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: The income tax consequences of a service recognition program under which qualifying employees would be allowed to visit their local favourite store and purchase any item of their choice, for which they would be reimbursed by the company. Alternatively, employees would have the option of selecting an item from the company's catalogue.
Position: The amount of the award would be a taxable employment benefit.
Reasons: Employee receiving awards under the program are essentially in the same position as employees receiving gift certificates. Accordingly, awards received by the employees would be considered near-cash awards, and the amount of such awards would be taxable employee benefits pursuant to our policy announced in Income Tax Technical News Issue #22..
XXXXXXXXXX 2002-014271
J. Gibbons, CGA
July 2, 2002
Dear XXXXXXXXXX:
We are replying to your facsimile dated May 21, 2002, concerning a service recognition program (the "Program") being considered by your Company. Under the Program, qualifying employees would be allowed to visit their local favourite store and purchase any item of their choice, for which they would be reimbursed by the Company. Alternatively, employees would have the option of selecting an item from the Company's catalogue.
Our comments are of a general nature only since we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular IC 70-6R5.
A new policy on employer-provided gifts and awards was announced in Income Tax Technical News Issue #22 (TN#22), dated January 11, 2002. Under this policy, an employer can provide an employee, on a tax-free basis, two non-cash gifts per year for special occasions, such as Christmas, birth of a child, or marriage, where the total cost of the gifts (including all taxes) is less than $500. 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 (including all taxes) is less than $500. The employer will be able to deduct the cost of gifts and awards.
Cash or near-cash gifts are not covered by the new policy, and the value of such gifts are considered taxable employment benefits, notwithstanding the cost of the gifts. We consider near-cash gifts 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. (You can find TN#22 on our website, which is located at www.ccra-adrc.gc.ca.)
In our view, employees receiving awards under your Company's Program are essentially in the same position as employees receiving gift certificates. Accordingly, awards received by the employees would be considered near-cash awards, and the amount of such awards would be taxable employment benefits.
We trust that these comments will be of assistance.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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