Employers' Guide
Taxable Benefits and Allowances

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T4130(E) Rev. 23

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Unless otherwise stated, all legislative references are to the Income Tax Act or, where appropriate, the Income Tax Regulations.

The CRA uses the term "Indian" as it has legal meaning under the Indian Act.

La version française de ce guide est intitulée Guide de l'employeur – Avantages et allocations imposables.

Find out if this guide is for you

Use this guide if you are an employer and you provide benefits or allowances to your employees, including individuals who hold an office, for items such as:

If you or a person working for you is not sure of the worker’s employment status, either one of you can request a ruling to determine the status. If you are a business owner, you can use the "Request a CPP/EI ruling" service in My Business Account. If you are an individual, you can use the “Request a CPP/EI ruling” service in My Account. You can also fill out and mail Form CPT1, Request for a CPP/EI Ruling – Employee or Self-Employed to the CPP/Rulings Division at the Tax Services Office in the province or territory of your residence or place of business. See the table found on Form CPT1 for the mailing addresses. For more information on employment status, go to Canada Pension Plan (CPP) and Employment Insurance (EI) Rulings.

A benefit or allowance can be paid to your employee in cash (such as a meal allowance) or provided to your employee in a manner other than cash (such as a parking space or a gift).

You may have to include the value of a benefit or allowance in an employee's income, depending on the type of benefit or allowance and the reason you give it.

This guide explains your responsibilities and shows you how to calculate the value of taxable benefits or allowances.

For information on calculating payroll deductions, go to How to calculate.

For information on filing an information return, go to When to file information returns.

What's new

A new taxable benefit policy applies to the following benefits:

Table of Contents

Chapter 1 – General information

What is a benefit, an allowance, or a reimbursement

Benefit

Your employee has received a benefit if you pay for or give something that is personal in nature:

A benefit is a good or service you give, or arrange for a third party to give, to your employee such as free use of property that you own. A benefit includes an allowance or a reimbursement of an employee’s personal expense.

Allowance

An allowance or an advance is any periodic or lump-sum amount that you pay to your employee on top of salary or wages, to help the employee pay for certain anticipated expenses without having them support the expenses. An allowance or advance is:

An allowance can be calculated based on distance, time or something else, such as a motor vehicle allowance using the distance driven or a meal allowance using the type and number of meals per day.

Reimbursement

A reimbursement is an amount you pay to your employee to repay expenses they incurred while carrying out the duties of employment. The employee must keep proper records (detailed receipts) to support the expenses and give them to you.

What are your responsibilities

If you provide benefits to your employees, you always have to go through the same steps. If a step does not apply to you, skip it and go on to the next step:

Note

In this guide, "employee" includes an individual who holds an office, unless otherwise noted.

Determine if the benefit is taxable

Your first step is to determine whether the benefit you provide to your employee is taxable and has to be included in their employment income when the benefit is received or enjoyed.

Whether or not a benefit is taxable depends on whether an employee or officer receives an economic advantage that can be measured in money, and whether that individual is the primary beneficiary of the benefit.

For more information, go to What is a taxable benefit.

The benefit may be paid in cash (such as a meal allowance or reimbursement of personal cellular phone charges), or provided in a manner other than cash, such as a parking space or a gift certificate. For more information and examples, go to Pensionable and insurable earnings.  

The manner in which you pay or provide the benefit to your employee will affect the payroll deductions you have to withhold. For more information, see Calculate payroll deductions.

Calculate the value of the benefit

Once you determine that the benefit is taxable, you need to calculate the value of the specific benefit.

The value of a benefit is generally its fair market value (FMV). This is generally the amount the employee would have had to pay for the same benefit, in the same circumstances, if there was no employer-employee relationship.

The cost to you for the particular property, good, or service may be used if it reflects the FMV of the item or service.

You must be able to support the value if you are asked.

Calculate the GST/HST on taxable benefits

When you calculate the value of the taxable benefit you provide to an employee, you may have to include:

Use the Benefits chart to find out if you should include GST/HST in the value of the benefit. Some benefits have further information about GST/HST in the topic specific section.

The amount of the GST/HST you include in the value of the taxable benefits is calculated on the gross amount of the benefits, before any other taxes and before you subtract any amounts the employee reimbursed you for those benefits.

You do not have to include the GST/HST for:

For more information on exempt or zero-rated supplies, go to Type of supply.

If you are a GST/HST registrant, you may have to remit the GST/HST for the taxable benefits you provide to your employees. For more information, go to About the GST/HST on benefits or see Chapter 5 – Remitting the GST/HST on employee benefits.

Calculate payroll deductions

After you calculate the value of the benefit, including any taxes that may apply, add this amount to the employee's income for each pay period or when the benefit is received or enjoyed. This gives you the total amount of income from which you have to make payroll deductions. You then withhold deductions from the employee's total pay in the pay period in the normal manner. The deductions you withhold, especially the employment insurance (EI) premiums, will depend on whether the benefit you provide is cash, non-cash, or near-cash. 

Note

If you provide your employee with a monthly taxable benefit, you may include a prorated value in your employee's income in each pay period in the month.

Cash benefits

Cash benefits include such things as:

Canada Pension Plan (CPP) – When a cash benefit is taxable, it is also pensionable. This means you have to deduct CPP contributions from the employee's pay. It also means that you have to pay your employer's share of CPP to the Canada Revenue Agency (CRA).

If the employment is not pensionable under the CPP, then any taxable benefits paid in cash are not pensionable and CPP contributions should not be withheld. For more information, go to How to calculate.

Employment insurance (EI) – When a cash benefit is taxable, it is also insurable. This means you have to deduct EI premiums from your employee's pay. It also means that you have to pay the employer's share of EI to the CRA.

If the employment is not insurable under the Employment Insurance Act, then any taxable benefits paid in cash are not insurable and EI premiums should not be withheld. For more information, go to How to calculate.

Income tax – When a cash benefit is taxable, you have to deduct income tax from the employee's total pay in the pay period.

Non-cash or near-cash benefits

A non-cash (or “in kind”) benefit is the actual good, service, or property that you give to your employee. This includes a payment you make to a third party for the particular good or service if you are responsible for the expense.

A near-cash benefit is one that functions as cash, or something that can easily be converted to cash, such as a security, stock, or gold nugget. For more information on near-cash benefits, see Gifts, awards, and long-service awards.

CPP – When a non-cash or near-cash benefit is taxable, it is also pensionable. This means you have to deduct CPP contributions from the employee's pay. It also means that you have to pay your employer's share of CPP to the CRA.

Notes

Except for security options, if a non-cash taxable benefit is the only form of remuneration you provide to your employee in the year, there is no remuneration from which to withhold deductions. You do not have to withhold CPP contributions on the amount of the benefit, even if the value of the benefit is pensionable. Also, you do not have to remit your share of the CPP amounts.

Always report the value of the non-cash benefit in box 14 "Employment income," and box 26 "CPP/QPP pensionable earnings," of the T4 slip, even if you did not have to deduct CPP/QPP contributions.

EI – A taxable non-cash or near-cash benefit is generally not insurable. Do not deduct EI premiums.

Exceptions to this rule are:

Income tax – When a non-cash or near-cash benefit is taxable, you have to deduct income tax from the employee's total pay in the pay period. Except for security options, if a non-cash or near-cash benefit is of such a large value that withholding the income tax will cause undue hardship, you can spread the tax you withhold over the balance of the year. The CRA considers undue hardship to occur if the required withholding results in your employee being unable to pay reasonable expenses related to basic family needs. Basic family needs are those related to food, clothing, shelter, health, transportation, and childcare.

Note

Except for security options, if a non-cash or near-cash taxable benefit is the only form of remuneration you provide to your employee, there is no remuneration from which to withhold deductions. You do not have to withhold income tax on the amount of the benefit, even if the value of the benefit is taxable.

For more information on calculating payroll deductions, go to Payroll deductions and contributions.

Benefits chart

Use the Benefits chart to find out if you should deduct CPP contributions and EI premiums on the taxable amounts, and which codes to use to report the taxable amounts on an employee's T4 slip. The chart also shows whether to include GST/HST in the value of the benefit for income tax purposes.

File an information return

If you are an employer, report the value of the taxable benefit or allowance on a T4 slip in box 14, "Employment income." Also report the value of the taxable benefit or allowance in the "Other information" area at the bottom of the employee's slip and use code 40, unless the CRA tells you to use a different code.

If you are a third-party payer providing taxable benefits or allowances to employees of another employer, report the benefits in the "Other information" area at the bottom of the T4A slip. Use the code provided for the specific benefit.

Example 

If you are a third party who provides travel benefits (travel assistance in a prescribed zone) to the employee of another employer, report these benefits under code 028 "Other income," in the "Other information" area at the bottom of the T4A slip.

If a benefit or an allowance described in this guide is non-pensionable, non-insurable, and non-taxable, do not include it in income and do not report it on an information slip.

For more information on reporting benefits and allowances, go to:

Employee's allowable employment expenses

Your employee may be able to claim certain employment expenses on their income tax and benefit return if, under the contract of employment, the employee had to pay for the expenses in question. This contract of employment does not have to be in writing but you and your employee have to agree to the terms and understand what is expected.

Examples

  • You allow your employee to use his personal motor vehicle for business and pay him a monthly motor vehicle allowance to pay for the operating expenses and you include the allowance in the employee's employment income as a taxable benefit
  • You have a formal telework arrangement with your employee that allows this employee to work at home. Your employee pays for the expenses of this work space on their own

You have to fill out and sign Form T2200, Declaration of Conditions of Employment, and give it to your employee so they can deduct employment expenses from their income. By signing the form, you are only certifying that the employee met the conditions of employment and had to pay for the expenses under their employment contract.

It is the employee's responsibility to claim the expenses on their income tax and benefits return and to keep records to support the claim.

For more information on allowable employment expenses, see:

Chapter 2 – Automobile and motor vehicle benefits and allowances

Information on the topics discussed in this chapter can be found at:

Definitions

Read through the following definitions. They will help you understand the terms and expressions the CRA uses in the information that follows.

Automobile

An automobile is a motor vehicle that is designed or adapted mainly to carry individuals on highways and streets, and has a seating capacity of not more than the driver and eight passengers.

If the vehicle you provide to your employee is not included in the definition of automobile as described, see Benefit for motor vehicles not defined as an automobile.

An automobile does not include:

or

Note

If the back part or trunk of a van, pickup truck, or similar vehicle has been permanently altered and can no longer be used as a passenger vehicle, it is no longer considered an automobile as long as it is used primarily for business.

Employee

While the information in this chapter relates to an employee, it may also apply to the following taxpayers:

Motor vehicle

A motor vehicle is an automotive vehicle designed or adapted for use on highways and streets. It does not include a trolley bus or a vehicle designed or adapted for use only on rails. Although an automobile is a kind of motor vehicle, the CRA treats them differently for income tax purposes.

Zero-emission vehicles are cars and trucks powered by rechargeable electric batteries or hydrogen fuel cells.

Personal driving (personal use)

Personal driving is any driving done for the purposes not related to employment.

An employee may use one of your owned or leased vehicles for purposes other than business or, an employee may use their personal vehicle to carry out employment duties and get an allowance for the business use of that vehicle. Whatever the situation, if your employee drives your vehicle for personal reasons or you reimburse your employee for the personal driving of their own vehicle, there is a taxable benefit that has to be calculated and included in their income.

