G2R Works - Recognition Programs, Loyalty Programs, Incentive Programs. Reward Programs

10. Where an employer pays for a vacation for an employee, the employee's family or both, the cost thereof to the employer constitutes a taxable benefit to the employee under paragraph 6(1)(a). Similarly, where a vacation property owned by an employer is used for vacation purposes by an employee, the employee's family or both, there is a taxable benefit conferred on the employee under paragraph 6(1)(a) the value of which is equivalent to the fair market value of the accommodation less any amount which the employee paid therefor to the employer. In any case, the taxable benefit may be reduced if there is conclusive evidence to show that the employee was involved in business activities for the employer during the vacation.

11. In a situation where an employee's presence is required for business purposes and this function is the main purpose of the trip, no benefit will be associated with the employee's travelling expenses necessary to accomplish the business objectives of the trip if the expenditures are reasonable in relation to the business function. Where a business trip is extended to provide for a paid holiday or vacation, the employee is in receipt of a taxable benefit equal to the costs borne by the employer with respect to that extension.

12. There may be instances where an employee acts as a host or hostess for an incentive award trip arranged for employees, suppliers or customers of the employer. Such a trip will be viewed as a business trip provided the employee is engaged directly in business activities during a substantial part of each day (e.g., as organizer of activities); otherwise it will be viewed as a vacation and a taxable benefit, subject, of course, to a reduction for any actual business activity.

13. Where an employee receives a prize or other award related to sales or other work performance from his or her employer, the fair market value of such an incentive is regarded as remuneration to be included in income under section 5 of the Act. Similarly, the fair market value of any award not regarded as remuneration that is received by an employee(a) in respect of,(b) in the course of, or(c) by virtue ofthe employee's office or employment is also included in income from an office or employment by virtue of paragraph 6(1)(a). (See also IT-75R2, "Scholarships, Fellowships, Bursaries, Prizes and Research Grants".)

14. Under this program, which is usually sponsored by an airline, a frequent air traveller can accumulate credits which may be exchanged for additional air travel or other benefits. Where an employee accumulates such credits while travelling on employer-paid business trips and uses them to obtain air travel or other benefits for the personal use of the employee or the employee's family, the fair market value of such air travel or other benefits must be included in the employee's income. Where an employer does not control the credits accumulated in a frequent flyer program by an employee while travelling on employer-paid business trips, the comments in 3 above will not apply and it will be the responsibility of the employee to determine and include in income the fair market value of any benefits received or enjoyed.

Travelling Expenses of Employee's Spouse ... 15. Where a spouse accompanies an employee on a business trip the payment or reimbursement by the employer of the spouse's travelling expenses is a taxable benefit to the employee unless the spouse was, in fact, engaged primarily in business activities on behalf of the employer during the trip.

Employer-Paid Educational Costs ... 18. When training is taken primarily for the benefit of the employer, there is no taxable benefit whether or not this training leads to a degree, diploma or certificate. A taxable benefit arises when the training is primarily for the benefit of the employee.

The following guidelines assist in the determination of whether there is a taxable benefit; however, they do not necessarily apply in non-arm's length relationships or in specific examples in which there is evidence that the benefit was in fact primarily for the employee. This will be the case, for example, if the employee and the employer have entered into an arrangement under which the remuneration ordinarily paid to the employee is reduced in recognition of training costs incurred by the employer.

There are three broad categories of training:

Specific Employer-Related Training: Courses which are taken for maintenance or upgrading of employer-related skills, when it is reasonable to assume that the employee will resume his or her employment for a reasonable period of time after completion of the courses, will generally be considered to primarily benefit the employer and therefore be non-taxable. For example, fees and other associated costs such as meals, travel and accommodation which are paid for courses leading to a degree, diploma or certificate, in a field related to the employee's current or potential future responsibilities in the employer's business, will not result in a taxable benefit.

General Employment-Related Training: Other business-related courses, although not directly related to the employer's business, will generally be considered non-taxable. Examples of non-taxable training would include stress management, employment equity, first-aid and language skills. Normally, in-house training will not be considered a taxable benefit.

