Rules for gifts and awards

New policy for 2010

As of January 1, 2010, we have changed the policy for gifts and awards as taxable benefits. For more information, see Policy for gifts and awards - 2010 and later years.

Policy for 2009 and earlier years

A gift has to be for a special occasion such as a religious holiday, a birthday, a wedding, or the birth of a child.

An award has to be for an employment-related accomplishment such as long or outstanding service, employee's suggestions, or meeting or exceeding safety standards. An award given to your employee for outstanding service or performance related reasons is considered a “reward” and is a taxable benefit to the employee.

If you give your employee a non-cash gift or award for any other reason, this policy does not apply and you have to include the fair market value of the gift or award in the employee’s income. The gifts and awards policy will also not apply to cash and near cash items or to gifts or awards given to non-arm’s length employees, such as your relatives, shareholders, or people related to them.

Use the fair market value of each gift to calculate the total value of gifts and awards given in the year, not its cost to you. You have to include the value of the GST/HST.

For more information see, Gifts and awards outside our policy.

Payroll deductions
Where the benefit is taxable, it is also pensionable. Deduct CPP contributions and income tax.

If the taxable benefit is paid in cash, it is insurable—deduct EI premiums. If it is a non-cash benefit, it is not insurable—do not deduct EI premiums. For EI purposes only, near-cash taxable benefits are treated the same as non-cash taxable benefits. Therefore, they are not insurable. Do not deduct EI premiums.

Reporting the benefit
Include the taxable gift, award or social event on a T4 slip in box 14, "Employment income" and in the "Other information" area under code 40 at the bottom of the employee's slip. For more information, see T4 - Information for employers.