 Personal driving includes:

Regular place of employment

A regular place of employment is any location where your employee regularly reports for work or performs the duties of employment. In this case, "regular" means there is some degree of frequency or repetition in the employee's reporting to that particular work location in a given pay period, month, or year. This "place" does not have to be an establishment of the employer.

 A regular place of employment may include:

Depending on the circumstances, your employee may have more than one location where they regularly report for work. If your employee has multiple regular work locations and travels between home and several work locations during the day, only the trip from your employee's home to the first work location or, the trip from the last work location to home is personal driving. Any travel by the employee between work locations is business related.

Exceptions

Where you provide your employees with transportation to a regular place of employment, it may not be a taxable benefit if either of the following applies:

Point of call

A point of call is a place the employee goes to perform their employment duties other than the employee's regular place of employment.

The CRA will consider the employee's travel between their home to a point of call to be "business" driving (and not a taxable benefit) if you need or allow the employee to travel directly from home to a point of call (such as a salesperson visiting customers, going to a client's premises for a meeting, or making a repair call) or to return home from that point.

Note

It must be reasonable that the employee's travel to the point of call be made at that time and on the way to or from work. If it is unreasonable, then that distance is personal driving and is a taxable benefit.

Vehicle

The term "vehicle" used in this chapter includes both automobiles and motor vehicles not defined as automobiles.

Keeping records

You and your employees have to keep records on the usage of the vehicle so that you can properly identify the business and personal use amounts of the total kilometres driven in a calendar year. The records may contain information relating to the business destination such as the date, the name and address of the client, and the distance travelled between home and the client's place of business. For more information, go to Keeping records.

Calculating automobile benefits

An employee receives a taxable benefit if an automobile is made available because of the employee's current, previous, or intended office or employment. The benefit for an automobile you provide is generally:

You can use the following tools to calculate the benefits:

Calculating a standby charge for automobiles you own or lease

The standby charge is for the benefit your employee gets when your owned or leased automobile is made available for their personal use. Any reimbursements you receive from your employee, other than expenses relating to the operation of the automobile, will decrease the standby charge that has to be included in your employee's income.

The following information about personal use, availability and reducing the standby charge is the same whether you own the automobile or lease it.

Availability and personal use

An automobile is available to your employee if they have access to or control over the vehicle. It includes any part of a day, weekends and holidays during the calendar year.

If your employee does not use your automobile for any personal driving, there is no taxable benefit, even if the automobile is available to your employee for the entire year. This applies as long as the kilometres driven by your employee were in the course of their employment duties and the vehicle is returned to your premises at the end of their work day.

Reducing the standby charge

Calculate the standby charge at a reduced rate if all of the following conditions apply:

Use one of the following tools to apply the reduced rate:

Automobile you own

There are two methods to calculate the standby charge when you own the automobile – the simplified calculation and the detailed calculation.

The simplified calculation has certain conditions that the employee has to meet. If the conditions are not met, you have to use the detailed calculation. To find out which calculation method is better for your employee, use Form RC18, Calculating Automobile Benefits.

The following information will help you fill in Form RC18 and the Automobile Benefits Online Calculator – Disclaimer.

1) Your automobile costs

The cost of your automobile for determining the standby charge is the total of the following two amounts:

Note

Where the automobile was purchased from a non-arm's length person, the cost is generally equal to the fair market value when you bought it, including options and GST/HST or PST.

Specialized equipment you add to the automobile to meet the requirements of a disabled person or for employment (such as cellular phones, two way radios, heavy-duty suspension, and power winches) are not considered to be part of the automobile's cost for purposes of calculating the standby charge.

If you operate a fleet or pool of automobiles, go to Fleet operations.

2) 30-day periods

When you divide the total days available by 30, round off the result to the nearest whole number if it is more than one.

Examples

20 days ÷ 30 = 0.67 (do not round off)
130 days ÷ 30 = 4.33 (round to 4)
135 days ÷ 30 = 4.50 (round to 4)
140 days ÷ 30 = 4.67 (round to 5)

3) Personal kilometres

See the section on Personal driving (personal use).

4) Reimbursements

A reimbursement is an amount you receive from your employee to repay you for some of your automobile costs. The amount the employee reimburses you may be used to reduce the employee’s taxable benefit.

Fleet operations

You may operate a fleet or pool of automobiles from which an employee uses several automobiles during the year. If you assign an automobile to an employee from a fleet or pool on a long-term or exclusive basis, the cost of the automobile you have assigned to the employee should be used when you calculate their standby charge.

However, if the fleet is mostly the same or if you group it into a few similar groups, you can calculate the standby charge based on the average cost of the group from which you provide the automobile. You and your employee have to agree to this.

For more information on grouping automobiles by average cost, see archived Interpretation Bulletin IT-63R, Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer – After 1992.

Automobile you lease

You must use the detailed calculation to calculate the standby charge for employer leased automobiles. The following information will help you fill in Form RC18 and the Automobile Benefits Online Calculator – Disclaimer.

1) Your leasing costs

Leasing costs of your automobile used in calculating the standby charge includes both of the following category:

Note

Leasing costs do not include liability and collision insurance costs.

2) 30-day periods

When you divide the total days available by 30, round off the result to the nearest whole number if it is more than one.

Examples

20 days ÷ 30 = 0.67 (do not round off)
130 days ÷ 30 = 4.33 (round to 4)
135 days ÷ 30 = 4.50 (round to 4)
140 days ÷ 30 = 4.67 (round to 5)

3) Personal kilometres

See the section on Personal driving (personal use).

4) Reimbursements

A reimbursement is an amount you receive from your employee to repay you for some of your automobile costs. The amount the employee reimburses you may be used to reduce the employee’s taxable benefit.

Lump-sum lease payments

Lump-sum amounts you pay the lessor at the beginning or end of a lease that are not a payment to buy the automobile will affect the standby charge for the automobile.

Prorate the lump-sum payment you make at the beginning of a lease over the life of the lease and add it to the leasing cost.

If you make a lump sum payment at the end of a lease, the CRA considers the payment to be a terminal charge. This means your lease costs should have been higher and the standby charge for the automobile has been understated.

In this situation, you can use one of the following methods:

Each employee can then write to any tax services office or tax centre and ask the CRA to adjust their income tax and benefit returns for those years.

A lump sum payment you receive from the lessor at the end of a lease is considered to be a terminal credit. When this happens, the standby charge for the automobile has been overstated since the lease costs should have been lower. In this situation, you can use one of the following methods:

Each employee can then write to any tax services office or tax centre and ask the CRA to adjust their income tax and benefit returns for those years.

Whichever method you use when you make or receive a lump-sum payment at the end of the lease, include the GST/HST and PST.

Employees who sell or lease automobiles

You can modify the calculation of the standby charge for individuals you employ to sell or lease automobiles if all of the following conditions apply:

You can choose the rate of 1.5% instead of 2% for the automobile’s cost to you, and calculate your automobile cost as the greater of the following two amounts:

Note

The cost of an automobile is generally equal to its fair market value at the time of acquisition, including GST/HST and PST.

Calculating an operating expense benefit

When you (or a person related to you) provide an automobile to an employee and pay for the operating expenses related to personal use (including the GST/HST and PST), this payment is a taxable benefit for the employee.

Operating expenses include:

Operating expenses do not include:

If you pay any amount of operating expenses, you have to determine the operating expense benefit by using either the optional or fixed rate calculation.

Optional calculation

You can choose this method to calculate the automobile's operating expense benefit if all of the following conditions apply:

If all of these conditions are met, calculate the operating expense benefit of the automobile at half of the standby charge before deducting any payments (reimbursements) your employee or a person related to your employee makes. In some cases, this optional calculation may result in a higher benefit amount than the fixed rate calculation.

Fixed rate calculation

The fixed rate for 2023 is 33¢ per kilometre of personal use (including the GST/HST and PST).

If the employee's main source of employment is selling or leasing automobiles, the fixed rate for 2023 is 30¢ per kilometre of personal use (including the GST/HST and PST).

Rates for previous tax years can be found in older versions of this guide or in section 7305.1 of the Income Tax Regulations.

Note

When you use the fixed rate calculation, you still have to keep records of this benefit.

Reimbursement for operating expenses

If the employee reimburses you in the year or no later than 45 days after the end of the year for all actual operating expenses (including the GST/HST and PST) attributable to personal use, you do not have to calculate an operating expense benefit for the year.

If the employee reimburses you for part of the automobile's operating expenses in the year or no later than 45 days after the end of the year, deduct the payment from the operating expense benefit that you calculate.

Example

In 2023, you provided your employee with an automobile. She drove 30,000 kilometres during the year, with 10,000 kilometres for personal use.

You paid $3,000 in costs associated with maintenance, licences, and insurance.

Calculate the part of the operating expenses that relates to the personal use of the automobile as follows:

10,000 km ÷ 30,000 km × $3,000 = $1,000

If she reimbursed you for the total amount of $1,000 in the year, or no later than 45 days after the end of the year, you do not have to calculate an operating expense benefit for her.

However, if she reimbursed you for only $800 of the expenses you paid in the year, or no later than 45 days after the end of the year, the operating expense benefit is $2,500, calculated as follows:

10,000 km × 33¢ = $3,300

$3,300 − $800 = $2,500

Operating expenses paid by employee to third party

If you provide an automobile to an employee and you require your employee to pay a third party for part or all of the operating expenses, such as gas or oil changes, (including the GST/HST and PST) in the year, administratively, the CRA will allow you to deduct the portion of the expenses paid by the employee that are attributable to personal use from the operating expense benefit that you calculated. Your records have to show that the employee paid the expenses directly to the third party.

Notes

The portion of the operating expenses that relates to personal use is the percentage obtained by dividing the number of personal kilometres by the total number of kilometres driven by the employee during the year while the automobile was available to the employee.

Excess amounts cannot be deducted from the employee’s standby charge that you calculated.

Example

In 2023, you provided your employee with an automobile. He drove 36,000 kilometres during the year, 12,000 kilometres of which were for personal use.

You paid $3,000 in associated insurance and maintenance during the year. Your employee paid $1,500 for gas and oil changes. He did not reimburse you for any of your costs and you did not reimburse him for any of his costs.

1) Calculate the employee’s operating expense benefit using the flat-rate calculation as follows:

12,000 km x 33¢ = $3,960

2) Calculate the personal portion of the operating expenses that he paid to a third party as follows:

12,000 km ÷ 36,000 km x $1,500 = $500

3) Calculate your employee’s taxable operating expense benefit by subtracting the amount you calculated in step 2 from the amount you calculated in step 1, as follows:

$3,960 – $500 = $3,460

Benefit for motor vehicles not defined as an automobile

Even if the vehicle you provide to your employee is not included in the definition of Automobile, there is still a taxable benefit for the employee for their personal driving.

You have to reasonably estimate the fair market value of your employee's personal use of your motor vehicle, including the GST/HST and PST. A reasonable estimate is considered to be the amount an employee would have had to pay in an arm's length transaction for the use of comparable transportation. It includes items such as the cost of leasing a comparable vehicle and any other related operating costs. For more information, go to paragraph 23 in the archived Interpretation Bulletin IT-63R5, Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer – After 1992.

Although other methods of calculating the value of your employee's taxable motor vehicle benefit are acceptable, the CRA generally accepts that the employment benefit arising from the employee's personal use of the vehicle will be considered reasonable if it is calculated using the rates shown under Reasonable allowance rates.

