7 July 1999 External T.I. 9915855 - EMPLOYEE LONG SERVICE AWARDS

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 Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

The Canadian International Development Agency is asking for the Department’s position on long service awards for employees such as a gold watch or gold pin.

Position:

General comments given.

Reasons:

See position taken in similar files.

Gaétane Bernier
Facilitator, Service and Innovation
Human Resources and Corporate
Services Branch 991585
Canadian International Development G. Moore
Agency
200 Promenade du Portage
Hull Qc K1A 0G4

July 7, 1999

Dear Ms. Bernier:

Re: Tax Treatment of Employee Long Service Awards

We are replying to your letter of June 1, 1999, regarding the tax treatment of employee long service awards given by the Canadian International Development Agency.

You are asking for the current interpretation of the Income Tax Act (the “Act”) with respect to long service awards such as a gold watch or a gold pin given to employees by an employer.

Our Comments

Written confirmation of the consequences inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. Where the particular transactions are partially completed or completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments which are of a general nature.

The Department’s position is that a gift, either in cash or in kind, from an employer to an employee, is a benefit derived “in respect of, in the course of, or by virtue of” an office or employment and is required to be included in income by virtue of paragraph 6(1)(a) of the Act. Similarly, when an employee is rewarded by an employer with merchandise or other non-cash items, the fair market value of the award must be included in the employee’s income. If an item is personalized with a corporate logo or engraved with the employee’s name or a message, the fair market value of the item may be negatively affected. In such cases, the amount to be included in the employee’s income may be reduced by a reasonable amount, having regard to all the circumstances. Each situation of this nature should be considered on its own merits. When the award given is a plaque, trophy or other memento of nominal value for which there is no market, it is not necessary to include any amount in an employee’s income as a taxable benefit. The onus rests with the employer to reasonably determine when a market for a nominal item does not exist.

You are asking whether there is a taxable benefit that is required to be included in income if an employee receives a gold watch or gold pin as a long service award from his or her employer. We cannot comment on this particular situation without reviewing all the relevant facts; however, as indicated above, the fair market value of the gift from the employer must be included in the employee’s income.

We trust that our comments will be of assistance to you.

Yours truly,

R. Albert, C.A.

for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch