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 ISSUE:
An employer gives long-service awards to employees. Under the policy, the employee is allowed to go out and find a gift within an approved price range. The employee issues a cheque in the name of the supplier. The employee then uses the cheque to purchase the gift. Would the gift be non-taxable under the Gifts and Awards Policy?
Position TAKEN:
No.
Reasons:
The award is near cash. Essentially, the employer is providing a gift certificate to whatever supplier the employee chooses.
XXXXXXXXXX 2002-013349
T. Young, CA
May 10, 2002
Dear XXXXXXXXXX:
Re: Gifts and Awards
This is in reply to your letter of March 14, 2002, concerning whether the new policy on employer-provided gifts and awards would apply to long-service awards given by your company.
When an employee reaches a certain length of service, the company allows the employee to go out and find a gift that they would like within a set value dependant on years of service. The company issues a cheque to the supplier for the value of the gift chosen. The employee then buys the gift using the cheque. The cheques are generally issued to such companies as XXXXXXXXXX. You have asked us if the cheque would be considered near cash and, thus, taxable.
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 are not 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.
In our view, in the situation you described, your company is essentially giving the employee a gift certificate to the supplier of the employee's choice. Therefore, the award would be considered near-cash and would be taxable.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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