For employers who want to reward their staff achievements, or acknowledge team members at certain personal milestones, it is important to always keep in mind the tax implications that these gifts can carry.
The following notes pertain to the Canada Revenue Agency’s (CRA) gift and award policy:
- An employer may give an unlimited number of non-cash gifts and non-cash awards to an arm’s length employee, so long as the total combined value of all non-cash gifts and non-cash awards do not exceed $500 per year. Any amount above $500 will be taxable (i.e. if an employee receives $650 in non-cash gifts and non-cash awards, the first $500 is not taxable; the remaining $150 will be taxable).
- An employer may award an employee with a separate non-cash long service/anniversary award, in addition to the above non-cash gifts and non-cash awards. This award would also be non-taxable to the amount of $500 per year. Again, any amount above $500 will be taxable (i.e. if an employee receives $575 in a non-cash long service/anniversary awards, the first $500 is not taxable; the remaining $75 will be taxable).
- The CRA requires that the above thresholds of $500 cannot be combined to offset an excess value in another. For example, if an employee receives $300 in non-cash gifts and non-cash awards and also receives a non-cash long service/anniversary award for $700, the $200 on the service/anniversary award that is above the $500 threshold will be taxable.
- The employer gift and award policy does not apply to non-arm’s length employees (this includes relatives of the owner(s), shareholders of closely held corporations) or relatives of a non-arm’s length employee.
- From the CRA policy: “items of an immaterial or nominal value, such as coffee, tea, T-shirts with employer logos, mugs, plaques, trophies, etc., will not be considered a taxable benefit to employees. There is no defined monetary threshold that determines an immaterial amount. Factors that may be taken into account include the value, frequency, and administrative practicability of accounting for nominal benefits.”
- Cash and near cash awards (i.e. gift certificates) are considered taxable benefits of the employee.