Note

The standby charge and operating expense benefit calculations should not be used.

Depending on how your motor vehicle is used by your employee and the conditions that you place on the use of it, you may be able to calculate your employee's taxable benefit using the Motor vehicle home at night policy below.

Motor vehicle home at night policy

Administratively, you can calculate the taxable benefit for your employee's personal use of the motor vehicle between home and work using the rates shown under Fixed rate calculation as long as your employee meets all of the following conditions:

  1. The motor vehicle is not an Automobile
  2. You tell your employee in writing that they cannot make any personal use of the vehicle, other than travelling between work and home

Note

Your employee will have to maintain full logbooks of the vehicle’s use as proof that there was no other personal use.

3. You have valid business reasons for making the employee take the vehicle home at night, such as:

4. The motor vehicle is specifically designed or suited for your business or trade and is essential for the performance of your employee’s duties. Just transporting the employee to the work location does not meet the condition of “essential in the performance of employment duties.” The following examples meet both conditions:

Note

The CRA generally considers an emergency to relate either to the health and safety of the general population or to a significant disruption to the employer’s operations.

For examples of situations where transportation to and from home is considered a taxable benefit, go to Examples – Transportation to and from home.

Reporting automobile or motor vehicle benefits

Employee’s benefit

Report the value of the benefit including the GST/HST and PST that applies in box 14, “Employment income,” and in the “Other information” area under code 34 at the bottom of the employee’s T4 slip.

Also, report the benefit on a T4 slip when the individual is an employee/shareholder and you provide the vehicle to the individual (or a person related to that individual) in their capacity as an employee.

Shareholder’s benefit

Report the value of the benefit including GST/HST and PST that applies using code 028, “Other income” in the “Other information” area at the bottom of the T4A slip if either of the following applies:

Automobile and motor vehicle allowances

An allowance is any payment that employees receive from an employer for using their own vehicle in connection with or in the course of their office or employment without having to account for its use. This payment is in addition to their salary or wages. An allowance is taxable unless it is based on a reasonable per-kilometre rate.

This section explains common forms of automobile and motor vehicle allowances.

Employees receiving a taxable allowance may be able to claim allowable expenses on their income tax and benefit return. For more information, see Employee's allowable employment expenses.

Reasonable per-kilometre allowance

If you pay your employee an allowance based on a per-kilometre rate that is considered reasonable, do not deduct CPP contributions, EI premiums, or income tax.

The per-kilometre rates that the CRA usually considers reasonable are the amounts prescribed in section 7306 of the Income Tax Regulations. Although these rates represent the maximum amount that you can deduct as business expenses, you can use them as a guideline to determine if the allowance paid to your employee is reasonable. The type of vehicle and the driving conditions are other factors used to determine whether an allowance is considered to be reasonable.

The CRA considers an allowance to be reasonable if all of the following conditions apply:

When your employees fill out their income tax and benefit return, they do not include this allowance in income.

Reasonable allowance rates

For 2023, they are:

In the Northwest Territories, Yukon, and Nunavut, there is an additional 4¢ per kilometre allowed for travel.

Rates for previous tax years can be found in older versions of this guide or in section 7306 of the Income Tax Regulations.

Per-kilometre allowance rates that are not considered reasonable

If you pay your employee an allowance based on a per-kilometre rate that is not considered reasonable (because it is either too high or too low), it is a taxable benefit and has to be included in the employee's income.

Flat-rate allowance

If you pay your employee an allowance based on a flat rate that is not related to the number of kilometres driven, it is a taxable benefit and has to be included in the employee's income.

Combination of flat-rate and reasonable per-kilometre allowances

If you pay your employee an allowance that is a combination of flat-rate and reasonable per-kilometre allowances that cover the same use for the vehicle, the total combined allowance is a taxable benefit and has to be included in the employee's income.

Example 1

You pay an allowance to your employee as follows:

  • a flat per-diem rate to offset the employee's fixed expenses for each day the vehicle is required
  • a reasonable per-kilometre rate for each kilometre driven to offset the operating expenses

The flat per-diem rate compensates the employee for some of the same use on which the reasonable per-kilometre allowance is based. That is, the fixed expenses incurred by the employee to operate the vehicle.

The combined amount is considered one allowance and therefore taxable, since it is not based only on the number of kilometres the vehicle is used for employment purposes.

Example 2

You pay an allowance to your employee as follows:

  • a flat-rate per month for travel inside the employment district
  • a reasonable per-kilometre rate for employment-related travel outside the employment district

Since the flat-rate allowance does not cover any of the same use of the vehicle on which the reasonable per-kilometre allowance is based, the allowances are considered separately.

The reasonable per-kilometre allowance paid for travel outside the district is not included in income. The amount based on a flat-rate paid for travel inside the district is taxable, since it is not based only on the number of kilometres for which the vehicle is used in connection with the employment.

Only the total of the monthly flat-rate allowance has to be reported in box 14, "Employment income," and in the "Other information" area under code 40 at the bottom of the employee's T4 slip.

Reimbursement or advance for travel expenses

A reimbursement is a payment you make to your employees as a repayment for amounts they spent (such as gas and meals) while conducting your business. Generally, the employee completes a claim or expense report detailing the amounts spent. Do not include a reasonable reimbursement (which is part of your business expenses) in the employee's income.

An advance is an amount you give to employees for expenses they will incur on your business. An accountable advance is one that you give to an employee who has to account for their expenses by producing vouchers and return any amount they did not spend.

Usually, a reimbursement or an accountable advance for travel expenses is not income for the employee receiving it unless it represents payment of the employee's personal expenses.

Averaging allowances

To comply with the rules on reasonable per-kilometre allowances, employees have to file expense claims with you on an ongoing basis, starting at the beginning of the year.

A flat-rate or lump-sum allowance that is not based on the number of kilometres driven cannot be averaged at the end of the year to determine a reasonable per-kilometre rate and then be excluded from the employee's income.

The CRA understands the administrative problems that can result from this. As a result, the CRA is giving you a choice. If you make accountable advances to employees for vehicle expenses, you do not have to include them in the employee's income if all of the following conditions are met:

Employees have to account for the business kilometres they travelled and any advances they received. They have to do so on the date their employment ends in the year, or by December 31, whichever is earlier.

At that time, you have to pay any amounts you owe the employee and the employee has to repay any amount over actual expenses. Where no repayment occurs, you cannot simply report the excess advances on the employee's T4 slip.

For more information on vehicle allowances, go to What is a taxable benefit.

Reducing tax deductions at source on automobile or motor vehicle allowances

In many cases, allowances that are not based only on a reasonable per-kilometre rate can later be substantially offset by the employees' expense deductions on their income tax and benefit returns. In these situations, employees can ask to reduce their tax deductions on their remuneration by filling out and sending in a Form T1213, Request to Reduce Tax Deductions at Source, or a written request to any tax services office along with the following information:

If you have a number of employees in the same situation, you can get a bulk waiver for the group. This way, every employee does not have to make an individual request.

Reporting automobile or motor vehicle allowances on the T4 slip

If you provide an allowance that the CRA considers to be taxable to your employee, you have to enter the yearly total of this allowance in box 14, "Employment income," and in the "Other information" area under code 40 at the bottom of the employee's T4 slip. Do not report any amount that the CRA does not consider taxable.

Chapter 3 – Other benefits and allowances

Aircraft Benefits

If you give your employee access to an aircraft for personal purposes, the employee receives a taxable benefit. You have to add to the employee’s salary the fair market value of the benefit, minus any amount the employee paid. The value of the benefit is determined on the basis of what is reasonable in relation to the facts of the case and the manner in which the aircraft is used.

For more information about aircraft benefits, go to Taxable benefit for the personal use of an aircraft.

Board and lodging

You may give your employee board and lodging which means that you provide them with accommodations and, in some cases, food. If you provide only meals to an employee, see Meals.

If you provide free lodging, or free board and lodging, to an employee, the employee receives a taxable benefit. As a result, you have to add to the employee's salary the fair market value of the board and lodging you provide. Report this amount in box 14, "Employment income," and in the "Other information" area under code 30 at the bottom of the employee's T4 slip.

If you provide subsidized lodging, or subsidized board and lodging, to an employee, the employee receives a taxable benefit. As a result, you have to add to the employee's salary the fair market value of the board and lodging you provide, minus any amount the employee paid. Report this amount in box 14, "Employment income," and in the "Other information" area under code 30 at the bottom of the employee's T4 slip.

Exceptions to the rules

There are certain situations that can affect the value of the taxable benefit your employee gets if you provide free or subsidized board and lodging. The exceptions are as follows:

Board and lodging allowances paid to players on sports teams or members of recreation programs

You can exclude up to $411 (for 2023) per month from income for a board and lodging allowance for a participant or member of a sports team or recreational program if all of the following conditions are met:

Do not report the excluded income on a T4 slip.

Board, lodging, and transportation – Special work sites and remote work locations

It is possible for an employee to work at a location that is both a special work site and a remote work location. However, the benefit can only be excluded from the employee's income once.

Note

If the special work site is in a prescribed zone, see Board, lodging, and transportation at a special work site in a prescribed zone.

Special work sites

Generally, a special work site is an area where temporary duties are performed by an employee who keeps a self-contained domestic establishment at another location as their principal place of residence. Because of the distance between the two areas, the employee is not expected to return daily from the work site to their principal place of residence.

Note

A self-contained domestic establishment (SCDE) is a house, an apartment, or other similar place of residence where a person usually sleeps and eats. It is generally a living unit with restricted access that contains a kitchen, bathroom, and sleeping facilities. The SCDE must be separate from any other living unit in the same building. A room in a hotel, dormitory, boarding house, or bunkhouse is not ordinarily considered to be a SCDE.

Usually, the GST/HST and PST applies on meals and accommodations you provide to an employee. In certain cases, such as long-term residential accommodation of one month or more, no GST/HST and PST applies. Where the GST/HST and PST does apply, include it in the value of the benefit.

Board and lodging at a special work site

You can exclude from income the value of board and lodging, or an allowance (not in excess of a reasonable amount) for board and lodging, that you provide to an employee who works at a special work site if all of the following conditions are met:

Note

You can only exclude from income an allowance (not in excess of a reasonable amount) paid to your employee for board and lodging if they incurred the expense.

Transportation

You can exclude from income the value of free or subsidized transportation, or an allowance (not in excess of a reasonable amount) for transportation expenses, that you provide to an employee who works at a special work site if all of the following conditions are met:

Form TD4, Declaration of Exemption – Employment at a Special Work Site

If all of the conditions listed under Board and lodging noted above are met, you and the employee should fill out Form TD4, Declaration of Exemption – Employment at a Special Work Site. This allows you to exclude the benefit or allowance from the employee's income. If you fill out Form TD4, do not include the amounts in box 14, "Employment income," or in the "Other information" area under code 30 at the bottom of the employee's T4 slip. After you fill out Form TD4 with the employee, keep it with your payroll records.

If all of the above-noted conditions are not met, do not fill out Form TD4. Treat the total amounts as part of the employee's income. Make the necessary deductions and report the amounts on the employee's T4 slip. This also applies to any part of an allowance for board, lodging, and transportation that is more than a reasonable amount.

Remote work locations

The CRA usually considers a work location to be remote when it is 80 kilometres or more from the nearest established community with a population of at least 1,000 people.

