Parking, Gifts Among Recent Changes in Canadian Taxable Benefits

Taxable benefits in Canada are similar but different from the treatment in the US, and the Canada Revenue Agency has made some recent changes to some of its policies on taxability, a CRA official said May 7.

The general rule is that employer-provided benefits are taxable and have to be reported to the CRA. Some benefits are not taxable in “certain circumstances” and key concepts of economic advantage, the fair market value, and the primary beneficiary of a benefit can help determine if a benefit is taxable, Nadine Raymond, manager of employer compliance audits at the CRA, said.

Automobiles, Parking

The CRA defines “automobile” and “motor vehicle” differently for the purposes of benefits, Raymond said. The CRA’s definition of an automobile is a motor vehicle that operates on highways and streets and carries the driver and up to eight passengers, with exceptions such as one for clearly marked police or fire vehicles or ambulances, she said.

The formula for determining the taxable value of automobile use is a standby charge, which represents the benefit of an employee’s access to a business automobile for personal use, plus employer payments for operating expenses, minus amounts of either of those values reimbursed by the employee, Raymond said.

Raymond spoke at the 2024 Payroll Congress in Nashville, Tennessee.

Parking spaces are generally taxable if provided for free and personal use, but are not taxable if the employee is disabled, has a “severe or prolonged” mobility impairment, when used for business reasons, or if the business is in a shopping center or industrial park, Raymond said.

“Business reasons” refers to employees that regularly use a vehicle as part of their job, such as to make service calls, and not travel between work and home, Raymond said. The CRA considers “regularly” to mean an average of at least three days in a five-day week, she said.

Additionally, since Jan. 1, 2022, parking is not taxable if a limited number of spaces are provided and three criteria are met, Raymond said:

• No more than two spaces are provided for every three employees who want parking.
• Spaces are not assigned.
• Spaces are offered to all employees who want parking.

Overtime Meals, Allowances

Meals or meal allowances provided to employees working overtime are not taxable if the value is “reasonable,” which the CRA generally interprets as up to C$23 (US$16,76), the employee works at least two hours of overtime before or after their scheduled shift, and if it is occasional in nature or usually less than three times per week, Raymond said. If overtime occurs more often or is normal, meals become taxable as they begin to resemble additional remuneration, she said.

A higher amount than C$23 can be considered reasonable based on the costs of the area, Raymond said, citing an example where an employer in northern British Columbia gave employees C$60 meal allowances.

The value of a meal also includes the federal Goods and Services Tax and Harmonized Sales Tax or provincial sales taxes, where applicable.

Subsidized meals not related to overtime work are generally taxable unless the employee pays a “reasonable charge” covering the cost of food and preparation, Raymond said.

Gifts, Awards

Gifts and awards are generally taxable but may not be if they are noncash, Raymond said. The CRA defines a gift as for a special occasion, such as a holiday or birthday, and an award as for an employment-related accomplishment or contribution. Rewards are a third category that covers noncash gifts or awards given for any other reason and must be included in employees’ income, Raymond said.

Employers can provide noncash gifts or awards that have a combined total fair market value of up to C$500 in a year without a limit on the number that can be given out, Raymond said. Since Jan. 1, 2022, gift cards can potentially be considered noncash if three criteria are met, Raymond said:

• The card can only be used at a single retailer or group of retailers identified on the card.
• It cannot be converted into cash.
• The employer keeps records including the employee’s name, the date and reason the card was provided, the type and amount of gift card, and the names of covered retailers.

Since Jan. 1, 2023, long-service awards are also nontaxable if they have a fair market value of up to C$500 and other criteria are met, Raymond said:

• It is noncash, including a gift card considered noncash.
• The award is given for at least five years of service.
• It has been at least five years since the employee last received a long-service award.

Future developments the CRA is considering include indexing of some thresholds, such as the meal threshold, which was previously C$17, Raymond said. The agency is also considering guidance on employer-provided electric vehicle chargers and parking rules for hybrid or carpooling workers, she said.