Personal Interest Training: Employer-paid courses for personal interest or technical skills that are not related to the employer's business are considered of primary benefit to the employee and thus taxable. For example, fees paid for a self-interest carpentry course would result in a taxable benefit.

19. Employees who have their eligible tuition fees paid for or reimbursed by their employer and have not received a taxable benefit are not entitled to claim the tuition tax credit. In addition, the education amount is not available, in any case, when employees have their eligible tuition fees paid for or reimbursed by their employer or when they receive remuneration while taking training in connection with their duties of employment.

20. Where an educational institution which charges tuition fees provides tuition free of charge or at a reduced amount to an employee of the institution, or to the spouse or children of the employee, the fair market value of the benefit will be included in the employee's income.

21. For 1984 and subsequent taxation years, any reasonable allowance (including tuition fees) received by an employee from the employer to cover the away-from-home education of a child will not be included in the employee's income by virtue of subparagraph 6(1)(b)(ix), so long as the child is in full-time attendance at a school which primarily uses for instruction the official language of Canada primarily used by the employee and the school is in a community not farther from the place where the employee is required to live than the nearest community in which there is a school having suitable boarding facilities and providing instruction in that language. To the extent that tuition fees paid by the employer for the employee's child are, by virtue of subparagraph 6(1)(b)(ix) not included in the employee's income, they may not be used in determining a tax credit for tuition fees (see the current version of IT-516). Before 1984 the allowance was excluded from income only if the school was the closest available providing instruction in that language without regard to the suitability of accommodation.

22. In computing tax payable, a student may be eligible for a non-refundable federal tax credit under subsection 118.5(1) in respect of tuition fees paid by or on behalf of the student (or the fair market value of free tuition provided to the student to the extent that it is reported as a taxable benefit). Any unused portion of such a credit (to a maximum of $600) may be transferred to, and claimed as a tax credit by, the student's spouse under section 118.8, or the student's parent or grandparent under subsection 118.9(1) (see the current version of IT-516). For the tax implications of scholarships, fellowships, bursaries, prizes and research grants, see the current version of IT-75.

Uniforms and Special Clothing ...

29. An employee who is supplied with a distinctive uniform which is required to be worn while carrying out the duties of employment or who is provided with special clothing (including safety footwear) designed for protection from the particular hazards of the employment, is not regarded as receiving a taxable benefit.

30. Payments made by an employer to a laundry or dry cleaning establishment for laundry or dry cleaning expenses of uniforms and special clothing, or directly to the employee in reimbursement of such expenses, do not constitute a taxable benefit to the employee.

Transportation to the Job 32 ... Employers sometimes find it expedient to provide vehicles for transporting their employees from pick-up points to the location of the employment at which, for security or other reasons, public and private vehicles are not welcome or not practical. In these circumstances the employees are not regarded as in receipt of a taxable benefit. However, a reimbursement or allowance paid to the employee for transportation to and from the location of employment must be included in income. Subsection 6(6) provides an exception to this latter rule. See also IT-91R3, "Employment at Special or Remote Work Sites".

Recreational Facilities ... 33. Where employees generally are permitted to use their employer's recreational facilities (e.g., exercise rooms, swimming pools, gymnasiums, tennis, squash or raquetball courts, golf courses, shuffle boards) free of charge or upon payment of a nominal fee, the value of the benefit derived by an employee through such use is not normally taxable. The taxable benefit received by an employee who is provided with board, lodging and accommodation is discussed in s 4 to 6 and 10 above.

34. Similarly, where the employer pays the fees required for an employee to be a member of a social or athletic club the employee is not deemed to have received a taxable benefit where the membership was principally for the employer's advantage rather than the employee's. See also IT-148R2, "Recreational Properties and Club Dues".

Employee Counselling Services ... 46. There is no inclusion in income for any benefit derived by an employee from counselling services provided or paid for by the employer in respect of: (a) the mental or physical health of the employee or an individual related to the employee, but not including a benefit attributable to an outlay or expense to which paragraph 18(1)(l) applies, or (b) the re-employment or retirement of the employee. This applies to such services as tobacco, drug or alcohol counselling, stress management counselling, and job placement and retirement counselling.