A location is considered an established community if it has essential services or those services are available within a reasonable commuting distance. Essential services may include access to:

Board and lodging at a remote work location

You can exclude from income the value of board and lodging, or an allowance (not in excess of a reasonable amount) for board and lodging that you provide to an employee who works at a remote work location, if all of the following conditions are met:

Transportation

You can exclude from income the value of free or subsidized transportation, or an allowance (not in excess of a reasonable amount) for transportation expenses, that you provide to an employee who works at a remote work location if all of the following conditions are met:

If you need help determining whether a location qualifies as remote, see archived Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations.

Form TD4, Declaration of Exemption – Employment at a Special Work Site

When there is an exemption for board, lodging, or transportation allowances you pay to employees who work at a remote work location, do not fill out Form TD4.

Payroll deductions

If you exclude a benefit for board, lodging, and transportation at a special work site or remote work location, it is not a taxable benefit. Do not deduct CPP contributions, EI premiums, or income tax.

Cell phone and internet services

If you provide your employee with a cell phone (or other handheld communication device) that you own, to help carry out their employment duties, the fair market value (FMV) of the cell phone or device is not a taxable benefit.

However, 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 considered a taxable benefit to the employee. This is the case even if the employee used, lost, or damaged the cell phone or device while carrying out their employment duties.

If you pay for, or reimburse the cost of an employee’s cell phone service plan, or Internet service at home to help carry out their employment duties, the portion used for employment purposes is not a taxable benefit.

If part of the use of the cell phone or Internet service is personal, you have to include the value of the personal use in your employee's income as a taxable benefit. The value of the benefit is based on the FMV of the service attributable to personal use, minus any amounts your employee reimburses you. You can only use your cost to calculate the value of the benefit if it reflects the FMV.

For cellular phone service only, the CRA does not consider your employee's personal use of the cellular phone service to be a taxable benefit if all of the following apply:

You, as the employer, are responsible for determining the percentage of employment use and the FMV.

Note

If you give your employee an allowance for cellular phone or Internet services, the allowance must be included in the employee’s income.

For more information, go to Cellular phone and Internet services.

Child care expenses

Child care is not taxable only if all of the following conditions are met:

If not all of the conditions are met, the taxable benefit is the fair market value (FMV) minus any amount that the employee pays for the service.

When you subsidize a facility operated by a third party in exchange for subsidized rates for your employees, the amount of the subsidy is considered a taxable benefit for the employee.

Counselling services

The fees you pay to provide services such as financial counselling or income tax preparation for an employee are usually considered a taxable benefit.

Employee counselling services are not taxable if they are for one of the following:

Note

This does not include amounts for using recreational or sporting facilities and club dues.

Disability-related employment benefits

If you provide benefits or allowances to an employee who has a disability, such as transportation costs or attendant services, the benefits may not be taxable.

Reasonable transportation costs between an employee's home and work location (including parking near that location) are not taxable if you pay them to or for an employee to whom either of the following applies:

These transportation costs can include an allowance for taxis or specially designed public transit and parking that you provide or subsidize for these employees.

You may have employees with severe and prolonged mental or physical impairments. If you provide reasonable benefits for attendants to help these employees perform their duties of employment, these benefits are not taxable for the employee. The benefits can include readers for persons who are blind, signers for persons who are deaf, and coaches for persons who are intellectually impaired.

Payroll deductions

If you exclude a disability-related employment benefit from income, it is not a taxable benefit. Do not deduct CPP contributions, EI premiums, or income tax.

For more information, go to Benefits provided to an employee who has a severe or prolonged impairment (disability).

Discounts on merchandise and commissions from personal purchases

If you sell merchandise to your employee at a discount, the benefit they get from this is not usually considered a taxable benefit.

However, the CRA considers discounts to be taxable in all of the following situations:

If you determine the discount is taxable or you sell merchandise to your employees below cost, the taxable benefit is the difference between the fair market value of the goods and the price the employees pay.

Commissions that sales employees receive on merchandise they buy for personal use are not a taxable benefit. Similarly, when life insurance salespeople acquire life insurance policies, the commissions they receive are not taxable as long as they own the policies and have to make the required premium payments. This only applies where the income received is not significant and the insurance policy has no investment component or business use.

Note

This policy does not apply to discounts on services.

Education benefits

If you provide education benefits to your employee, it may be a taxable benefit to the employee in certain circumstances.

If you provide education benefits to a person other than the employee, such as employee's family member, you do not have to include the value of the benefit in the employee's income as long as you deal at arm's length with the employee and the education benefit is not a replacement for salary, wages or other remuneration. Although scholarships, bursaries, and free tuition for family members are no longer a taxable benefit to employees, the benefit may be income to the family member. For more information, see Family members.

Educational allowances for children

If you pay any amounts to an employee as an educational allowance for the employee's child, you have to include these amounts in the employee's income for the year.

However, if the employee and their family have to live in a specific location away from their home and the schools in the area do not meet the educational needs of the employee's children, the educational allowance may not be taxable if all of the following conditions are met:

Subsidized school services

Subsidized school services are generally taxable. However, in remote areas, employers are often responsible for essential community services that municipalities usually provide.

If you provide free or subsidized school services in remote areas for your employee's children, the employee does not receive a taxable benefit. Do not deduct CPP contributions, EI premiums, or income tax on these amounts.

Note

This does not include an educational allowance or educational costs you pay directly to your employee, as explained elsewhere in this section.

Scholarships, bursaries, tuition, and training

Employee

You may provide an employee, or former employee, with a scholarship or bursary on the condition that the employee returns to employment with you on completing the course. In this situation, the amount of the scholarship or bursary is considered to be employment income for the employee or former employee.

You have to report on a T4 slip any scholarships, fellowships, or bursaries you gave to an employee if they primarily benefit the employee. If you get any questions from your employee about the income, you can refer them to Scholarships, bursaries, tuition, and training.

Specific employment-related training
The CRA generally considers that courses taken to maintain or upgrade employment-related skills are mainly for your benefit when it is reasonable to assume that the employee will resume their employment for a reasonable period of time after they finish the course.

For example, tuition fees and other associated costs such as books, meals, travel, and accommodation that you pay for courses leading to a degree, diploma, or certificate in a field related to your employee's current or future responsibilities in your business are not a taxable benefit.

General employment-related training
The CRA generally considers that other business-related courses, although not directly related to your own business, are taken mainly for your benefit.

For example, fees you pay for stress management, employment equity, first aid, and language courses are not a taxable benefit.

Personal interest training
The CRA considers that courses for personal interest or technical skills not related to your business are taken mainly for the employee's benefit and, therefore, are a taxable benefit.

Scholarship and tuition fees

If you paid for, or reimbursed, your employee's tuition fees and there is no taxable benefit according to these guidelines, the tuition fees will not qualify for the tuition tax credit. You should inform your employee of this.

If you paid for, or reimbursed, education amounts that are reported on either a T4 or T4A slip, these amounts may be eligible for the scholarship exemption. The individual may be able to fully exclude from their income tuition fees, scholarships, fellowships, and bursaries they received from you.

Family members

If you offer a program that provides free or reduced tuition fees to the family members of your employees, do not include the value of any benefit the employee's family member receives in your employee's income unless:

Instead, report the FMV of the scholarship or bursary on a T4A slip for the family member. If a family member meets certain criteria, they may not have to include the amount in income on their income tax and benefit return.

The same applies if you are an educational institution offering free or discounted tuition to your employees’ family members.

If you get any questions, you can refer them to the Federal Income Tax and Benefit Guide.

For more information on scholarships or bursaries provided in employment situations, go to Scholarships, bursaries, tuition, and training.

Employment insurance premium rebate

As an employer, you may be eligible for a reduction in the employer EI premium rate that you use to calculate your share of the EI premiums if you offer income protection coverage, such as a wage loss replacement plan or other income maintenance plan, to your employees that reduce the EI benefits payable to an employee. For more information, go to How to reduce the EI premium rate if you provide your employees with a short-term disability plan.

If you are granted an EI premium reduction, you will calculate your employer's EI premiums using a rate that is lower than the standard employer rate of 1.4 times the employees' EI premiums.

You have to return 5/12 of any savings to your employees in the year in which you received the EI premium reduction, or within the first four months of the following year. This savings can either be given to your employee in cash, such as a cash allowance or a cash rebate, or indirectly through increased employer contributions to an employee's health and welfare trust, group sickness or accident insurance plan, private health services plan, or in any other manner. These indirect benefits will only be tax-free (i.e. not included in the employee's employment income) if they are given to the employee in the form of a benefit specifically exempt from taxation under paragraph 6(1)(a) of the Income Tax Act.

Note

If the benefit is taxable, you must include it in your employee's income in the year the employee received it. For more information, see Benefits chart.

Gifts, awards, and long-service awards

A gift or an award that you give an employee is a taxable benefit from employment, whether it is cash, near-cash, or non-cash. However, the CRA has an administrative policy that exempts non-cash gifts and awards in some cases.

Cash and near-cash gifts or awards are always a taxable benefit for the employee. A near-cash item is one that functions as cash, or an item that can be easily converted to cash, such as gold nuggets, securities, or stocks. For more information, see Rules for gifts and awards and Policy for non-cash gifts and awards, or go to Gifts, awards, and long-service awards.

Example of a near-cash gift or an award

You give your employee a $100 gift card or gift certificate to a department store. The employee can use this to purchase whatever merchandise or service the store offers. The CRA considers the gift card or gift certificate to be an additional remuneration that is a taxable benefit for the employee because it functions in the same way as cash.

Examples of non-cash gifts or awards

You give your employee tickets to an event on a specific date and time. This may not be a taxable benefit for the employee since there is no element of choice, if the other rules for gifts and awards are met.

You give your employee a voucher (which may be a ticket or a certificate) that entitles the employee to receive an item for a set value at a store. For example, you may give your employees a voucher for a turkey valued up to $30 as a Christmas gift, and for convenience, you arrange for your employees to go to a particular grocery store and exchange the voucher for a turkey. The employees can only use the voucher to receive a turkey valued up to $30 (no substitutes).

Vouchers and event tickets are generally considered non-cash gifts and awards.

Rules for gifts and awards

A gift has to be for a special occasion such as a religious holiday, a birthday, a wedding, or the birth of a child.

An award has to be for an employment‑related accomplishment such as outstanding service, or employees’ suggestions. It is recognition of an employee’s overall contribution to the workplace, not recognition of job performance. Generally, a valid, non‑taxable award has clearly defined criteria, a nomination and evaluation process, and a limited number of recipients.

An award given to your employees for performance‑related reasons (such as performing well in the job they were hired to do, exceeding production standards, completing a project ahead of schedule or under budget, putting in extra time to finish a project, covering for a sick manager or colleague) is considered a reward and is a taxable benefit for the employee.

If you give your employee a non‑cash gift or an award for any other reason, this policy does not apply and you have to include the fair market value of the gift or award in the employee’s income.

The gifts and awards policy does not apply to cash and near‑cash items or to gifts or awards given to non‑arm’s length employees, such as your relatives, shareholders, or people related to them.

For more information on gifts and awards outside the CRA’s policy, go to Gifts and awards outside our policy and Policy for non-cashgifts and wards, or go to What is a taxable benefit.

Value

Use the fair market value (FMV) of each gift to calculate the total value of gifts and awards given in the year, not its cost to you. You have to include the value of the GST/HST and PST in the FMV.

