Taxable Benefits

This section is intended for employers who provide benefits to their employees. It contains information on the most common benefits received by employees and indicates whether those benefits must be included in an employee's income and, if so, in which boxes of the employee's RL-1 slip the value of the benefits must be entered.

This section also covers benefits provided to individuals because they are shareholders or members of a partnership (also referred to as “partners”). It contains information on benefits for which an RL-1 slip must be issued to the shareholder or partner.

In calculating the value of a benefit, you must take into account the GST and QST that the employee, shareholder or partner 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 Employee Benefits and Expenses Incurred by Employees, Partners and Volunteers.

Taxable benefit granted to an employee

As a rule, a benefit (including an expense allowance) 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.

Benefits (including an allowance) are 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.

Taxable cash benefit

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

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.

However, 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.

Nevertheless, 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 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 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 rules related to source deductions and employer contributions

In determining the remuneration subject to source deductions and employer contributions, you must take into account the special rules applicable to the benefits related to:

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

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