Taxable Benefits

A benefit (including an allowance) is generally subject to source deductions and employer contributions. Therefore, any taxable benefits in cash or in kind (that is, other than in cash) that are granted to an employee are considered salary or wages (This link will open a new window)

In calculating the value of a benefit, you must take into account the GST and QST that the employee would have paid had he or she purchased the property or service that constitutes the benefit. However, do not add GST or QST to taxable allowances or to other taxable benefits in cash. For more information, click GST/HST and QST.

Taxable benefit granted to an employee

As a rule, a benefit (including an expense allowance (This link will open a new window)) received by an employee is taxable unless the Taxation Act states otherwise or unless, under certain conditions, the value of the benefit is excluded from the calculation of the employee's income.

Note that benefits that are normally tax-exempt may be considered taxable if they prove to be a disguised form of remuneration.

Taxable cash benefit granted to an employee

Any taxable cash benefit granted to an employee is considered to be a salary or wages. Therefore, if you grant a taxable cash benefit to an employee during a pay period, you must add the value of the benefit to the employee's remuneration when you calculate the remuneration subject to source deductions and employer contributions. 

Taxable benefit in kind granted to an employee

Any taxable benefit in kind (that is, other than in cash) granted to an employee is also considered to be a salary or wages. Therefore, if you grant a taxable benefit in kind to an employee during a pay period, you must add the value of the benefit to the employee's remuneration when you calculate the remuneration subject to source deductions and employer contributions. 

A taxable benefit in kind is not subject to source deductions of income tax and employee and employer Québec Pension Plan (QPP) contributions if you do not pay the employee any sum in cash or by cheque for the pay period in which the benefit is provided.

However, you must include the value of the benefit in calculating the employer contribution to the health services fund, the contribution related to labour standards (CNT) and, where applicable, your contribution to the Workforce Skills Development and Recognition Fund (WSDRF).

Note

Most taxable benefits in kind are not subject to employee and employer Québec parental insurance plan (QPIP) premiums, the only exception being the benefit related to board and lodging provided to an employee for a pay period in which the employee receives cash remuneration.

Benefit granted to a shareholder

A taxable benefit granted to a shareholder of a corporation (or to a person related to the shareholder) is not subject to source deductions and employer contributions. 

Also, you must not include the value of the benefit in your total payroll used to determine your health services fund contribution rate, your participation in workforce skills development or, if applicable, your contribution to the Workforce Skills Development and Recognition Fund (WSDRF). 

Benefit granted to a shareholder who is also an employee 

A benefit granted to a shareholder of a corporation (or to a person related to the shareholder) who is also an employee of the corporation is taxable if the shareholder receives the benefit as an employee of the corporation, rather than as a shareholder.

In such a case, you must treat the benefit as if it were granted to an employee. 

Benefit granted to a shareholder who is also a director 

Il you grant a benefit to a shareholder in his or her capacity as director (not as shareholder), you must treat it as if it were granted to an employee.

Benefit paid to a partner

A taxable benefit granted to a partner (or to a person related to the partner) is not subject to source deductions and employer contributions. 

Also, you must not include the value of the benefit in your total payroll used to determine your health services fund contribution rate, your participation in workforce skills development or, if applicable, your contribution to the Workforce Skills Development and Recognition Fund (WSDRF).

Special cases

Special rules apply to the following types of benefits:

See the pages of this section for more information on the various types of taxable benefits.

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