Policy for non-cash gifts and awards

You may give an employee an unlimited number of non-cash gifts and awards with a combined total value of $500 or less annually. If the FMV of the gifts and awards you give your employee is greater than $500, the amount over $500 must be included in the employee's income. For example, if you give gifts and awards with a total value of $650, there is a taxable benefit of $150 ($650 – $500).

Items of small or trivial value do not have to be included when calculating the total value of gifts and awards given in the year for the purpose of the exemption. Examples of items of small or trivial value include:

Under the CRA's administrative policy, if you provide your employee with gift cards, the gift cards is considered non-cash if all the following apply:

Long-service awards

As well as the gifts and awards in the policy stated above, you can, once every five years, give your employee a non-cash long-service or anniversary award valued at $500 or less, tax free. The award must be for a minimum of five years' service, and it has to be at least five years since you gave the employee the last long-service or anniversary award. Any amount over the $500 is a taxable benefit.

If it has not been at least five years since the employee's last long-service or anniversary award, then the award is a taxable benefit. For example, if the 15-year award was given at 17 years of service, and then the next award is given at 20 years of service, the 20-year award will be a taxable benefit, since five years will not have passed since the previous award.

The $500 exemption for long-service awards does not affect the $500 exemption for other gifts and awards in the year you give them. For example, you can give an employee a non-cash long-service award worth $500 in the same year you give them other non-cash gifts and awards worth $500. In this case, there is no taxable benefit for the employee.

Note

If the value of the long-service award is less than $500, you cannot add the shortfall to the annual $500 exemption for non-cash gifts and awards.

For more information, go to Rules for gifts and awards.

Awards from a manufacturer

If a manufacturer of goods gives cash awards or non-cash awards to the dealer of the goods, the manufacturer does not have to report the awards on an information slip.

However, if the dealer passes on cash awards to an employee, the dealer has to report the cash payment in box 14, "Employment income," and in the "Other information" area under code 40 at the bottom of the employee's T4 slip. If the dealer passes on non-cash awards to an employee, the dealer may not have to report the awards in the employee's income if the other conditions of the awards' policy are met.

If a manufacturer gives a cash award or a non-cash award directly to the employee of a dealer or other sales organization, the manufacturer has to report the value of the award as a benefit using code 154, "Cash award or prize from payer," in the "Other information" area at the bottom of the T4A slip.

Group term life insurance policies – Employer-paid premiums

This section applies to current, former, and retired employees.

Note

Premiums you pay for employees' group life insurance that is not group term insurance or optional dependant life insurance are also a taxable benefit.

A group term life insurance policy is one for which the only amounts payable by the insurer are policy dividends, experience rating refunds, and amounts payable on the death or disability of an employee, former employee, retired employee, or their covered dependants.

Term insurance is any life insurance under a group term life insurance policy other than insurance for which a lump-sum premium has become payable or has been paid. Life insurance for current employees would usually be term insurance, although it is sometimes provided for retired employees.

A lump-sum premium is a premium for insurance on an individual's life where all or part of the premium is for insurance for a period that extends more than 13 months after the payment of the premium (or more than 13 months after the time the premium became payable, if it is paid after it became payable).

Calculating the benefit

If the premiums are paid regularly and the premium rate for each individual does not depend on age or gender, the benefit is:

plus

minus

In any other situation, a detailed calculation is required. For more information, call 1-800-959-5525.

Reporting the benefit

Report the benefit for current employees and employees who are on a leave of absence (such as maternity leave) in box 14, "Employment income," and in the "Other information" area under code 40 at the bottom of the employee's T4 slip.

Except as indicated in the next paragraph, for former employees or retirees, report the benefit on a T4A slip using code 119 in the "Other information" area, regardless of the amount. The $500 reporting threshold for T4A slips, which is described on When to file information returns", does not apply.

If you are the administrator or trustee of a multi-employer plan and you provided taxable benefits under the plan to employees, former employees, or retirees, report the benefit using code 119 in the "Other information" area at the bottom of the T4A slip if it is more than $25.

Note

Effective January 2018, employers who pay Group Term Life Insurance premiums on behalf of retirees, when it’s the only income reported on the T4A slip, are only required to report the premium if the amount is greater than $50. Your former employees are still responsible for reporting the amount on their personal income tax and benefits return.

Housing or utilities

If the accommodation you provide to the employee is in a prescribed zone, see Accommodation or utilities provided by the employer.

If your employee is a member of the clergy or a religious order or a regular minister of a religious denomination, they might be entitled to claim a clergy residence deduction. For more information, see Clergy residence.

Housing or utilities – benefit

If you provide an employee, including the superintendent of an apartment block, with a house, apartment, or similar accommodation rent free or for less than the fair market value (FMV) of such accommodation, there is a taxable benefit for the employee.

You have to estimate a reasonable amount for the housing benefit. It is usually the FMV for the same type of accommodation, minus any rent the employee paid.

In addition, the amount you pay on behalf of, or reimburse to your employee for utilities (such as telephone, hydro, natural gas, water, cable or internet) is also a taxable benefit. This is the amount that you include in the employee's income as a utilities benefit.

If the employee occupies the accommodation for at least one month, the value of the accommodation is usually not subject to the GST/HST.

Special circumstances that reduce the value of a housing benefit

The following two factors may reduce the value of a housing benefit you provide to your employee:

Note

If the accommodation you provide is smaller than your employee needs, the CRA does allow any reduction in value.

These two factors apply in the above order. If both circumstances apply to an accommodation, you should first reduce the value to equal the value of accommodation that suits your employee's needs. Then, you should apply any reduction for loss of privacy and quiet enjoyment to that reduced value.

Housing or utilities – allowance

If you give your employee an allowance to pay for rent or utilities, include the allowance in your employee's income as a taxable housing or utilities benefit.

Reporting the benefit

Report the taxable benefit for the utilities in box 14, "Employment income," and in the "Other information" area under code 40 at the bottom of the employee's T4 slip. Report the taxable benefit for housing in box 14 and in the "Other information" area under code 30.

Notes

Special rules apply if you pay for utilities (or provide them) for a member of the clergy. You must add eligible utilities (electricity, heat, water, and sewer) for clergy members to the taxable benefit for housing under code 30. Report all other utilities under code 40.

For more information, go to Fill out the slips and summaries.

Clergy residence

Clergy residence deduction

If your employee is a member of the clergy, they may be able to claim a deduction from income for their residence when filing a personal income tax and benefits return.

An employee who is a member of the clergy, a regular minister, or a member of a religious order can claim the clergy residence deduction if the employee is in one of the following situations:

To claim the deduction, the employee has to fill out parts A and C of Form T1223, Clergy Residence Deduction. You have to fill out Part B and sign the form to certify that this employee has met the required conditions. The employee does not have to file the form with their income tax and benefit return, but has to keep it in case the CRA asks to see it.

Reducing remuneration from which you have to deduct income tax and CPP
Employer provided or paid – benefit

If you provide your employee with free or low-rent accommodation, do not include the accommodation and utilities share of the benefit that is equal to the clergy residence deduction, in your employee's income when you calculate the income tax and CPP contributions to deduct as long as your employee does both of the following:

Employee owned or rented – allowance

Your employee may own or rent the accommodation and pay for utilities either out of their own money or by using the allowance you paid to them. If your employee will be claiming the clergy residence deduction on their personal income tax and benefits return, they may get a letter of authority from a tax services office to reduce the income on which you have to deduct tax and CPP. When your employee provides you with a letter of authority from a tax services office, reduce the income by the amount stated in the letter.

Note

Although the clergy residence deduction and the utilities share of the benefit can be excluded from income for the purpose of calculating tax deductions and CPP, you still have to report it on your employee's T4 slip. Special rules apply if you pay for utilities (or provide them) for a member of the clergy. For more information, go to Fill out the slips and summaries.

For more information, see archived Interpretation Bulletin IT-141R, Clergy Residence Deduction.

Income maintenance plans and other insurance plans

Employers may offer various types of insurance plans to employees. The tax treatment of employer-paid premiums or contributions to these plans may differ depending on the nature of the plan, the type of benefits offered, and whether the plan is offered to individual employees (a non-group plan) or a group of employees (a group plan).

Non-group plans

The premium or contribution is a taxable benefit if you pay it to a non-group plan that is:

Group sickness or accident insurance plans

Premiums or contributions you pay to a group sickness or accident insurance plan are a taxable benefit to your employee, unless it is in respect of a wage-loss replacement benefit payable on a periodic basis (not lump-sum). Examples of plans where the premium is a taxable benefit include, but are not limited to, accidental death and dismemberment and critical illness insurance.

Include the taxable benefit in box 14, “Employment income,” and in the “Other information” area under code 40 at the bottom of the employee’s T4 slip. Report the retiree's taxable benefit using code 028, "Other income" in the "Other information" area at the bottom of the T4A slip.

Employee-pay-all plans

If the plan is an employee-pay-all plan, any premium you pay on behalf of the employee, and any reimbursements made to your employee, are considered taxable benefits. A plan is an employee-pay-all plan where your employee is contractually responsible for paying the premiums to the third party that administers the plan, even where the plan allows you to pay the premiums on the employee's behalf and include the value of the premiums in your employee's income.

For more information on employee-pay-all plans, go to CPP/EI Explained and choose "Wage Loss Replacement Plans" or see archived Interpretation Bulletin IT-428, Wage Loss Replacement Plans.

Group disability benefits – insolvent insurer

Under subsection 6(17) of the Income Tax Act (ITA), a top up disability payment includes a payment made by an employer directly to an individual to replace all or part of the periodic payments that, because of an insurer's insolvency, are no longer being made to the individual under a disability policy for which the employer made contributions. This treatment allows the continued deduction of contributions made by the employee to be considered in determining the amount to be included in the employee's income from employment under paragraph 6(1)(f) of the ITA. This applies to any top up disability payment made after August 10, 1994.

A disability policy is a group disability insurance policy that provides periodic payments to individuals for lost employment income.

Loans – interest-free and low-interest

You may have to include in income any benefit arising from an interest-free or low-interest loan received, or debt incurred, by a person because of an office, employment, or shareholding.

If a person is both an employee and a shareholder, it is a question of fact whether a particular indebtedness arose because of shareholdings or because of an office or employment. For more information, see archived Interpretation Bulletin IT-119R4, Debts of Shareholders and Certain Persons Connected with Shareholders

The benefit is generally calculated as the amount of interest that the person would have paid on the loan or debt for the year at the prescribed rates (for more information, see Prescribed interest rates), minus the amount of interest that they paid on the loan in the year or no later than 30 days after the end of the year.

Special rules apply to certain loans or debt and to home-relocation loans. For more information, see Exceptions below and Home-relocation loans.

Exceptions

A taxable benefit will not arise where a person receives a loan or incurs a debt because of an office, employment, or shareholding when either of the following occurs:

Note

Arm’s length refers generally to persons that are not related. 

Loans received because of employment

An employee receives a taxable benefit if you give any person or partnership a loan because of the employee's current, previous, or intended office or employment. The CRA considers a loan received because of employment if it is reasonable to conclude that the loan would not have been received, or the terms of the loan would have been different, had there been no current, previous, or intended employment.

The loan can be received by the employee or any other person or partnership, including, for example, the employee's spouse. A benefit can also arise from any other indebtedness such as the unpaid purchase price of goods or services, or an overpayment of salary that your employee repays you over a period of time.

