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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: General questions on taxability of employer provided gifts and awards
Position: Generally taxable but one gift (two in year of marriage) may be given tax-free within the guidelines set out in paragraph 9 of IT-470R (Consolidated).
Reasons: Paragraph 6(1)(a) of Act and policy in IT-470R (consolidated)
XXXXXXXXXX 2001-007566
Wayne Antle, CGA
April 25, 2001
Dear XXXXXXXXXX:
Re: Gifts and Recognition Awards
This is further to your letter of March 5, 2001 concerning the tax treatment of gifts and awards given to employees.
Since the situations you present seem to relate to actual proposed transactions, we refer you to our policy in this regard, which is set out in Information Circular 70-6R4 dated January 29, 2001 Advance Income Tax rulings. This circular explains that it is our policy not to provide written confirmation of the tax implications inherent in particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in IC 70-6R4. Nonetheless, we have provided some general comments.
The administrative position of the Canada Customs and Revenue Agency ("CCRA") with respect to employer-provided gifts and awards is set out in paragraph 9 of Interpretation Bulletin IT-470R (Consolidated) Employees' Fringe Benefits. Paragraph 9 states:
A gift (either in cash or in kind) from an employer to an employee is a benefit derived during or because of the individual's employment. When the value of a gift commemorating a wedding, Christmas or similar occasion does not exceed $100 and when the employer does not claim its cost as an expense in computing taxable income, the gift is not required to be reported as income of an employee. This practice will only apply to one gift to an employee in a year, except in the year an employee marries in which case it will apply to two gifts.
When an employee is rewarded by an employer with merchandise or other non-cash items, the fair market value of the award must be included in the employee's income. If an item is personalized with a corporate logo or engraved with the employee's name or a message, the fair market value of the item may be negatively affected. In such cases, the amount to be included in the employee's income may be reduced by a reasonable amount, having regard to all the circumstances. Depending on the value of a particular award, the existence of a logo may have little, if any, impact on the fair market value of the item. When the award given is a plaque, trophy or other memento of nominal value for which there is no market, it is not necessary to include any amount in an employee's income as a taxable benefit.
With respect to the above policy, you have posed the following three questions:
1) When an employee receives more than one gift or award in the year, and the total value of the gifts and awards given to the employee exceeds $100, what are the tax consequences?
Since IT-470R contemplates an employer giving one gift per year on a tax-free basis to an employee (two in the year of marriage), the value of any additional gifts given to an employee would constitute a taxable employment benefit notwithstanding the value of the gifts. The fair market value of any award given to an employee would be considered a taxable employment benefit unless the award has only a nominal value such as a plaque or trophy.
2) Is there any difference in tax treatment between consumable gifts and non-consumable gifts?
The tax treatment of a gift is not affected by whether it is consumable or non-consumable.
3) Is there any difference in tax-treatment for retirement gifts as opposed to gifts for other special occasions?
There is no special treatment for retirement gifts. The CCRA policy only permits a second gift to be given to an employee on a tax-free basis in the year an employee marries wherein the additional gift is a wedding present.
We trust that our comments will be of assistance.
Yours truly
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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