As the end of the year approaches, many employers consider showing appreciation to their employees with gift cards. However, ensuring these gifts remain tax-exempt requires understanding the Canada Revenue Agency’s (CRA) updated guidelines.
Effective January 1, 2022, the CRA introduced new rules regarding non-cash gifts, including gift cards. According to these guidelines, employers can provide an unlimited number of non-cash gifts annually, as long as the combined value does not exceed $500 per employee before becoming taxable.
To qualify for the $500 exemption, gift cards must meet specific criteria:
- The gift card must be given to recognize a special occasion.
- It should come pre-loaded with money and be usable only at a single retailer or a group of retailers specified on the card.
- The terms and conditions must explicitly state that the funds cannot be converted into cash.
- Employers must maintain a detailed log recording the gift card details, including employee name, date provided, reason for the gift, type and amount of the card, and retailer information.
It’s crucial to note that these guidelines apply strictly to gift cards meeting all outlined conditions. Cards that do not comply are considered near-cash benefits and are subject to taxation.
For comprehensive information on CRA’s administrative policies regarding gift cards, employers are encouraged to visit the CRA’s official website here.
Understanding and adhering to these guidelines ensures your gifts are compliant with CRA regulations, offering both recognition and financial benefits to your valued employees.