Loyalty and other points programs

Your employees may collect loyalty points, such as frequent flyer points or air miles, on their personal credit cards when travelling on business trips, even though you reimburse them for the amounts they spend. Usually, these points can be exchanged or cashed in for rewards (goods or services, including gift cards and certificates).

Your employees do not have to include in their income the value of the rewards they received or enjoyed from the points they collect on these business trips, unless any of the following applies:

• The points are converted to cash.
• The plan or arrangement between you and the employee seems to be a form of additional remuneration.
• The plan or arrangement is a form of tax avoidance.

If any of the conditions above are met, the employee has to declare the fair market value of any personal rewards he or she received on an income tax and benefit return.

Include any GST/HST that applies in the value of this benefit.

Payroll deductions

If the benefit is taxable, it is also pensionable. Deduct CPP contributions and income tax. If the taxable benefit is paid in cash, it is insurable. Deduct EI premiums. If it is a non-cash benefit, it is not insurable. Do not deduct EI premiums.

Reporting the benefit

Report the taxable benefit in box 14 "Employment income" and in the "Other information" area under code 40 at the bottom of the employee's T4 slip. For more information, see T4 - Information for employers.

Examples

To see how this policy works, see Examples - Loyalty and other points programs.

Forms and publications

• ITNEWS-40 Income Tax - Technical News No. 40

Date modified:

2015-12-17