Rules for gifts and awards
A gift or award that you give an employee is a taxable benefit from employment, whether it is cash, near-cash, or non-cash. However, we have an administrative policy that exempts non-cash gifts and awards in some cases.
Cash and near-cash gifts or awards are always a taxable benefit for the employee. A near-cash item is one that functions as cash, such as a gift certificate or gift card, or an item that can be easily converted to cash, such as gold nuggets, securities, or stocks.
Example of a near cash gift or award
You give your employee a $100 gift card or gift certificate to a department store. The employee can use this to purchase whatever merchandise or service the store offers. We consider the gift card or gift certificate to be an additional remuneration that is a taxable benefit for the employee because it functions in the same way as cash.
Example of a non cash gift or award
You give your employee tickets to an event on a specific date and time. This may not be a taxable benefit for the employee since there is no element of choice, if the other rules for gifts and awards are met.
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 outstanding service, employees' suggestions, or meeting or exceeding safety standards. It is recognition of an employee's overall contribution to the workplace, not recognition of job performance. Generally, a valid, non-taxable award has clearly defined criteria, a nomination and evaluation process, and a limited number of recipients.
An award given to your employees for performance-related reasons (such as performing well in the job he or she were hired to do, exceeding production standards, completing a project ahead of schedule or under budget, putting in extra time to finish a project, covering for a sick manager/colleague) is considered a reward and is a taxable benefit for 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 does 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.
For more information on gifts and awards outside our policy go to Gifts and awards outside our policy.
Use the fair market value (FMV) 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.
The following items are not included in our question and answer tool below because they have their own separate policies. If you are giving one of these types of gifts or awards to your employee, you can get more information by selecting the item from the list below:
- Social events and hospitality functions.
- Loyalty and other points programs.
- Gifts and awards given through prize draws and social committees that are not controlled and funded by the employer.
- Gifts and awards given where there is no employer/employee relationship, such as awards from a manufacturer to employees of a retailer.
Answer a few questions to determine whether there is a taxable benefit. Do this for each item you give an employee.
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 in box 14, "Employment income" and in the "Other information" area under code 40 at the bottom of the employee's T4 slip. For more information, see T4 - Information for employers.
To see how this policy works, see Examples for 2010 and later years.
- Date modified: