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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
1. Whether new policy on gifts and awards applies to gifts and awards given by closely held corporations to their shareholders.
2. Whether there are any other considerations with respect to the application of the new policy.
Position:
1. Policy does not apply to gifts and awards given to shareholders of closely held corporations.
2. Policy does not apply where gifts or awards are given as a form of extra remuneration, or given in lieu of taxable remuneration or benefits.
Reasons:
1. Only applies in employment situations, and not individuals receiving items in their capacity as shareholders.
2. Overall policy on nontaxable privileges in paragraph 2 of IT-470R.
XXXXXXXXXX 2001-011617
Wayne Antle, CGA
January 10, 2002
Dear XXXXXXXXXX:
Re: New Policy on Employer-Provided Gifts and Awards
This is in response to your facsimile of December 21, 2001 and our telephone conversation (Antle/XXXXXXXXXX) on January 9, 2002, concerning whether the new policy on employer-provided gifts and awards would allow closely held corporations to provide their shareholders with gifts and awards on a tax-free basis. We also discussed situations where gifts and awards are, in fact, remuneration.
Essentially, the new policy allows employers to 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 not more than $500 per year. Similarly, employers can 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 not greater than $500 per year. Cash or near-cash gifts and awards would not be covered by this new policy, and the value of such gifts and awards would therefore be considered taxable employment benefits notwithstanding the cost to the employer. We consider near-cash gifts and awards to mean any items that can readily be converted to cash, or are essentially equivalent to cash, such as securities, gold nuggets, or gift certificates.
The new policy only applies in employment situations where employers provide non-cash gifts to employees for special occasions, or non-cash awards to employees to recognize special achievements. It does not apply to gifts and awards given by closely held corporations to their shareholders or their relatives, since these gifts and awards are normally considered to be received by the individuals in their capacity as shareholders.
In addition, the new policy does not apply where gifts or awards, as the case may be, represent a form of disguised remuneration. For example, where a gift or award is given in lieu of extra wages or benefits, it will be treated as a taxable employment benefit. Likewise, the new policy does not apply where an employee foregoes salary, wages, or other taxable benefits in favor of receiving a gift or award. For example, where an employee is entitled to a bonus of $2,000, but asks the employer for a $500 stereo as a Christmas gift, and the employer agrees to reduce the bonus to $1,500, we will consider the value of the stereo to be a taxable employment benefit.
We trust that our comments will be of assistance.
Yours truly
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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