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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".