‘Tis the season in which many employers like to show their employees how much they appreciate all their hard work throughout the year. Could you think of any better way than to provide your employees with an up to $500 tax free gift? Especially if such a gift would also be 100% tax deductible to your business?
To mark special occasions such as Christmas or Hanukkah, Canada Revenue Agency (CRA) allows employers to give their employees non-cash gift awards, with a combined annual total value of $500 or less (including all taxes) on a tax-free basis. Please keep in mind that if the cost of the gift is over the $500 limit, the employer must include the full fair-market value of the gift(s) in the employee’s income, and any tax advantage for the employee would be lost.
However, be careful what you give as items such as gift certificates, stocks, gold nuggets or gift cards can be easily converted into cash and therefore will be considered as taxable employee benefit.
Please also note that this gifts and awards policy does not apply to non-arm’s length employees, such as your relatives, shareholders, or people related to them.