GIFTS
In
general, a gift to an employee (in
cash or in kind) is a taxable
benefit and is subject to
Employer Health Tax (EHT)
.
However, under the administrative
policy issued by the Canada Revenue
Agency (CRA), employers are able to
give employees:
-
a maximum of two tax-free,
non-cash gifts per year provided
the total cost of the gifts to
the employer (including
HST ) does not exceed
$500
-
a maximum of two tax-free,
non-cash achievement or
incentive awards per year
provided the total cost of the
awards to the employer
(including
HST) does not exceed
$500.
These non-taxable gifts and/or
awards are not subject to
EHT
.
This policy on tax-free gifts and
awards does not apply to cash or
near-cash gifts and awards such as
gift certificates. The value of such
gifts and awards is considered a
taxable employment benefit and is
subject to
EHT
.
For 2010 and subsequent taxation
years, the
CRA
has made certain changes to its
administrative policy on non-cash
gifts and non-cash awards. The most
significant change is that the
employers are able to give each
employee an unlimited number of
non-cash gifts and non-cash awards
per year on a tax-free.
Are gifts or
inheritances
taxable?
There is no
"gift tax" in
Canada . Any
resident of
Canada who
receives a gift
or inheritance
of any amount
from any source
(except from an
employer) will
not have to
include this in
their income.
However, if
capital property
(real estate,
other than a
principal
residence, or
investments) is
given as a gift,
the person who
has given the
gift will be
deemed to have
sold the capital
property at fair
market value,
and will have to
pay tax on any
resulting
capital gain.
The fair market
value is deemed
to be the "cost"
to the person to
whom the shares
were given. If
income producing
property is
gifted to a
child who is
under 18 years
old, the income
from the
property will
normally be
attributed back
to the person
giving the gift.
(Income Tax Act
s 74.1(2))
The above does
not include
gifts from an
employer to an
employee, which
will likely be
considered a
taxable benefit
to the
employee. CRA
has a series of
questions that
an employer can
answer to
determine if
there is a
taxable
benefit. This
is found on
their web page
Rules for Gifts
and Awards.
For more
information on
gifts or awards
for employees,
see the Canada
Revenue Agency (
CRA) guide
T4130 Employers'
Guide Taxable
Benefits,
and search for
the topic
"Gifts, awards
and social
events".