An Early Gift from the Federal Government
The Federal Government has updated its administrative policy regarding what they consider a near-cash employee gift or award. When we last addressed employee gifts and awards, the Federal Government considered all gift cards to be a near-cash amount and, consequently, taxable when received by an employee.
Under the new administrative policy, a gift card will be considered non-cash if all the following apply:
- The gift card comes with money already on it and can only be used to purchase goods or services from a single retailer or a group of retailers identified on the card.
- The terms and conditions of the gift card clearly state that amounts loaded to the card cannot be converted into cash.
- A log is kept recording gift card information containing all of the following:
- Name of the employee;
- Date the gift card was provided to the employee;
- Reason for providing the gift card (part of social event, gift or award);
- Type of gift card;
- Amount of the gift card; and
- Name of the retailer(s).
This change aligns the Federal policy with the long-standing Quebec policy.
The balance of this issue of Tax TargetTM will review the Federal and Quebec Governments’ gifts and awards policies.
Definitions
A gift must be for a special occasion, such as a religious holiday, a birthday, a wedding, or the birth of a child.
An award must be for an employment-related accomplishment such as long or outstanding service, employees’ suggestions, or meeting or exceeding safety standards. An award cannot be performance related.
Federal Policy
There is a single $500 exemption (GST/QST included) that will be applied against the total value of all the non-cash gifts and awards given to an employee each year.
If an employee receives more than one non-cash gift and/or award whose total value is less than $500, there is no taxable benefit. However, if the total value is over $500, for example $700, there is a taxable benefit of $200 ($700 – $500).
Cash or near-cash (securities, precious metals, cryptocurrency, prepaid credit cards) gifts and awards are always a taxable benefit to the employee.
Items of small or trivial value will not be considered a taxable benefit. Examples of such items include coffee or tea, t-shirts with employer’s logo, mugs, plaques, or trophies.
Every five years, an employer may also give an employee an additional non-cash award for long service or anniversary, valued at $500 or less, without creating a taxable benefit. This does not affect the yearly $500 exemption mentioned above.
Quebec Policy
Revenue Quebec’s policy is similar, but not identical, to the Federal policy. The differences are as the following:
- Gift certificates, coupons, or gift cards, which must be used to purchase goods or services, are not considered to be “cash or near-cash” and would not be taxable if the annual $500 limit is respected; and
- Thresholds for gifts and awards are calculated separately; consequently, an employee may receive a $500 gift and a $500 award in the same calendar year without attracting taxation.