Professional Membership Fees ... 47. The payment of professional membership fees by an employer on behalf of employees is not a taxable benefit if the employer is the primary beneficiary of the payment. Whether the employer is the primary beneficiary is a question of fact. When the professional association is related to an employee's duties, and membership is a requirement of employment, the fact that the employer is the primary beneficiary will be accepted, and consequently, there is no taxable benefit resulting from the payment. However, when membership is not a condition of employment, the question of primary beneficiary must still be resolved. The employer will be responsible for making this determination; however, the employer must be able to justify its decision should the Department request this.

Notice -- Bulletins do not have the force of law


	Date: December 3, 2001 Subject: Canada Customs and Revenue Agency Pronouncements regarding gifts for special occasions On October 24, 2001 Canada Customs and Revenue Agency announced changes to the administrative policy dealing with employee gifts effective for the 2001 and subsequent tax years. The news release is reproduced as follows: Gifts for special occasions ... Employers can give their employees two non-cash gifts per year, on a tax-free basis, for special occasions such as Christmas, Hanukkah, birthdays, and marriages. The total cost of the gifts to the employer, including taxes [PST & GST], must not be more than $500 per year. The employer can deduct the cost of the gifts. Awards to recognize achievements ... Employers can give their employees two non-cash awards per year, on a tax-free basis, in recognition of achievements such as reaching a set number of years of service, meeting or exceeding safety standards, or reaching similar milestones. The total cost of the awards to the employer, including taxes, must not be more than $500 per year. The employer can deduct the cost of the awards. Cash or near-cash gifts ... This position does not apply to cash or near-cash gifts and awards. The value of such gifts and awards will be considered a taxable employment benefit. Near-cash gifts and awards may include: gift certificates, gold nuggets, any items that can easily be converted to cash. Gifts or awards whose value exceeds $500 ... Where the cost of the gift or gifts (maximum of two) exceeds $500, the full fair-market value of the gift(s) will be included in the employee's income. Where the cost of the award or awards (maximum of two) exceeds $500, the full fair-market value of the award(s) will be included in the employee's income. If the cost of the gift or award exceeds the $500 limit, the gifts or awards are deemed to form part of the employee's remuneration package. This new policy replaces the old administrative policy of allowing one tax free gift of up to $100. Source: MICHAEL I. d'ABADIE & COMPANY INC. Chartered Accountants - End -