The taxable benefit the employee receives in the tax year is the total of the following amounts:

  1. the interest on each loan and debt calculated at the prescribed rate for the periods in the year during which it was outstanding
  2. the interest on the loan or debt that was paid or payable for the year by you, the employer (for this purpose, an employer is a person or partnership that employed or intended to employ the individual and also includes a person related to the person or partnership)

minus the total of the following amounts:

c. the interest for the year that any person or partnership paid on each loan or debt no later than 30 days after the end of the year
d. any part of the amount in b) that the employee pays back to the employer no later than 30 days after the end of the year

Note

Sometimes these rules do not apply. For more information, see Exceptions.

If the employee receives a taxable benefit on a loan or debt because of employment, report the benefit in box 14, “Employment income,” and in the “Other information” area, report the interest benefit under code 36. Report any forgiven loan principal amounts under code 40.

For information about similar taxable benefits resulting from loans received because of services performed by a corporation that carries on a personal services business, see archived Interpretation Bulletin IT-421R, Benefits to individuals, corporations and shareholders from loans or debt.

Example

Joshua is your employee. He borrowed $150,000 from you at the beginning of the year. The prescribed rate of interest for the loan is 3% for the first quarter, 4% for the second and third quarters, and 5% for the fourth quarter. Joshua paid you $2,000 interest on the loan no later than 30 days after the end of the year. During the year, a company related to you paid $1,000 interest on the loan for Joshua. Before the end of the same year, Joshua repaid the $1,000 to the company.

Calculate the benefit to include in his income as follows:

a)

Prescribed rate × loan amount for the year:
3% × $150,000 × 1/4 = $1,125
4% × $150,000 × 2/4 = $3,000
5% × $150,000 × 1/4 = $1,875

$6,000

plus

b)

Amount paid by a third party

$1,000

 

 

$7,000

minus

c)

Interest paid ($2,000 + $1,000) =

$3,000

d)

Amount Joshua repaid

$1,000
$4,000

Joshua's taxable benefit

$3,000

Loans received because of shareholdings

Persons and partnerships are generally taxable on benefits received from a corporation of which they are a shareholder. Depending on the particular facts, where a person or partnership receives a loan or incurs a debt because of a shareholding:

A taxable benefit does not apply if the loan or debt is required to be included in the income of a person or partnership.

Therefore, a person or partnership should determine if the amount of the loan or debt is required to be included in income before considering whether a taxable benefit may arise. A taxable benefit cannot be included in income voluntarily to avoid any requirement to include the amount of a loan or debt in income.

Loans received or debts incurred because of shareholdings may give rise to a taxable benefit when all of the following conditions are met:

If these conditions are met, the person or partnership (for example, a shareholder) is considered to receive a benefit in the tax year that is equal to:

minus

Note

A person may be an individual, a corporation, or a trust.

The calculation of the benefit is modified where one or more such loans are considered to have been made under a back-to-back shareholder loan arrangement. For more information on back-to-back shareholder loans, see pages 54 and 55 of Tax Measures: Supplementary Information for Budget 2016 on the Department of Finance Canada pages of Canada.ca.

Include the shareholder's benefit under code 117, "Other income," in the "Other information" area at the bottom of the T4A slip.

Home-purchase loan

A home-purchase loan is any part of a loan to an employee that the employee used to get or repay another loan to buy a residence. The residence has to be for that employee or a person related to that employee. This also applies to a shareholder or a person related to a shareholder.

To calculate the benefit for a home-purchase loan, see Loans received because of employment.

Once a home-purchase loan is established, the prescribed interest rate remains in effect for a period of five years. The amount of interest you calculate as a benefit should not be more than the interest that would have been charged at the prescribed rate when the loan or the debt was established.

If the term of repayment for a home-purchase loan is more than five years, the balance owing at the end of five years (from the day the loan was made) is considered a new loan. Treat the outstanding balance as a new loan on that date. To calculate the benefit, use the prescribed rate in effect at that time.

Home-relocation loans

A home-relocation loan is a loan you give to an employee or an employee's spouse or common-law partner when they meet all of the following conditions:

Note

Only a debt that is a loan can be a home relocation loan.

To calculate the benefit for the home-relocation loan, see Loans received because of employment.

Include the amount of the taxable benefit in box 14, "Employment income," and in the "Other information" area under code 36 at the bottom of the employee's T4 slip.

The amount of interest you calculate as a benefit should not be more than the interest that would have been charged at the prescribed rate in effect when the employee received the loan.

If the term of repayment for the home-relocation loan is more than five years, the balance owing at the end of five years (from the day the loan was made) is considered a new loan. Treat the outstanding balance as a new loan on that date. To calculate the benefit, use the prescribed rate in effect at that time.

Note

For 2018 and later tax years, the home-relocation loan deduction has been eliminated.

Forgiven loans

A loan to an employee may be partly or fully forgiven (the employee does not have to repay the loan). In either case, the forgiven amount is considered employment income and is added to the employee's T4 slip for the year the amount is forgiven. For more information, see archived Interpretation Bulletin IT-421R2, Benefits to individuals, corporations and shareholders from loans or debt.

Reporting the benefit

If an employee or any person or partnership receives a loan or incurs a debt because of the employee's employment, report the benefit in box 14, "Employment income," and in the "Other information" area under code 36 at the bottom of the employee's T4 slip.

If a person or partnership that was a shareholder (or was related to a shareholder) receives a loan or incurs a debt, you generally have to report the benefit on a T4A slip. Enter the amount under code 117, "Loan benefits," in the "Other information" area at the bottom of the T4A slip.

Note

The taxable benefit must be reported on a T4 or T4A slip even if the borrower is eligible to deduct the interest.

Prescribed interest rates

To get the current prescribed rates of interest, go to Prescribed interest rates.

Loyalty and other points programs

Your employees may collect loyalty points, such as frequent flyer points or air miles, on their personal credit cards when travelling on business trips, even though you reimburse them for the amounts they spend. Usually, these points can be exchanged or cashed in for rewards (goods or services, including gift cards and certificates).

Your employees do not have to include in their income the value of the rewards they received or enjoyed from the points they collect on these business trips, unless any of the following apply:

If any of the conditions above are met, the employee has to declare the fair market value (FMV) of any personal rewards they received on an income tax and benefit return.

Note

If you control the points (such as when an employee uses a company credit card) you have to report on their T4 slip the FMV of any personal rewards they received from redeeming the points.

For examples of situations where loyalty and other points programs are considered taxable benefits, go to Loyalty or other points programs.

Meals

Overtime meals or allowances

If you provide overtime meals, or an allowance for overtime meals, there is no taxable benefit if all of the following conditions apply:

If overtime occurs frequently or becomes the norm, the CRA considers the overtime meals or allowances to be a taxable benefit, since they start to take on the characteristics of additional remuneration.

For examples of situations where overtime meals, or allowances for overtime meals, are considered taxable benefits, go to Examples – Overtime meals or allowances.

Subsidized meals

If you provide subsidized meals to an employee (such as in an employee dining room or cafeteria), these meals are not considered a taxable benefit if the employee pays a reasonable charge. A reasonable charge is one that covers the cost of the food, its preparation, and service.

If the charge is not reasonable, the value of the benefit is the cost of the meals, minus any payment the employee makes.

Include the taxable benefit in box 14, "Employment income," and in the "Other information" area under code 40 at the bottom of the employee's T4 slip.

Medical expenses

If you pay or provide an amount to pay for an employee's medical expenses in a tax year, these amounts are considered to be a taxable benefit for the employee.

Generally, there is no GST/HST and PST to include in the value of this benefit. However, some medical expenses that qualify for the medical expense tax credit may be subject to the GST/HST and PST. In such a case, include the GST/HST and PST in the value of the benefit.

For more information on qualifying medical expenses, go to:

Moving expenses and relocation benefits

When you transfer an employee from one of your places of business to another, the amount you pay or reimburse the employee for certain moving expenses is usually not a taxable benefit. This includes any amounts you incurred to move the employee, the employee's family, and their household effects. This also applies when the employee accepts employment at a different location from the location of their former residence. The move does not have to be within Canada.

Also, if you pay certain expenses to move an employee, their family, and their household effects out of a remote work location when their employment duties are finished, the amount you pay is not a taxable benefit.

If you paid allowances to your employee for incidental moving expenses that they do not have to account for, see Non-accountable moving allowances.

Moving expenses paid by employer that are not a taxable benefit

The following expenses are not a taxable benefit to your employees if you paid or reimbursed them:

Moving expenses paid by employer that are a taxable benefit

If you pay or reimburse moving costs that the CRA does not list above, the amounts are generally considered a taxable benefit to the employee.

If you do not reimburse, or only partly reimburse, an employee for moving expenses, the employee may be able to claim some of the moving expenses when filing their income tax and benefit return.

For more information on the deduction for moving expenses that is available to your employees, go to Moving expenses and relocation benefits.

Housing loss

If you pay or reimburse your employee for a housing loss, the amount is a taxable benefit for the employee.

However, there is an exception for amounts paid for an eligible housing loss. Generally, in these situations, only half of the amount that is more than $15,000 is taxable.

Note

If you spread the payment over two years, you will need to include an amount on your employee's T4 slip for each year. Example 2 below shows how to calculate the taxable benefit.

Example 1

In March 2023, you compensated Clara, your employee, for a $40,000 loss she incurred on the sale of her house. The loss was an eligible housing loss. Clara started to work at her new workplace in June 2023.

The taxable benefit you will report on Clara's 2023 T4 slip will be $12,500, calculated as follows:

½ × ($40,000 − $15,000)

Example 2

In June 2022, you agreed to compensate Paul, your employee, for any eligible housing loss incurred on the sale of his house. Paul started to work at his new work location on December 1, 2022.

Paul's eligible housing loss amounted to $65,000. You paid out the compensation in two payments: $30,000 in September 2022 and $35,000 in February 2023.

Paul's taxable benefit in 2023 was $7,500 (half of the amount paid in 2022 that is more than $15,000).

Paul's taxable benefit in 2023 is $17,500. This is calculated as follows:

  • half of the total of amounts paid in 2022 and 2023 that is more than $15,000 (½ × [$65,000 − $15,000] = $25,000)

minus

  • the amount included in income in 2022 ($7,500)

For more information on housing losses, go to Moving expenses and relocation benefits.

Non-accountable moving allowances

A non-accountable moving allowance is an allowance for which an employee does not have to provide details or submit receipts to justify amounts paid. The CRA considers a non-accountable moving allowance for incidental relocation or moving expenses of $650 or less to be a reimbursement of expenses that the employee incurred because of an employment-related move. Therefore, this type of allowance is not taxable. For the CRA to consider it as a reimbursement for incidental expenses, the employee has to certify in writing that they incurred expenses for at least the amount of the allowance, up to a maximum of $650.

Do not report the amount of the reimbursement. Report any part of the non-accountable moving allowance that is more than $650 in box 14, "Employment income," and in the "Other information" area under code 40 at the bottom of the employee's T4 slip.

Examples

If you gave a non-accountable moving allowance of $625 to an employee who certifies that they incurred expenses for the amount of the allowance, the employee will not be taxed on the amount received. Do not include this amount on the employee’s T4 slip.

If you gave a non-accountable moving allowance of $750 to an employee who can certify the expenses, they will be taxed on $100 only, which is the part of the amount that is more than $650. Include the $100 on a T4 slip in box 14, "Employment income," and in the "Other information" area under code 40 at the bottom of the employee’s T4 slip.

