Benefit Provided to an Employee
Generally speaking and unless the Taxation Act states otherwise, the value of board, lodging and other benefits an employee (or a person with whom they are not dealing at arm's length) receives or enjoys because of their office or employment must be included in their income. Accordingly, an expense allowance received by an employee, including a sum they receive and do not have to justify the use of, for personal or living expenses or for any other purposes, must generally be included in the employee's income.
A benefit that is normally non-taxable may be considered taxable if it proves to be a disguised form of remuneration.
Benefits can be paid in cash, such as an expense reimbursement, or granted in kind (other than in cash), in the form of property or a service given to the employee.
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.
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 the QPP contribution up to the amount of the sum paid. For more information, see “Reporting a benefit on the RL-1 Slip” below and the Calculating a Security Option Benefit page. For employees who receive tips, the employee QPP contribution must be deducted before Québec income tax is (see the Guide for Employers [TP-1015.G-V]).
A taxable benefit in kind is not subject to Québec parental insurance plan (QPIP) premiums unless the benefit is related to board and lodging and the employee is paid an amount 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).
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.
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 1 and 2).
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 includes only the value 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.
An employee can claim a deduction for employment expenses in their income tax return, subject to certain conditions. To claim the deduction, the employee has to enclose one of the following forms with their 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.
If you have employees (salaried or paid on commission) working from home because of the COVID-19 pandemic, you can use the Order Prefilled TP-64.3-V Forms online service (in French only) to order prefilled TP-64.3-V forms for each of your employees. You can then sign the forms electronically if you wish and send them to your employees.
Note that you cannot use the service to order forms for employees who are required to incur expenses not related to working from home.
For more information about employment expenses and the forms to be completed, see IN-118-V, Employment Expenses.