Social events and hospitality functions

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https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/social.html

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Calculate payroll deductions and contributions

Social events and hospitality functions

Content has been updated for clarity, completeness and plain language.

The changes identified by the tags are effective on January 1, 2023, and are identified with:

  • Update to CRA administrative policy
  • New CRA administrative policy

On this page

Determine if the benefit is taxable

Depending on your situation, social events and hospitality functions you provide to your employees may not be taxable under the CRA's administrative policy .

What is a "social event"

A social event is where you provide a free party or other events, such as a holiday party, seasonal function, company picnic, or other social gatherings.

What is a "hospitality function"

A hospitality function is where you provide a meal or other hospitality services at a work-related function that is not a social event. This includes events such as team-building lunches, motivational, planning, education, and networking sessions.

Situations

Situation: In-person (or combined in-person and virtual) social events you provide to your employees Update to CRA administrative policy

Non-taxable situation

Under the CRA's administrative policy, if you provide a free party or other in-person social events, the benefit is not taxable if all of the following apply:

  • It is available to all employees (at an employer's place of business, which can mean a branch or division depending on the situation)
  • Cost is $150 or less (including taxes) per person:
    • persons includes spouses or common-law partners
    • ancillary costs (such as transportation home, taxi fare, and overnight accommodation) for in-person social event attendees are not included in total cost limit for the event
  • If you provide gift cards to your employees attending virtually for meals, beverages, and delivery services, the card must meet the conditions for the card to be considered non-cash
  • The event is within the maximum annual limit for social events (total of six employer-paid combined in-person and virtual social events)

Taxable situation

If the social events you provide to your employees do not meet all of the conditions above, it is a taxable benefit.

If the total cost for the event (not including ancillary costs) is more than the limit per person, the full amount is taxable. Where the benefit is taxable, you must include ancillary cost and the cost of the attendance of the spouse or common-law partner in the income of the employee.

To calculate the benefit, go to Calculate the value of the benefit.

Situation: Virtual social events you provide or reimburse to your employees New CRA administrative policy

Non-taxable situation

Under the CRA's administrative policy, if you provide or reimburse for a virtual social event, the benefit is not taxable if all of the following apply:

  • It is available to all employees (at an employer's place of business, which can mean a branch or division depending on the situation)
  • If the virtual social event:
    • only includes meals, beverages and delivery services, the total cost is $50 or less (including taxes) per employee
    • includes meals, beverages, delivery services and entertainment, the total cost is $100 or less (including taxes) per employee
  • If you provide gift cards to your employees for meals, beverages and delivery services, the card must meet the conditions for the card to be considered non-cash
  • If you reimburse expenses or provide an accountable advance, the employee must send you receipts
  • The event is within the maximum annual limit for social events (total of six employer-paid combined in-person and virtual social events)

Taxable situation

If the social events you provide to your employees do not meet all of the conditions above, it is a taxable benefit.

If the cost of the event is more than the limit per employee, the full amount is taxable.

To calculate the benefit, go to Calculate the value of the benefit.

Situation: Hospitality functions you provide to your employees

If you provide a meal or other hospitality services, the benefit is not taxable if all of the following apply:

  • It is part of a work-related event, such as a planning or education session, or a networking session
  • The employer is considered to be the primary beneficiary of the benefit
  • The event is not to celebrate the completion of a project or task, or a thanks for a job well done
  • Each hospitality function has a reasonable cost


What is a CRA's administrative policy for the purpose of taxable benefits


Generally, benefits that employers provide to their employees are taxable under section 6 of the Income Tax Act (ITA), unless specifically excluded in the ITA. The administrative policies of the CRA identify conditions under which some of these benefits may not be taxable. Our administrative policies are detailed in the specific topics.


Gift cards you provide to your employees that are considered non-cash


Under the CRA's administrative policy, if you provide your employee with gift cards, the gift card is considered non-cash if all of the following apply:

  • It comes with money already on it and can only be used to purchase goods or services from a single retailer or a group of retailers identified on the card
  • The terms and conditions of the gift card clearly state that amounts loaded to the card cannot be converted into cash
  • A log is kept to record gift card information containing all of the following:
    • Name of the employee
    • Date the gift card was provided to the employee
    • Reason for providing the gift card (part of social event, gift or award)
    • Type of gift card
    • Amount of the gift card
    • Name of the retailer(s)

This includes gift certificates, chip cards and electronic gift cards. If the gift card meets all these conditions, it is considered non-cash for the purpose of the CRA's administrative policy. If the card does not meet these conditions, it is considered a near-cash benefit and is taxable.

