Cell phone and internet services

The CRA's administrative policy does not apply if you give your employees an allowance for cell phone and internet services. The benefit received is always taxable.

To calculate the benefit, refer to: Calculate the value of the benefit.

Under the CRA's administrative policy, if you provide your employee with a cell phone (or other handheld communication device) that you own and you require your employee to use the cell phone as part of their employment duties, the fair market value (FMV) of the cell phone or device is not a taxable benefit.

Non-taxable situation

Under the CRA's administrative policy, if you provide an employee with cell phone service plans, the FMV of the benefit is not taxable if all of the following apply:

• You require your employee to use the cell phone service plans as part of their employment duties
• The plan has a reasonable fixed cost
• Your employee's personal use of the service does not result in additional charges (the total charges are not more than the plan cost)

Records to keep

You must also be prepared to justify your position regarding the cost of the plan being reasonable. When determining whether a plan is reasonable or not, judgement should be made in respect of the employee's employment related needs. A more expensive plan may be considered reasonable if the employee requires that service in order to perform their regular duties of employment.

Taxable situation

If the cell phone service plans do not meet all of the conditions above, it is a taxable benefit.

Where additional charges are incurred in excess of the price of the plan as a result of the employee's personal use, it is a taxable benefit unless the employee reimburses you for the additional charges.

To calculate the benefit, refer to: Calculate the value of the benefit.

The CRA's administrative policy does not apply if you reimburse your employee for the cost of their own cell phone (or other handheld communication device). The FMV of the cell phone or device is a taxable benefit. This is the case even if the employee used, lost, or damaged the cell phone or device while carrying out their employment duties.

If the plan cost includes both the purchase of the phone and service, and the plan meets all conditions, only the part for the purchase of the phone is a taxable benefit.

For the conditions, refer to: Cell phone service plans you provide or reimburse to your employees.

To calculate the benefit, refer to: Calculate the value of the benefit.

Non-taxable situation

The business use portion is not a taxable benefit.

Taxable situation

The CRA's administrative policy does not apply if you provide or reimburse your employee for the cost of internet services at home. The personal use of the service is taxable.

To calculate the benefit, refer to: Calculate the value of the benefit.

Non-taxable situation

Under the CRA's administrative policy, if you reimburse your employee for personal long distance telephone calls, the benefit is not taxable if one of the following apply:

• They relate to selling the employee's old residence and they are in respect of the moving or relocation of the employee, the employee's family, and their household effects to one of the employer's places of business.
• In respect of moving or relocating the employee, the employee's family, and their household effects out of a remote work location after the employment is finished.

Learn more: Moving expenses and relocation benefits.

Taxable situation

If the long distance phone calls you reimburse to your employees do not meet all of the conditions above, it is a taxable benefit.

To calculate the benefit, refer to: Calculate the value of the benefit.

An employee works a lot from home or on the road. The employee already owns the cell phone and uses it to perform their employment duties. They also use the phone 60% of the time for personal use. The employer reimburses the employee for their monthly phone service plan. The employee's service plan is $80 per month and includes extra features no required for their employment duties (cost for the service plan is not considered reasonable in the circumstances).

The amount reimbursed by the employer for the personal use portion of the cell phone plan is a taxable benefit because the cost of the plan is not considered reasonable and the amount reimbursed includes personal use. The taxable benefit is calculated as follows:

• $576 (($80 x 12 months = $960) x 60%) is the amount reimbursed for the personal use of the cell phone service plan
• minus $0 because the employee did not reimburse the employer
• equals $576 is the value of the benefit to be included on the T4 slip

The amounts must be included in the pay period they were received or enjoyed.

An employee works a lot from home or on the road. The employee owns the cell phone and uses it to perform their employment activities. The employee also uses the phone 60% of the time for personal use. The employer reimburses the employee for their monthly phone service plan (total of $70 per month). Part of the plan includes the cost of the purchase of the phone of $20 per month. The cost of the service plan is $50 per month and is considered reasonable in the circumstances.

The amount reimbursed by the employer for the phone service plan is not a taxable benefit as the service plan meets the conditions for the phone service plan to be considered not taxable. The amount reimbursed by the employer for the purchase of the phone is a taxable benefit and must be included in their income. The taxable benefit is calculated as follows:

• $240 is the amount reimbursed for the purchase of the employee’s cell phone by the employer
• minus $0 because the employee did not reimburse the employer
• equals $240 is the value of the benefit to be included on the T4 slip

The amounts must be included in the pay period they were received or enjoyed.

An employee works from home. The employee has a bundle that includes home internet, home phone, cable, and cell phone. The employee uses home internet for personal use 40% of the time. The employer reimburses the employee for their monthly phone service plan and home internet charges (total of $110 per month). The breakdown of the cost is $60 for the cost of the internet service and $75 for the phone service plan (which is considered reasonable in the circumstances).

The amount reimbursed for the monthly phone service plan is not a taxable benefit because as the service plan meets the conditions for the phone service plan to be considered not taxable. The amount reimbursed by the employer for the personal use of the home internet is a taxable benefit and must be included in their income. The taxable benefit is calculated as follows:

• $288 (($60 x 12 months = $720) x 40%) is the amount reimbursed for the personal use of the cell phone service plan
• minus $0 because the employee did not reimburse the employer
• equals $288 is the value of the benefit to be included on the T4 slip

The amounts must be included in the pay period they were received or enjoyed.