Gifts and Rewards
A gift or reward you give to an employee constitutes a taxable benefit whose value must be included in the employee's income. In the case of a non-monetary gift or reward, you must include GST and QST in the value of the benefit.
The value of the following tax-exempt benefits should not be included in the employee's income:
- a non-monetary gift given for a special occasion (such as Christmas, a birthday, a wedding or similar occasion), up to a value of $500 (including taxes) per year; and
- a non-monetary reward given in recognition of certain accomplishments (such as reaching a certain number of years of service, meeting or exceeding safety requirements, or achieving similar objectives), up to a value of $500 (including taxes) per year.
The following benefits are fully taxable and their value should be included in the employee's income:
- gifts and rewards paid in cash, or easily convertible into cash;
- personal insurance premiums that you pay; and
- gifts and rewards for work performance.
You have to include the value of these benefits in boxes A and L and in box G or box I of the RL-1 slip (see courtesy translation RL-1-T). See Benefit Provided to an Employee to find out how a benefit in kind should be treated.
A gift certificate, gift coupon or gift card that has to be used to purchase goods or services from a particular business or list of businesses is not considered to be easily convertible into cash.
If you give an employee a gift valued at $100 for his or her birthday and another valued at $450 for Christmas, you must include $50 (($100 + $450) − $500) in boxes A, G and L of the employee's RL-1 slip. If the gifts are cash gifts, however, the entire amount ($550) must be included in boxes A, G, I and L.
If the reward (other than a reward in recognition of certain accomplishments) is an item that is personalized with the employee's name, a corporate logo or a message, you can subtract an amount that is reasonable in the circumstances from the value of the benefit to be included in the employee's income. If the reward is a plaque, trophy or other memento of nominal value for which there is no market, it is not considered a taxable benefit.
Incentive bonuses and other prizes (in cash or in kind) related to sales made in the course of employment or a business also constitute a taxable benefit. If a portion of a prize or an incentive bonus is paid in kind, include GST and QST in the calculation of the benefit.
If an employee receives a gift or reward directly from a supplier or client, the supplier or client must file an RL-1 slip in the employee's name and include the value of the gift or reward in boxes A and L and in box G or box I of the slip. The $500 exemption does not apply.
For example, an automobile manufacturer that rewards a dealer directly, in cash or in kind, is not required to report the value of the reward on an RL-1 slip. If the dealer subsequently distributes the reward to his or her employees, the dealer must include the value of the employees' respective shares of the reward in boxes A and L and in box G or box I of the employees' RL-1 slips. However, if the manufacturer rewards one of the dealer's employees directly, the manufacturer must file an RL-1 slip in the employee's name and include the value of the reward in boxes A and L and in box G or box I of the slip. The $500 exemption cannot be applied to the reward.
The cost of gifts and rewards is fully deductible in the calculation of your income, provided the amount is reasonable under the circumstances. This includes gifts and rewards that qualify for the $500 exemption.