![]() It’s important to remember the “non-cash” criterion imposed by the CRA, as the $500 per year administrative concession does not apply to what the CRA terms “cash or near-cash” gifts and all such gifts are considered to be a taxable benefit and included in income for tax purposes, regardless of amount. The total value over $500 annually will be a taxable benefit to the employee, and must be included on the employee’s T4 for the year, and on which income tax must be paid. In sum, the CRA’s administrative policy is simply that non-cash gifts to an arm’s length employee, regardless of the number of such gifts, will not be taxable if the total fair market value of all such gifts (including goods and services tax or harmonized sales tax) to that employee is $500 or less annually. However, the CRA makes an administrative concession in this area, allowing non-cash gifts (within a specified dollar limit) to be received tax-free by employees, as long as such gifts are given on religious holidays such as Christmas or Hanukkah, or on the occasion of a significant life event, like a birthday, a marriage, or the birth of a child. The starting point for the rules is that any gift (cash or non-cash) received by an employee from his or her employer at any time of the year is considered to constitute a taxable benefit, to be included in the employee’s income for that year. There is, as a consequence, a detailed set of rules which outline the tax consequences of gifts and awards provided by the employer, and even in relation to annual holiday celebrations sponsored (and paid for) by an employer. Notwithstanding, the potential exists for employers to provide what would otherwise be taxable remuneration in the guise of holiday gifts, and it’s the responsibility of the tax authorities to ensure that such strategies are caught by the tax net. As a result, the cost of drafting and administering those rules can outweigh the revenue generated by the enforcement of such rules, to say nothing of the potential ill will generated by imposing tax consequences on holiday gifts and celebrations. On an individual or even a company level, the amounts involved are usually small, or even nominal, and the range of situations which must be addressed by the applicable tax rules are virtually limitless. Trying to formulate and administer the tax rules around holiday gifts is something of a no-win situation for the Canada Revenue Agency (CRA). Unfortunately, a failure to properly structure such gifts or other extras can result in unintended and unwelcome tax consequences to those employees. And it is certainly the case that employers who provide such extras don’t intend to create a tax headache for their employees. During the month of December, it is customary for employers to provide something “extra” for their employees, by way of a holiday gift, a year-end bonus or an employer-sponsored social event.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |