How to Give Like Santa and not end up like Scrooge

December is the time of year employers often choose to give a gift to their employees as a Christmas present.  However, anytime there is an exchange between the employer and an employee the tax consequences need to be considered.

Canada Revenue Agency has the following rules for gifts:

Cash and near-cash gifts or awards are always a taxable benefit to the employee.   A near-cash item is one that can be easily converted to cash such as a gift certificate, gift card, gold nuggets, securities, or stocks.

Non-cash gifts given to employees up to a total value of $500 are exempted from being treated as a taxable benefit to the employee with the following conditions:

  1. A gift has to be for a special occasion such as a religious holiday, a birthday, a wedding, or the birth of a child;
  2. There is no limit to the number of tax-free non-cash gifts and awards you may give your employee in a year;
  3. The employee must be unrelated [at arm's length] to the employer;
  4. If you give gifts totalling more than $500 the excess amount is taxable.  For example,  if you give an employee gifts in the year  with a total value of $650, there is a taxable benefit of $150 ($650 -$500).

 

Property of Marino Vereecke Professional Corporation, CA