To determine if non-cash gifts are taxable, go to Non-cash gifts or awards provided to your employees.


Cash


Includes:

  • physical currency
  • cheques
  • direct deposit


Near-cash


A near-cash benefit is one that functions as cash or something that can easily be converted to cash, such as a security, stock, or gold nugget.


Non-cash


A non-cash (or "in kind") benefit is the actual good, service, or property that you give to your employee. This includes a payment you make to a third party for the particular good or service if you are responsible for the expense.

Calculate the value of the benefit

If the benefit is taxable, the value of the benefit is equal to the cost of the event received by the employee.

  • In-person: Option 1

    You need to calculate the full amount if the cost of the:

    • in-person (or combined in-person and virtual) social event is more than $150 (including taxes) per person:
      • include ancillary costs
      • include the cost of the attendance of the spouse or common-law partner

  • Virtual social event: Option 2

    You need to calculate the full amount if the cost of the virtual social event:

    • only includes meals, beverages and delivery services and is more than $50 (including taxes) per employee
    • includes meals, beverages, delivery services and entertainment and is more than $100 (including taxes) per employee
Example 1 – Calculations for in-person social event (not combined)

The employer provided an in-person free holiday party to 80 employees and 20 spouses. The employer also provided hotel rooms for employees coming in from out of town, the total per person was $200 to cover the cost for overnight hotel stay (ancillary cost). The cost for conference room rental was $5,000, for a speaker $3,500, and for meals and beverages $5,000.

  • $5,000 for conference room rental
  • plus $3,500 for a speaker
  • plus $5,000 for meals and beverages
  • equals $13,500 is the total cost for the in-person social event
  • divide by 100 persons
  • equals $135 is the total cost per person (including taxes)
  • plus $0 for hotel rooms because the cost is $150 or less (including taxes)
  • equals $0 is the value of the benefit to be included on the T4 slip

The event is not a taxable benefit because the cost is $150 or less (including taxes) per person.

Example 2 – Calculations for virtual social event (not combined)

With the organization's move to remote work, the employer provided a virtual social event with entertainment in place of the usual in-person event. 75 employees and 25 spouses attended the event. The employer provided gift cards (which meet the conditions for the card to be considered non-cash ) of $50 to 75 employees and not the spouses or common-law partners to cover the cost for meal, beverage and delivery service. The employer also provided a virtual motivational speaker, the cost was $3,500.

  • $3,500 for virtual motivational speaker
  • plus $3,750 for gift cards ($50 gift cards × 75 employees)
  • equals $7,250 is the total cost for the virtual social event
  • divide by 75 employees (attending spouses will have no impact on the average value calculation since this is a virtual social event and therefore the calculation will be made on a per employee basis)
  • equals $97 is the total cost per employee (including taxes)
  • equals $0 is the value of the benefit to be included on the T4 slip

The event is not a taxable benefit because the cost is $100 or less (including taxes) per employee.

Example 3 – Calculations for virtual social event (not combined)

With the organization's move to remote work, the employer provided a virtual social event with no entertainment. Only the employees attended the event. In total, 75 employees attended the event. The employer provided gift cards (which meet the conditions for the card to be considered non-cash ) of $75 to the 75 employees.

  • $5,625 for gift cards ($75 gift cards × 75 employees)
  • equals $5,625 is the total cost for the virtual social event
  • divide by 75 employees
  • equals $75 is the total cost per employee (including taxes)
  • equals $75 is the value of the benefit to be included on the T4 slip

The event is a taxable benefit because the cost is more than $50 (including taxes) per employee.

The amounts must be included in the pay period they were received or enjoyed.

