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: Whether Gift Certificates given to employees at Christmas to buy groceries would be considered a taxable benefit if the certificates are under $500, not redeemable for cash, and limited by an expiry date.
Position: Yes, they are a taxable benefit under 6(1)(a).
Reasons: Consistent with Agency policy.
2005-015361
XXXXXXXXXX Darlene Green
(613) 957-2082
October 20, 2005
Dear XXXXXXXXXX:
Re: Gift Certificates
This is in response to your e-mail correspondence of October 5, 2005 wherein you asked about the proper tax treatment of Gift Certificates given to employees at Christmas to buy groceries. Specifically, you asked whether the gift certificates would be considered a taxable benefit if they are under $500, not redeemable for cash, and limited by an expiry date.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5 dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Revenue Agency with respect to your particular situation.
The Canada Revenue Agency's current policy concerning employer-provided gifts and awards 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 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.
We trust that our comments will be of assistance to you.
Yours truly,
Randy Hewlett
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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