‘Tis the season to give gift cards!

Words by Mathew Lam

Generally, gift cards that were given to employees by their employer, were considered near-cash, and resulted in a taxable benefit to the employee.  The Canada Revenue Agency (CRA) has recently updated their administrative policy with respect to the tax treatment of gift cards.  A gift card can be considered as a non-cash gift if it meets all the following conditions:

1. It comes with money already on it and can only be used to purchase goods or services from a single retailer or a group of retailers identified on the card
2. The terms and conditions of the gift card clearly state that amounts loaded to the card cannot be converted into cash
3. A log is kept to record gift card information containing all of the following:

• • Name of the employee
  • Date the gift card was provided to the employee
  • Reason for providing the gift card (part of social event, gift or award)
  • Type of gift card
  • Amount of the gift card
  • Name of the retailer(s)

Keep in mind that non-cash gifts can still be taxable if the total fair market value of all non-cash gifts exceed $500 (including taxes).  Only the amount more than $500 will be taxable.  A full list of exceptions and carve-outs can be found on the following weblink:

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/gifts-awards-social-events/gifts-awards-long-service-awards.html

So, if your employees haven’t received any gifts for the year and Santa is feeling festive, a gift card (not exceeding $500) to a single retailer or a group of retailers may be a great idea!