a XXXXXXXXXX branch would result in a taxable benefit to the employees.
Distinguish between an award and a reward and provide the circumstances in which a reward may be non-taxable.
Whether a hospitality reward such as employer-provided team building lunch is taxable to the employee and if so, how the cost of such a lunch should be reported for tax purposes.
Position: 1) All employees at an employer's particular place of business could be a branch or division.
Awards and rewards are taxable if they do not fall within our policy.
Team building lunch is taxable
Reasons: Previous Position taken
2005-016181
XXXXXXXXXX Luisa A. Majerus, CA
(613) 832-3488
January 19, 2006
Dear XXXXXXXXXX:
Re: Employee Recognition Policy
This is in reply to your email dated December 1, 2005, requesting clarification with respect to the taxation of employee awards, rewards and social events.
Specifically, you have asked us:
1) For clarification of the phrase "generally available to all employees" and whether an employer-provided social event that is generally available to all employees in a XXXXXXXXXX branch would result in a taxable benefit to the employees.
2) To distinguish between an award and a reward and to provide the circumstances in which a reward may be non-taxable.
3) Whether a hospitality reward such as employer-provided team building lunch is taxable to the employee and if so, how the cost of such a lunch should be reported for tax purposes.
Paragraph 6(1)(a) of the Income Tax Act (the "Act") includes in a taxpayer's income the "value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment."
However, certain employer-provided awards are not taxable to employees. In certain situations employers may give two non-cash gifts per year, on a tax-free basis, to employees for special occasions such as Christmas, Hanukkah, birthday, marriage or a similar event where the aggregate cost of the gifts to the employer is less than $500 per year. Similarly, employers will be able to give employees two non-cash awards per year, on a tax-free basis, in recognition of special achievements such as reaching a set number of years of service, meeting or exceeding safety standards, or reaching similar milestones where the total cost of the awards to the employer is less than $500 per year. The employer will be able to deduct the cost of the gifts and awards.
Furthermore, an employer-provided party or other social event, which is generally available to all employees and the cost per employee is no more than $100 per person will be considered to be non-taxable. Ancillary costs, such as transportation home, would increase that amount.
Accordingly, in response to your specific questions:
1) It is our view that the phrase "generally available to all employees" means a social event for all employees in an employer's particular place of business, which could mean a branch or division depending on the circumstances.
2) In the context of the policy noted above there is no distinction between an award and a reward. However, where an employer rewards an employee for achieving or exceeding an economic objective directly related to his or her employment duties, the presumption is that such a reward would be considered part of the employee's remuneration. The onus is on the employer to establish that an award is not, in fact, a form of remuneration in order to fall within the policy.
3) A hospitality reward such as an employer-provided team building lunch is generally taxable to the employee unless the event is generally available to all employees in an employer's particular place of business.
We trust this information is helpful.
Yours truly,
Randy Hewlett
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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