Municipal officer's expense allowance

A municipal corporation or board may pay a non-accountable expense allowance to an elected officer to perform the duties of that office.

For 2019 and later tax years, the full amount of this non-accountable allowance is a taxable benefit. Enter it in box 14, “Employment income,” and in the “Other information” area under code 40 at the bottom of the employee’s T4 slip.

Parking

Employer-provided parking is usually a taxable benefit for an employee, whether or not the employer owns the lot. The amount of the benefit is based on the fair market value of the parking, minus any payment the employee makes to use the space.

There are some exceptions to the taxability of parking:

Note

Travel between work and home is not considered travel for business purposes.

The CRA does not require you to include a benefit in your employee's income in the following situations:

For more information on scramble parking, go to Parking.

Note

If you provide enough parking spaces for all employees who want parking, but do not assign the parking spaces to individual employees, this is not scramble parking. You must add the benefit to the employee's remuneration.

To determine if an employee has received a benefit, the facts of each case must be examined. If you are not sure if employer-provided parking is a taxable benefit, contact the CRA.

You can answer a series of questions on our Web site to help you determine if there is a taxable benefit. For more information, go to Parking.

Pooled registered pension plans (PRPP)

Contributions you make to a PRPP for your employees are not a taxable benefit if the plan has been accepted for registration by the Minister of National Revenue and that registration has not been revoked. Do not include these contributions in your employees’ employment income.

On the other hand, if you contribute to a plan that is registered under the Pooled Registered Pension Plan Act or a similar provincial act and not with the Minister of National Revenue, your contributions are a taxable benefit. They are considered to be paid in cash and are taxable, pensionable, and insurable. Deduct income tax, CPP contributions, and EI premiums.

For more information about PRPPs, go to The Pooled Registered Pension Plan (PRPP).

Power saws and tree trimmers

If you are an employer in the forestry business, you may have employees who, according to their contracts, have to use their own power saws or tree trimmers at their own expense.

Rental payments you make to employees for the use of their own power saws or tree trimmers are taxable benefits and should be included in their income on a T4 slip. Their income should not be reduced by the cost or value of saws, trimmers, parts, gasoline, or any other materials the employee supplies.

Premiums under provincial hospitalization, medical care insurance, and certain Government of Canada plans

You may be paying premiums or contributing to a provincial or territorial hospital or medical care insurance plan for an employee. The amount you pay is considered a taxable benefit for the employee. Report this benefit in box 14, "Employment income," and in the "Other information," area under code 40 at the bottom of the employee's T4 slip. If you have to make payments to such a plan for amounts other than premiums or contributions for the employee, they are not considered a taxable benefit for the employee.

If you are the former employer of an employee who has retired, any amount you pay as a contribution to a provincial or territorial health services insurance plan for the retired employee is a taxable benefit.

Report this benefit under code 118, "Medical premium benefits," in the "Other information" area at the bottom of the T4A slip.

Any amount that the federal government pays for premiums under a hospital or medical care insurance plan for its employees and their dependants serving outside Canada is a taxable benefit. This also applies to dependants of members of the Royal Canadian Mounted Police and the Canadian Forces serving outside Canada.

Private health services plan premiums

If you make contributions to a private health services plan (such as medical or dental plans) for employees, there is no taxable benefit for the employees.

Note

Employee-paid premiums to a private health services plan are considered qualifying medical expenses and can be claimed by the employee on their income tax and benefit return.

Include the amounts that the employee paid on a T4 slip in the "Other information" area under code 85. The use of code 85 is optional. If you do not enter code 85, the CRA may ask the employee to provide supporting documents.

Use the T4A slip to report these amounts for former employees or retired employees. Enter the amount under code 135, "Recipient-paid premiums for private health services plans," in the "Other information" area at the bottom of the T4A slip.

For more information on private health services plans, go to Private Health Services Plan and see archived Interpretation Bulletin IT-339R2, Meaning of private health services plan (1988 and subsequent taxation years).

Professional membership dues

If you pay professional membership dues for your employee and you are the primary beneficiary of the payment, there is no benefit for the employee.

Whether you or the employee is the primary beneficiary is a question of fact. If you pay or reimburse professional membership dues because membership in the organization or association is a condition of employment, the CRA considers you to be the primary beneficiary and there is no taxable benefit for the employee.

When membership is not a condition of employment, you, as the employer, are responsible for determining the primary beneficiary. You have to be prepared to justify your position if the CRA ask you to do so.

In all situations where you pay or reimburse an employee's professional membership dues and the primary beneficiary is the employee, there is a taxable benefit for the employee.

Note

You should tell your employee that they cannot deduct from their employment income any non-taxable professional dues that you have paid or reimbursed to them.

For more information, see archived Interpretation Bulletin IT-158R2, Employees' professional membership dues.

Recreational facilities and club dues

The use of a recreational facility or club is a taxable benefit for an employee in any of the following situations:

However, the use of a recreational facility or club does not result in a taxable benefit for an employee in any of the following situations:

For more information, go to Recreational facilities and club dues.

Registered retirement savings plans (RRSPs)

Contributions you make to your employee's RRSP and RRSP administration fees that you pay for your employee are considered to be a taxable benefit for the employee. However, this does not include an amount you withheld from the employee's remuneration and contributed for the employee.

If the GST/HST applies to the administration fees, include it in the value of the benefit.

Payroll deductions

Contributions you make to your employee's RRSPs are generally paid in cash and are pensionable and insurable. Deduct CPP contributions and EI premiums.

However, your contributions are considered non-cash benefits and are not insurable if your employees cannot withdraw the amounts from a group RRSP (except for withdrawals under the Home Buyers' Plan or Lifelong Learning Plan) before the employees retire or cease to be employed.

Although the benefit is taxable and has to be reported on the T4 slip, you do not have to deduct income tax at source on the contributions you make to your employee's RRSPs if you have reasonable grounds to believe that the employee can deduct the contribution for the year. For details, go to Calculate payroll deductions and contributions.

Administration fees that you pay directly for an employee are considered taxable and pensionable. Deduct CPP contributions and income tax. These are considered a non-cash benefit, so they are not insurable. Do not deduct EI premiums.

Security options

A security is a share of the capital stock of a corporation or a unit of a mutual fund trust that is a qualifying person.

Note

A qualifying person is a corporation or a mutual fund trust.

Many employers grant options to their employees as a form of compensation. These options give the employee of the employer or of a qualifying person with which the employer does not deal at arm’s length, the right to acquire a security of the employer, or a security of another qualifying person with which the employer does not deal at arm’s length.

Generally, options issued to employees will be provided under one of the following three types of plans:

Taxable benefit

When a corporation agrees to sell or issue its shares to an employee, or when a mutual fund trust grants options to an employee to acquire trust units, the employee may receive a taxable benefit. Generally, the employee receives the taxable benefit in the same year they acquire the shares or units, or otherwise disposes of their rights under the option agreement. However, when certain conditions are met, the taxable benefit is deferred until the year the employee disposes of the shares. For more information, refer to Security options deduction for the disposition of shares of a Canadian controlled private corporation – Paragraph 110(1)(d.1).

The taxable benefit is the difference between the fair market value (FMV) of the shares or units when the employee acquired them and the amount paid, or to be paid, for them, including any amount paid for the rights to acquire the shares or units. Also, a benefit can accrue to the employee if their rights under the agreement become vested in another person, or if they transfer or sell the rights.

The shares or trust units are considered to be acquired when legal ownership of the shares or units has been transferred and the vendor has entitlement to receive payment. In general, this would occur where the shares or units have been transferred to the employee/broker and paid for.

Include this benefit in box 14, "Employment income," and in the "Other information" area under code 38 at the bottom of the employee's T4 slip. Also, show the deductions the employee is entitled to in the "Other information" area of the T4 slip, as explained in the rest of this section.

For more information on security options, see archived Interpretation Bulletin IT-113R4, Benefits to Employees – Stock Options.

Cash-outs 

An employer may allow an employee to receive cash instead of securities in exchange for their options. Generally, the cash paid is equal to the difference between the FMV of the securities at the time the options would have been exercised and the amount paid or to be paid for the securities. This difference is equal to the employment benefit the employee is deemed to have received.

If an employee relinquishes a stock option right to an employer in exchange for a cash payment or other in kind benefit, the employee can claim the security options deduction if eligible or the employer can claim the cash-out as an expense, but not both. If the employer chooses not to claim the cash-out as an expense, the employer must make an election to do so under subsection 110(1.1) by entering this amount under code 86, "Security options election," in the "Other information" area of the T4 slip. This would allow the employee to claim the deduction under paragraph 110(1)(d). The amount you report under code 86 may be different from the taxable benefit you have to include in the employee's income in box 14 and under code 38.

If code 86 of the T4 is not entered, this means that the employer decided to claim the expense and the employee would not be allowed to claim the deduction under paragraph 110(1)(d). For more information, go to Payroll.

Note

You cannot elect to defer the security option.

Payroll Deductions

Cash-outs

Deduct CPP Contribution, EI premiums and income tax.

Options

Security options are considered a non-cash benefit, so they are not insurable. In all cases do not deduct EI premiums. There is no CPP contribution or no income tax withholding requirement where a taxable benefit is received by an arms­-length employee with respect to the disposition of Canadian-controlled private corporation shares.  

In all other cases where a taxable benefit is received, the employer is required to withhold and remit an amount in respect of the taxable security option benefit (excluding any security option deduction) to the same extent as if the amount of the benefit had been paid as an employee bonus.

For more information, go to Security options. Deduct CPP contributions and income tax.

When determining the amount of the security option benefit subject to income tax withholding, the CRA will permit the employer to reduce the benefit by 50% using the security options deduction under paragraph 110(1)(d).

Security options deduction – Paragraph 110(1)(d)

The employee can claim a deduction under paragraph 110(1)(d) of the Income Tax Act if all of the following conditions are met:

The deduction the employee can claim is one-half of the amount of the resulting taxable benefit in the year. Identify the amount of the deduction by entering it in the "Other information" area under code 39 at the bottom of the employee's T4 slip.

Annual vesting limit

For security options granted on or after July 1, 2021 (other than options granted after June 2021 that replace options granted before July 2021), the employee is subject to a $200,000 annual vesting limit under paragraph 110(1)(d) if the qualifying person meets both of the following conditions: 

How to determine the portion of the securities that are non-qualified securities

The portion of the securities that are non-qualified securities and not eligible for the deduction under 110(1)(d) is determined by the formula:

A/B

A = C + D – $200,000 (if the result is negative, the amount is zero)

where

C = total FMV (at the time the agreement is entered into) of the securities to be sold or issued under the agreement for a particular vesting year

D = is the lesser of:

(i) $200,000; and

(ii) the total FMV (at the time the agreements were entered into with the qualifying person, or another qualifying person that does not deal at arm's length with the particular qualifying person) of the securities to be sold or issued in respect of other agreements (whether entered into previously or contemporaneously) for that particular vesting year

B = the amount determined for C

The qualifying person is required to fill out T2 Schedule 59 to report non-qualifying security options beyond the $200,000 annual vesting limit.

