Canadians - Gifts and awards given by employers to their employees

The Canada Revenue Agency reminds employers that certain gifts and awards that they give to their employees may not result in a taxable benefit to the employees. Employers can now give their employees, on a tax-free basis, two non-cash awards per year to mark employment achievements and two non-cash gifts per year to mark special occasions such as holidays, birthdays, or marriage.

The total cost including taxes of the two gifts or the two awards cannot be over $500 per employee. If the total cost including taxes of the two or more gifts or the two or more awards in a year is over $500, the fair-market value of one or more of the gifts or awards may have to be included in the employee's income. Employers can deduct the total cost of the gifts or awards from their income regardless of the value.

For example, during 2004 an employer gives each employee a DVD player that costs $250 including taxes as a holiday gift and a watch that costs $350 including taxes as an employment achievement award. The employees do not have to report the value of either the gift or the award as part of their taxable income because the total cost of the award is $500 or less and the total cost of the gift is $500 or less.

However, regardless of the cost, the following gifts and awards are considered a taxable employment benefit:

• cash or near-cash gifts and awards such as Christmas or holiday bonuses or near-cash gifts and awards such as gift certificates

• points that can be redeemed for air travel or other rewards

• reimbursements from an employer to an employee for a gift or an award that the employee selected, paid for and then provided a receipt to the employer for reimbursement

• hospitality rewards such as employer-provided team-building lunches and rewards in the nature of a thank you for doing a good job

• gifts and awards given by closely held corporations to their shareholders or related persons

• disguised remuneration such as a gift or award given as a bonus

• manufacturer-provided gifts or awards given directly by the manufacturer to the employee of a dealer

 

 

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