Example 4 – Calculations for combined in-person and virtual social events

The employer provided a combined in-person and virtual free holiday party to their employees and their spouses or common-law partners. 65 employees and 20 spouses attended the event in person. 10 employees and 5 spouses attended the event virtually. The employer also provided hotel rooms for employees coming in from out of town, the total per person was $200 to cover the cost for overnight hotel stay (ancillary cost). The cost for conference room rental was $5,000, for a speaker $3,500, and for catering the in-person attendees for meals and beverages $5,000. The employer also provided gift cards (which meet the conditions for the card to be considered non-cash ) of $50 to the 10 employees who were attending virtually for meals, beverages and delivery services.

  • $5,000 for conference room rental
  • plus $3,500 for a speaker
  • plus $5,000 for catering for in-person attendees for meals and beverages
  • plus $500 for gift cards ($50 gift cards × 10 employees attending virtually)
  • equals $14,000 is the total cost for the in-person and virtual social event
  • divide by 100 persons
  • equals $140 is the total cost per person (including taxes)
  • plus $0 for hotel rooms because the cost is $150 or less (including taxes)
  • equals $0 is the value of the benefit to be included on the T4 slip

The event is not a taxable benefit because the cost is $150 or less (including taxes) per person.

Example 5 – Calculation for combined in-person and virtual social events

The employer provided a combined in-person and virtual free holiday party to their employees and their spouses or common-law partners. 65 employees and 20 spouses attended the event in person. 10 employees and 5 spouses attended the event virtually. The employer did not provide hotel rooms for employees coming in from out of town. The cost for conference room rental was $5,000, for a speaker $3,500, and for catering the in-person attendees for meals and beverages $7,500. The employer also provided gift cards (which meet the conditions for the card to be considered non-cash ) of $50 to the 10 employees who were attending virtually for meals, beverages and delivery services.

  • $5,000 for conference room rental
  • plus $3,500 for a speaker
  • plus $7,500 for catering for in-person attendees for meals and beverages
  • plus $500 for gift cards ($50 gift cards provided to 10 employees attending virtually)
  • equals $16,500 is the total cost for the in-person and virtual social event
  • divide by 100 persons
  • equals $165 is the total cost per person (including taxes)
  • equals $165 for employees attending with no spouse or $330 ($165 × 2) for employees attending with a spouse is the value of the benefit to be included on the T4 slip

The event is a taxable benefit because the cost is more than $150 (including taxes) per person.

The amounts must be included in the pay period they were received or enjoyed.

Withhold payroll deductions and remit GST/HST

If the benefit is taxable, you must withhold the following deductions. The amounts must be included in the pay period they were received or enjoyed.

The withholding and remitting requirement depends on the type of remuneration: cash , non-cash , or near-cash .

  • Non-cash and near-cash: Option 1

    Withhold:

    • Income tax
    • CPP
    • EI (do not withhold)

    Remit:

    • GST/HST in certain situations

  • Cash: Option 2

    Withhold:

    • Income tax
    • CPP
    • EI

    Do not remit:

    • GST/HST

Learn how to calculate deductions and the GST/HST to remit on benefits: How to calculate – Calculate payroll deductions and contributions.

Report the benefit on a slip

If the benefit is taxable, you must report the following amounts on the T4 slip.

  • Non-cash and near-cash: Option 1

    Report on:

    • Box 14 – Employment Income
    • Box 26 – CPP/QPP pensionable earnings
    • Code 40 – Other Information

  • Cash: Option 2

    Report on:

    • Box 14 – Employment Income
    • Box 24 – EI insurable earnings
    • Box 26 – CPP/QPP pensionable earnings
    • Code 40 – Other Information

Learn how to report the benefit on a slip: Fill out the slips and summaries – File information returns (slips and summaries).

References

Legislation

ITA: 6
Amounts to be included as income from office or employment
ITA: 6(1)(a)
Value of any benefit is to be included as income from office or employment
ITA: 6(1)(b)
Allowance for any purpose
ITA: 67
General limitation regarding expenses
ITA: 67.1(2)(e)
Exceptions to general limitation regarding expenses
CPP: 12(1)
Amount of contributory salary and wages
ETA: 173
Taxable benefit is considered a supply for GST/HST purposes
IECPR: 2(1)
Amount of Insurable Earnings
IECPR: 2(3)
Earnings from Insurable Employment
IECPR: 2(3)(a.1)
Earnings from Insurable Employment – amount excluded as income under 6(1)(a) or (b), 6(6) or (16) of the ITA


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Date modified:
2024-04-10