My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, November 19, 2012

Taxable Employment Benefits

In 2009, the Canada Revenue Agency (“CRA”) set forth many of its administrative policies on taxable benefits in its informational publication Income Tax Technical News No. 40. As many of these issues are still relevant to many employees today, I will summarize a few of these issues in today’s blog posting.

Loyalty Rewards


Everyone wants points, and the CRA used to require employers to impute an employment benefit on their employees T4 where they earned points by charging work expenses. However, since 2009, the CRA does not require your employer to include an income benefit on your T4 if the points are not converted to cash, the plan is not an alternative form of remuneration or for tax avoidance purposes and you use your own credit card and are reimbursed.

If your employer redeems points on their credit card to provide you with personal travel or other personal benefits, the employer is required to include an income benefit equal to the fair market value of the benefits on your T4.

If you are a shareholder of a corporation and use a corporate credit card to accumulate points and use those points personally, we have seen the CRA assess taxable benefits or shareholder benefits.

Gifts and Awards


Employees can receive up to $500 in non-cash gifts for special occasions (birthday, wedding, child birth) and non-cash awards for employment related accomplishments (regardless of the number of gifts) per year.

Employees can receive a non-cash long service/anniversary award (for at least five year's service) with a total value of $500 or less once every five years. Thus, you cannot receive your first award until you have worked five years, and you cannot receive another award until 5 years later.

Any rewards in excess of $500 become taxable. The annual gifts and long service awards are two separate awards, thus, you can receive both in a year.

Finally, any performance related award (sales target awards) or cash or near cash awards are taxable. The policy does not apply to gifts or awards to non-arm's length employees.

Overtime Meals and Allowances


There will not be a taxable benefit where the following conditions are met:

1. The meal or meal allowance is reasonable (up to $17).

2. The employee works two or more hours of overtime before or after their scheduled hours.

3. The overtime is infrequent (less than 3 times a week) unless as result of an occasional workload requirement such as major repairs or a financial reporting period.

Scholarships and Tuition Fees


For employees, tuition fees and other costs such as books, travel and accommodation that are paid by an employer that lead to a degree or diploma or certification in a field related to your employment are not taxable benefits.  However, if the scholarship or tuition fees are for non-specific employment training, there will be a taxable benefit to the employee.

Where the scholarship or tuition fees are paid for post-secondary education for a family member of an employee, there will be a taxable benefit to the family member (not the employee) receiving the scholarship or tuition.

Where the scholarship or tuition fees paid for a family member are for elementary or secondary education, the taxable benefit is allocated to the employee, not the family member.

Bloggers Note: As my regular readers are aware, I typically answer most questions on this blog. However, due to work related obligations this week, I will not answer any questions on this blog post. I have therefore provided CRA  links within each topic area to assist you with any questions.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

8 comments:

  1. Hi Mark, I have a question about foreign property and T1135...
    If my employer is a US corporation with a branch in Canada (also a legal Canadian entity), how are my employer stock purchases *and* Restricted Stock Units (RSUs) treated as far as foreign property is concerned? Do i have to file T1135 ?
    Also, since RSUs don't have any cost basis to me, does it really matter?
    thanks

    ReplyDelete
    Replies
    1. Hi Anon:

      I was not going to answer any questions this week, but I have a minute.

      I will not provide a definitve answer on a question to which there is a $2,500 penalty for non-filing and to which I have no detailed documents on your RSU's.

      The fact your employer has a Cdn branch and Cnd corp is irrelevant if you own US shares. Those shares would be subject to a T1135 filing. As you note in your last paragraph, the filing requirement is based on a cost and ownership of foreign holdings over $100k. If you have no legal ownership of the stock, you cannot have a cost base.

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  2. Hi Mark,

    I have a tax question on scholorships awarded to employees. If a Company starts an annual $500 scholorship for its employees to compete with application criteria, does the employer have to T4 this as a taxable benefit to the employee or is this amount exempt? Thanks for your help

    ReplyDelete
    Replies
    1. Hi Rick,

      Your employer will have to issue either a T4 or T4a. However, if the scholarship meets certain criteria, the amount may be eligible to go on a T4a and then may be exempt for tax. I dont have the time to check what the criteria would be to enable your employer to file a T4a vs a T4.

      Delete
  3. Is there a taxable benefit if a shareholder lives in a house owned by the company? If so can I offset the amount via shareholder loan?

    ReplyDelete
    Replies
    1. Hi Anon

      There are huge shareholder benefit issues. If that is the case, see an accountant. this article may help http://moodysgartner.com/personal-use-property-owned-by-a-corporation/

      Delete
  4. Can the company sell the house back to the Shareholder and offset the sale against the shareholder loan account? What would be the implications of doing this? Think of a landlord living in one of the units that is owned by his corp.

    ReplyDelete
    Replies
    1. too complicated for a blog, speak to your accountant or engage one

      Delete