	Employees' Fringe Benefits Excerpts from Bulletin posted on the Canada Customs and Revenue Agency Web Site (dated previous to above) Holiday Trips, Other Prizes and Incentive Awards 10. Where an employer pays for a vacation for an employee, the employee's family or both, the cost thereof to the employer constitutes a taxable benefit to the employee under paragraph 6(1)(a). Similarly, where a vacation property owned by an employer is used for vacation purposes by an employee, the employee's family or both, there is a taxable benefit conferred on the employee under paragraph 6(1)(a) the value of which is equivalent to the fair market value of the accommodation less any amount which the employee paid therefor to the employer. In any case, the taxable benefit may be reduced if there is conclusive evidence to show that the employee was involved in business activities for the employer during the vacation. 10. Where an employer pays for a vacation for an employee, the employee's family or both, the cost thereof to the employer constitutes a taxable benefit to the employee under paragraph 6(1)(a). Similarly, where a vacation property owned by an employer is used for vacation purposes by an employee, the employee's family or both, there is a taxable benefit conferred on the employee under paragraph 6(1)(a) the value of which is equivalent to the fair market value of the accommodation less any amount which the employee paid therefor to the employer. In any case, the taxable benefit may be reduced if there is conclusive evidence to show that the employee was involved in business activities for the employer during the vacation. 11. In a situation where an employee's presence is required for business purposes and this function is the main purpose of the trip, no benefit will be associated with the employee's travelling expenses necessary to accomplish the business objectives of the trip if the expenditures are reasonable in relation to the business function. Where a business trip is extended to provide for a paid holiday or vacation, the employee is in receipt of a taxable benefit equal to the costs borne by the employer with respect to that extension. 12. There may be instances where an employee acts as a host or hostess for an incentive award trip arranged for employees, suppliers or customers of the employer. Such a trip will be viewed as a business trip provided the employee is engaged directly in business activities during a substantial part of each day (e.g., as organizer of activities); otherwise it will be viewed as a vacation and a taxable benefit, subject, of course, to a reduction for any actual business activity. 13. Where an employee receives a prize or other award related to sales or other work performance from his or her employer, the fair market value of such an incentive is regarded as remuneration to be included in income under section 5 of the Act. Similarly, the fair market value of any award not regarded as remuneration that is received by an employee(a) in respect of,(b) in the course of, or(c) by virtue ofthe employee's office or employment is also included in income from an office or employment by virtue of paragraph 6(1)(a). (See also IT-75R2, "Scholarships, Fellowships, Bursaries, Prizes and Research Grants".) 14. Under this program, which is usually sponsored by an airline, a frequent air traveller can accumulate credits which may be exchanged for additional air travel or other benefits. Where an employee accumulates such credits while travelling on employer-paid business trips and uses them to obtain air travel or other benefits for the personal use of the employee or the employee's family, the fair market value of such air travel or other benefits must be included in the employee's income. Where an employer does not control the credits accumulated in a frequent flyer program by an employee while travelling on employer-paid business trips, the comments in 3 above will not apply and it will be the responsibility of the employee to determine and include in income the fair market value of any benefits received or enjoyed. Travelling Expenses of Employee's Spouse ... 15. Where a spouse accompanies an employee on a business trip the payment or reimbursement by the employer of the spouse's travelling expenses is a taxable benefit to the employee unless the spouse was, in fact, engaged primarily in business activities on behalf of the employer during the trip. Employer-Paid Educational Costs ... 18. When training is taken primarily for the benefit of the employer, there is no taxable benefit whether or not this training leads to a degree, diploma or certificate. A taxable benefit arises when the training is primarily for the benefit of the employee. The following guidelines assist in the determination of whether there is a taxable benefit; however, they do not necessarily apply in non-arm's length relationships or in specific examples in which there is evidence that the benefit was in fact primarily for the employee. This will be the case, for example, if the employee and the employer have entered into an arrangement under which the remuneration ordinarily paid to the employee is reduced in recognition of training costs incurred by the employer. There are three broad categories of training: Specific Employer-Related Training: Courses which are taken for maintenance or upgrading of employer-related skills, when it is reasonable to assume that the employee will resume his or her employment for a reasonable period of time after completion of the courses, will generally be considered to primarily benefit the employer and therefore be non-taxable. For example, fees and other associated costs such as meals, travel and accommodation which are paid for courses leading to a degree, diploma or certificate, in a field related to the employee's current or potential future responsibilities in the employer's business, will not result in a taxable benefit. General Employment-Related Training: Other business-related courses, although not directly related to the employer's business, will generally be considered non-taxable. Examples of non-taxable training would include stress management, employment equity, first-aid and language skills. Normally, in-house training will not be considered a taxable benefit. Personal Interest Training: Employer-paid courses for personal interest or technical skills that are not related to the employer's business are considered of primary benefit to the employee and thus taxable. For example, fees paid for a self-interest carpentry course would result in a taxable benefit. 