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 awards program falls within gifts and awards policy where employees can choose a non-cash gift from a retailer?
Position: No
Reasons: The non-cash item is clearly part of the employee's remuneration package because it replaces his or her entitlement to cash.
2007-024798
XXXXXXXXXX Shaun Harkin, CMA
(613) 957-9229
March 13, 2008
Dear XXXXXXXXXX :
Re: Technical Interpretation Request - Employee Recognition Program
This is in reply to your email of August 27, 2007, concerning how the Canada Revenue Agency's policy (the "Policy") on employer-provided gifts and awards would apply to the employee recognition program of XXXXXXXXXX .
Specifically, you asked the following two questions:
1) If an employee is permitted to purchase a gift or award of his or her choice and be reimbursed would that be considered a taxable benefit regardless of the dollar value?
2) If the employee's choice is a restaurant meal rather than buying an actual item, would that be considered a taxable benefit regardless of the dollar value?
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, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following general comments.
Revisions to the Policy were announced in Income Tax Technical News Issue #22, dated January 11, 2002. Under the Policy, an employer can provide an employee, on a tax-free basis, up to 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 are able to give employees up to 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 may deduct the cost of gifts and awards.
Cash or near-cash gifts are not covered by the Policy, and the value of such gifts is considered a taxable employment benefit, 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.
In our view, employees permitted to select a gift or award from a store or from a restaurant are essentially in the same position as employees receiving gift certificates. Accordingly, such gifts or awards received by the employees would be considered near-cash gifts and would be taxable employment benefits.
We note that the Policy does not extend to employer-provided "hospitality" functions, such as team building lunches, other motivational occasions, lunches/dinners or other similar functions that are in the nature of a "thank you" from the employer for doing a good job or completing a job within a specified timeframe. A hospitality reward such as an employer-provided team building lunch is generally taxable to the employee unless the event is generally available to all employees in an employer's particular place of business. It is the employer's responsibility to determine whether the employer is giving the employee a gift or award within the meaning of the Policy or hosting a hospitality function and whether the employee is in receipt of a taxable benefit.
We trust that these comments will be of assistance.
Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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