Benefit Provided to an Employee

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A benefit (including an expense allowance) received by an employee because of the employee's office or employment is generally taxable.

The value of a taxable benefit has to be included in the employee's income, unless the Taxation Act states otherwise or we agree, under certain conditions, that it should not be included.

A benefit that is normally considered tax-exempt may be considered taxable if it proves to be a disguised form of remuneration.

A benefit can be paid to an employee in cash, such as an expense allowance or expense reimbursement, or granted in kind (other than in cash), in the form of property or a service given to the employee.

Source deductions and contributions

Taxable benefits (including allowances) are generally subject to source deductions and employer contributions. This means that taxable benefits in cash or in kind (that is, other than in cash) that you provide are considered a salary or wages. If you provide a taxable benefit to an employee in a pay period, add the value of the benefit to the employee's remuneration in order to calculate source deductions and employer contributions.

Important
See the list of taxable benefits for information about the types of benefits you can provide.

Benefit in kind

A taxable benefit in kind is not subject to source deductions of income tax or Québec Pension Plan (QPP) contributions if you do not pay the employee any sum for the pay period in which the benefit is provided. If you pay the employee a sum for the pay period in which the benefit is provided and that sum does not cover the total amount of source deductions of income tax and the employee QPP contribution, you have to withhold income tax and QPP up to the amount of the sum paid. For more information, see “Reporting a benefit on the RL-1 Slip” below and Security Options.

A taxable benefit in kind (other than a benefit related to board and lodging) is also not subject to Québec parental insurance plan (QPIP) premiums if you pay the employee a sum for the pay period in which the benefit is provided.

You must include the value of a taxable benefit in kind in calculating the employer contribution to the health services fund, the contribution related to labour standards and, where applicable, the contribution to the Workforce Skills Development and Recognition Fund (WSDRF).

Reporting a benefit on the RL-1 slip

Include the value of a taxable benefit provided to an employee in box A and in box J, K, L, P, V or W of the employee's RL-1 slip (see courtesy translation RL-1-T). If a taxable benefit is subject to Québec Pension Plan (QPP) contributions and Québec parental insurance plan (QPIP) premiums, also include its value in box G (pensionable salary or wages under the QPP) or box I (eligible salary or wages under the QPIP) of the slip. Special rules apply to benefits in kind.

Important
See the list of taxable benefits for information about the types of benefits you can provide.

Benefit in kind

If you do not pay the employee any sum for the pay period in which the benefit is provided, do not include its value in box G of the employee's RL-1 slip. The benefit is, however, considered to be pensionable salary or wages under the QPP for the employee. As a result, you have to enter “G-1” in a blank box of the RL-1 slip, followed by the value.

If you pay the employee a sum for the pay period in which the benefit is provided and that sum does not cover the total amount of source deductions of income tax and the employee QPP contribution, you have to withhold income tax and the QPP contribution up to the amount of the sum paid. You must include in box G the portion of the pensionable salary or wages (including the amount of the exemption) that is related to the amount withheld. You also have to enter “G-1” in a blank box of the RL-1 slip, followed by the portion of the value of the benefit in kind in respect of which you were unable to withhold the QPP contribution because the amount you paid did not cover all of the contribution. For more information, see RL-1 Slip – Box G (examples 6 and 7).

Note
An employee who has not reached the maximum QPP contribution for the year can make an optional contribution on the amount or on a portion of the amount entered in box G-1 when filing his or her income tax return.

You should not include the value of a benefit in kind in box I of an employee's RL-1 slip, unless the benefit is related to board and lodging provided to an employee for a pay period in which the employee receives cash remuneration.

Benefit related to previous employment

If the amount in box A consists only of a benefit (in cash or in kind) that an individual receives in the year because of previous employment, enter “211” in a blank box of the RL-1 slip, followed by the amount in box A. This amount is equal to the total of the amounts entered in boxes J, K, L, P, V and W.

For more information about preparing and filing RL-1 slips, see RL-1 Slip – Employment and Other Income.

Employment expenses

An employee can claim a deduction for employment expenses in his or her income tax return, subject to certain conditions. To claim the deduction, the employee has to enclose one of the following forms with his or her income tax return:

  • TP-64.3-V, General Employment Conditions (salaried employees, employees who earn commissions)
  • TP-66-V, Employment Expenses of Transport Employees
  • TP-75.2-V, Employment Expenses of Salaried Tradespeople (for example, hairdressers, cooks, plumbers, apprentice mechanics)
  • TP-78-V, Employment Expenses of Forestry Workers

You must give the applicable form, duly completed and signed, to the employee to certify that the employee meets the general conditions for employment.

For more information about employment expenses and the forms to be completed, see IN-118-V, Employment Expenses.

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