Under Canada Revenue Agency (CRA) policy, non-cash gifts and awards provided to employees can be non-taxable if specific criteria are met.
Key CRA criteria for non-taxable status
Annual exemption limit: Employers can provide up to $500 per year, including taxes, in total non-cash gifts and awards per employee without creating a taxable benefit.
Gift vs. award purpose:
Gifts must relate to a special occasion, such as a holiday, birthday, or wedding.
Awards must recognize an employee’s overall contribution or years of service. Awards tied to job performance, targets, or productivity are always considered taxable earnings.
Non-cash rule and gift cards: Physical items qualify as non-cash. A gift card may also be treated as a non-cash benefit only if it:
Is restricted to an identified retailer or group of retailers;
Cannot be converted into cash.
Note: Prepaid Visa, Mastercard, and American Express cards are considered near-cash and are fully taxable.
Only the amount actually reimbursed counts toward the $500 annual exemption. For example, if an employee claims $1,800 from a $3,000 gift allocation, up to $500 may be non-taxable, $1,300 taxable, and the unused $1,200 would not be considered a benefit.
Allocation schedule: Funds allocated on a regular calendar basis without being tied to a specific occasion are generally considered taxable.
Category restrictions: Restricting funds to specific categories, such as active living, home expenses, or groceries, does not make them non-taxable. Restrictions must typically also apply to specific vendors unless a separate CRA exemption applies.
The employer should review the program’s purpose, format, and restrictions with its accounting team or a tax professional. Tedy can help configure the categories and report reimbursed amounts, but the employer remains responsible for determining the tax treatment.
