AdobeStock_77939924_WM.jpeg

Koroll & Company Blog

Can I Give Tax-Free Gifts To My Company’s Employees This Christmas?

[fa icon="calendar"] Oct 18, 2019 11:00:00 AM / by Allen Koroll

Koroll_employee_gifts_Christmas

Year-end employee gifts are a great way to say thank you to your team for everything that they have done throughout the past year.

The problem is, if managed incorrectly, there can be unexpected tax consequences for both you and your employees. That is why, before deciding what you will give, you should first have a better understanding of the tax treatment for employee gifts.

1. Cash gifts are always taxed

If you give your employee a cash bonus or near-cash gifts, such as a gift card or gift certificate, it is always considered a taxable benefit, meaning that you will have to include the total amount on your employees T4 as a taxable benefit and the appropriate source deductions - such as income tax, CPP premiums and EI premiums, should be remitted by the employer.

2. Non-cash gifts are taxed over $500

Understanding that you want to reward your employees for hard work and milestones, the Canada Revenue Agency (CRA) has made a concession regarding non-cash gifts, which are tangible items such as a bottle of wine, a book or a watch.

Under this rule, non-cash gifts will not be taxable in the hands of your employee so long as the total fair market value of the gift(s), in any given year, is less than $500. Any amount over this $500 maximum must be included as a taxable benefit on your employees T4. Note that there are no EI premiums on non-cash gifts.

Example:

This season, you decide to give your senior staff a new TV valued at $500 and your junior staff a $300 bonus.

The junior staff would have the $300 added to their income and the appropriate EI, CPP and tax would be deducted. The senior staff, on the other hand, would have no tax or income implications.

If instead, the TVs received by the senior staff were valued at $1,000, then the first $500 would have no tax implications but the second $500 (the amount of the $500 annual maximum) would have to be added to income with the appropriate CPP and tax deducted.

For more questions on employee gifts, please contact Koroll & Company today. Our experts can work with your business to ensure you aren’t hit by any unexpected tax consequences further down the line.


Book A Free Consultation


The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.



About Koroll & Company

At Koroll & Company we grow our firm through satisfied clients referring us as a trusted accounting firm to their friends, family members and associates. The only way we know how to achieve this is strive to exceed your expectations and provide you with exceptional service. We have 20+ years servicing Newmarket, ON and the surrounding areas, and look forward to servicing you next. So give us a call and speak to a friendly staff member from Koroll & Company today!

Topics: Tax Deductions

Allen Koroll

Written by Allen Koroll