19. Employees who have their eligible tuition fees paid for or reimbursed by their employer and have not received a taxable benefit are not entitled to claim the tuition tax credit. In addition, the education amount is not available, in any case, when employees have their eligible tuition fees paid for or reimbursed by their employer or when they receive remuneration while taking training in connection with their duties of employment. 20. Where an educational institution which charges tuition fees provides tuition free of charge or at a reduced amount to an employee of the institution, or to the spouse or children of the employee, the fair market value of the benefit will be included in the employee's income. 21. For 1984 and subsequent taxation years, any reasonable allowance (including tuition fees) received by an employee from the employer to cover the away-from-home education of a child will not be included in the employee's income by virtue of subparagraph 6(1)(b)(ix), so long as the child is in full-time attendance at a school which primarily uses for instruction the official language of Canada primarily used by the employee and the school is in a community not farther from the place where the employee is required to live than the nearest community in which there is a school having suitable boarding facilities and providing instruction in that language. To the extent that tuition fees paid by the employer for the employee's child are, by virtue of subparagraph 6(1)(b)(ix) not included in the employee's income, they may not be used in determining a tax credit for tuition fees (see the current version of IT-516). Before 1984 the allowance was excluded from income only if the school was the closest available providing instruction in that language without regard to the suitability of accommodation. 22. In computing tax payable, a student may be eligible for a non-refundable federal tax credit under subsection 118.5(1) in respect of tuition fees paid by or on behalf of the student (or the fair market value of free tuition provided to the student to the extent that it is reported as a taxable benefit). Any unused portion of such a credit (to a maximum of $600) may be transferred to, and claimed as a tax credit by, the student's spouse under section 118.8, or the student's parent or grandparent under subsection 118.9(1) (see the current version of IT-516). For the tax implications of scholarships, fellowships, bursaries, prizes and research grants, see the current version of IT-75. Uniforms and Special Clothing ... 29. An employee who is supplied with a distinctive uniform which is required to be worn while carrying out the duties of employment or who is provided with special clothing (including safety footwear) designed for protection from the particular hazards of the employment, is not regarded as receiving a taxable benefit. 30. Payments made by an employer to a laundry or dry cleaning establishment for laundry or dry cleaning expenses of uniforms and special clothing, or directly to the employee in reimbursement of such expenses, do not constitute a taxable benefit to the employee. Transportation to the Job 32 ... Employers sometimes find it expedient to provide vehicles for transporting their employees from pick-up points to the location of the employment at which, for security or other reasons, public and private vehicles are not welcome or not practical. In these circumstances the employees are not regarded as in receipt of a taxable benefit. However, a reimbursement or allowance paid to the employee for transportation to and from the location of employment must be included in income. Subsection 6(6) provides an exception to this latter rule. See also IT-91R3, "Employment at Special or Remote Work Sites". Recreational Facilities ... 33. Where employees generally are permitted to use their employer's recreational facilities (e.g., exercise rooms, swimming pools, gymnasiums, tennis, squash or raquetball courts, golf courses, shuffle boards) free of charge or upon payment of a nominal fee, the value of the benefit derived by an employee through such use is not normally taxable. The taxable benefit received by an employee who is provided with board, lodging and accommodation is discussed in s 4 to 6 and 10 above. 34. Similarly, where the employer pays the fees required for an employee to be a member of a social or athletic club the employee is not deemed to have received a taxable benefit where the membership was principally for the employer's advantage rather than the employee's. See also IT-148R2, "Recreational Properties and Club Dues". Employee Counselling Services ... 46. There is no inclusion in income for any benefit derived by an employee from counselling services provided or paid for by the employer in respect of: (a) the mental or physical health of the employee or an individual related to the employee, but not including a benefit attributable to an outlay or expense to which paragraph 18(1)(l) applies, or (b) the re-employment or retirement of the employee. This applies to such services as tobacco, drug or alcohol counselling, stress management counselling, and job placement and retirement counselling. Professional Membership Fees ... 47. The payment of professional membership fees by an employer on behalf of employees is not a taxable benefit if the employer is the primary beneficiary of the payment. Whether the employer is the primary beneficiary is a question of fact. When the professional association is related to an employee's duties, and membership is a requirement of employment, the fact that the employer is the primary beneficiary will be accepted, and consequently, there is no taxable benefit resulting from the payment. However, when membership is not a condition of employment, the question of primary beneficiary must still be resolved. The employer will be responsible for making this determination; however, the employer must be able to justify its decision should the Department request this. *Notice -- Bulletins do not have the force of law*
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