Calculating examples – Annual vesting limit with single option
Description Situation 1 Situation 2 Situation 3
Situation 1 – before July 1, 2021      
An employee receives the option to acquire 10,000 shares of their non-CCPC employer with gross revenues of more than $500 million on July 15, 2020 for their fair market value (FMV) of $40 per share. (10,000 shares x $40 per share) $400,000    
The employee exercises all of their options on September 15, 2020 when the FMV of the shares were $50 per share. (10,000 shares x $50 per share) $500,000    
Situation 2 – On or after July 1, 2021      
An employee receives the option to acquire 10,000 shares of their non-CCPC employer with gross revenues of more than $500 million on July 15, 2021 for their FMV of $40 per share. (10,000 shares x $40 per share)   $400,000  
The employee exercises all of their options on September 15, 2021 when the FMV of the shares were $50 per share. (10,000 shares x $50 per share)   $500,000  
Situation 3 – On or after July 1, 2021      
An employee receives the option to acquire 10,000 shares of their non-CCPC employer with gross revenues of more than $500 million on July 15, 2021 for their FMV of $40 per share. (10,000 shares x $40 per share)     $400,000
The employee exercises only 5,000 of their options on September 15, 2021 when the FMV of the shares were $50 per share. (5,000 shares x $50 per share)     $250,000
Non-qualified securities      
FMV of the securities under this options agreement at the time of grant. (C) and (B) N/A $400,000 $400,000
Lesser of $200,000 and the FMV of the securities under other options agreements with the qualifying person (or another qualifying person that does not deal at arm's length with the particular qualifying person) vesting within the same calendar year. (D) N/A
$0 $0
A = C + D - $200,000 (if the result is negative, the amount is zero) N/A =$200,000 =$200,000
Portion of the securities deemed non-qualified. (A/B) N/A =$200,000/$400,000 (50%)     =$200,000/$400,000 (50%)
Number of non-qualified securities, to be reported on T2 Schedule 59, line 500. N/A
=5,000 (10,000 x 50%) =5,000 (10,000 x 50%)
Taxable benefit      
FMV of the shares when exercised minus the amount paid by the employee to acquire the shares. ($500,000 - $400,000) $100,000 $100,000  
FMV of the shares when exercised minus the amount paid by the employee to acquire the shares (5,000 shares x $40 per share = $200,000). ($250,000 - $200,000)     $50,000
Security options deductions      
One-half of the amount taxable – 110(1)(d) ($100,000 x 50%) $50,000    
One-half of the amount taxable – 110(1)(d) ($200,000 vesting limit ÷ $40 grant price per share = 5,000 shares eligible for the deduction) (5,000 shares x ($50 - $40) x 50%)   $25,000  

One-half of the amount taxable – 110(1)(d) ($200,000 vesting limit ÷ $40 grant price per share = 5,000 shares eligible for the deduction.) ($50,000 x 50%)

Because only 5,000 shares were exercised, they all qualify for the deduction.

    $25,000
Amount to be included on the T4 2020 tax year 2021 tax year 2021 tax year
Box 14 (may include other income) = $100,000 = $100,000 = $50,000
Code 38 = $100,000 = $100,000 = $50,000
code 39 = $50,000 = $25,000 = $25,000
Calculation examples – Annual vesting limit with multiple options
Description
2022 2023 2024
On August 1, 2022, an employee is first granted an option to acquire 70,000 shares of their non-CCPC employer with gross revenues of more than $500 million for their FMV of $2 per share. The first year they will be able to acquire those securities is in the 2024 calendar year. (70,000 x $2) $140,000   $140,000
On April 15, 2023, the same employee is granted the option to acquire another 50,000 shares of the company’s shares for their FMV of $2 per share. The first year they will be able to acquire those securities is in the 2024 calendar year. (50,000 x $2)   $100,000 $100,000
The employee exercised both sets of options on January 23, 2024 when they had a FMV of $3 per share (70,000 x $3) + (50,000 x $3)     $360,000
Non-qualified securities      
FMV of the securities under this options agreement at the time of grant. (C) and (B) $140,000 $100,000  
Lesser of $200,000 and the FMV of the securities under other options agreements with the qualifying person (or another qualifying person that does not deal at arm's length with the particular qualifying person) vesting within the same calendar year. (D) $0 $140,000  
A = C + D - $200,000 (if the result is negative, the amount is zero) $0 $140,000  
Portion of the securities deemed non-qualified. (A/B) $0/$140,000 $40,000/$100,000 (40%)  
Number of non-qualified securities, to be reported on T2 Schedule 59, line 500. = 0 = 20,000 (50,000 x 40%)  
Taxable benefit      
FMV of the shares when exercised minus the amount paid by the employee to acquire the shares. ($360,000 - $240,000)     $120,000
Security options deductions      
One-half of the amount taxable - 110(1)(d) (120,000 shares less the 20,000 non-qualified shares = 100,000 shares eligible for the deduction) (100,000 shares x ($3 - $2) x 50%)     $50,000
Amount to be included on the T4     2024 tax year
Box 14 (may include other income)     = $120,000
Code 38     = $120,000
Code 39     = $50,000
Designation of non-qualified securities 

Qualifying persons subject to the new rules will be able to designate securities to be issued or sold under a securities option agreement as non-qualified securities for purposes of the employee stock option rules. When this designation is made, employees will not be entitled to a stock option deduction, but the employer will be entitled to a deduction for the value of the benefit received by employees.

Notification requirements for non-qualified securities

Qualifying persons will be required to notify employees in writing no later than 30 days after the day the securities option agreement is entered into for non-qualified securities, and to report the issuance of securities options for non-qualified securities on Form T2 Schedule 59 with their income tax and benefit return. 

Charitable donations

An employee will be ineligible for the additional 50% stock option deduction if the employee donates to a qualified donee a publicly listed security acquired under a securities option that is a non-qualified security under the new stock option rules. The employee may, however, be eligible for the charitable donation tax credit. 

Note

The effect of foreign exchange gains and losses is not relevant when determining if an individual is eligible for the security option deduction.

Security options deduction for the disposition of shares of a Canadian-controlled private corporation (CCPC) – Paragraph 110(1)(d.1)

The employee receives the benefit in the year they dispose of the shares, but not in the year of acquiring them if all of the following conditions are met:

In this case, the employee can claim a deduction under paragraph 110(1)(d.1) of the Income Tax Act if all of the following conditions are met:

The deduction the employee can claim is one-half of the amount of the resulting taxable benefit in the year. Identify the amount of the deduction by entering it in the "Other information" area under code 41 at the bottom of the employee's T4 slip.

Social events

If you provide a free party or other social event to all your employees and the cost is $150 per person or less, the CRA does not consider it to be a taxable benefit. Additional costs such as transportation home, taxi fare, and overnight accommodation are not included in the $150 per person amount. If the cost of the party is greater than $150 per person, the entire amount, including the additional costs, is a taxable benefit.

If you provide a virtual social event to your employees, the benefit is not taxable if all of the following apply:

If the benefit is all cash, do not include the GST/HST and PST. However, if all or part of the taxable benefit is non-cash and is not an exempt or zero-rated supply, include the GST/HST and PST in the value of that part of the benefit.

For more information, go to What is a taxable benefit.

Spouse's or common-law partner's travelling expenses

If a spouse or common-law partner accompanies an employee on a business trip, the amount you reimburse the employee for the spouse's or common-law partner's travelling expenses is a taxable benefit for the employee.

The reimbursement is not considered a taxable benefit if the spouse or common-law partner went at your request and was mostly engaged in business activities during the trip.

For more information, see archived Interpretation Bulletin IT-131R2, Convention expenses.

Tax-free savings account (TFSA)

You may offer your employees and their spouses the opportunity to participate in a group TFSA. Contributions you make to your employees' TFSA for them, as well as TFSA administration fees that you pay for them, are considered to be a taxable benefit for the employees. However, this does not include any amount you withheld from the employees' remuneration and contributed for the employees.

Contributions you make to your employees' TFSA for them are generally paid in cash and are taxable, pensionable, and insurable. Deduct income tax, CPP contributions and EI premiums.

Administration fees that you pay directly for an employee are taxable and pensionable. Deduct CPP and income tax. These are considered a non-cash benefit, so they are not insurable. Do not deduct EI premiums.

If the GST/HST applies to the administration fees, include it in the value of the benefit.

Tickets

Whether a ticket is a taxable benefit to the employee depends on whether the ticket is provided for personal or business use. Each case is different.

Generally, the value of tickets is considered a taxable benefit when an employer gives an employee tickets for personal use unless it is being given under the terms of the gifts and awards policy. This would also be the case if the employer gives tickets to a person with whom the employee does not deal at arm’s length (such as a family member) for a non-business use.

There is no taxable benefit to an employee for the value of a ticket used for business purposes. Sometimes an employee needs a ticket to attend a game or event to be able to perform their employment duties. In these situations, the tickets are given to the employee for a business use.

Employment duties may include:

An employer has to keep records to support the business use of tickets given to employees. These records should contain all of the following information:

Reporting the benefit

Employers have to include in the employee’s income the value of all tickets, which are used for personal purposes, given to an employee during the year. Include the fair market value (usually the face value of the ticket, including applicable taxes) of the tickets in box 14, “Employment income,” and in the “Other information” area under code 40 at the bottom of the employee’s T4 slip.

Tool reimbursement or allowance

If you reimburse or provide an allowance to your employees to offset the cost of tools that they need for their job or you pay for their tools, the amount of the payment is a taxable benefit and should be included in the employees' income.

When employed tradespersons (including apprentice mechanics) file their income tax and benefit return, they may be able to deduct part of the cost of eligible tools they bought to earn employment income as a tradesperson.

Employers have to fill out and sign Form T2200, Declaration of Conditions of Employment, to certify that the employee must acquire these tools as a condition of, and for use in their employment.

For more information, go to Tool reimbursements, allowances and rental payments.

Transportation passes

Airline passes for employees and retirees of an airline company

If you provide standby airline passes to a current airline employee for their personal travel, there is no taxable benefit for the employee.

If you provide space-confirmed airline passes to a current airline employee for personal travel, the passes are a taxable benefit. The value of the benefit to be included in the employee’s income is the fair market value of the pass (including any fees and taxes), less any amount paid by the employee.

If you provide standby or space-confirmed airline passes to a retired airline employee for their personal travel, there is no taxable benefit for the retired employee.

Transit passes

If you pay for or provide your employee with public transit passes, it is usually a taxable benefit for the employee. Public transit includes transit by local bus, streetcar, subway, commuter train or bus, and local ferry.

Report the taxable benefit on the employee's T4 slip in box 14, "Employment income," and in the "Other information" area under code 40 at the bottom of the slip.

Transit passes – employees of a transit company

If your company is in the business of operating a bus, streetcar, subway, commuter train or bus, or ferry service, and you provide free transit passes to your employees or their families, special rules apply.

If you provide free or discounted passes to a current or a retired employee of one of the businesses mentioned above, and the passes are only for the employee's or the retiree's use, there is no taxable benefit for the employee or the retiree.

Note

To qualify as a non-taxable benefit under this special rule, ferry passes are limited to passenger (walk on) fares only.

If you provide free or discounted passes to a member of your employee's or retired employee's family, the fair market value (FMV) of the pass is a taxable benefit for the employee. Report the retiree's benefit using code 028, "Other income" in the "Other information" area at the bottom of the T4A slip.

Note

If you provide free or discounted passes to a current employee in an area other than the transportation business or its operations, their FMV is a taxable benefit for the employee. For example, if a city owns a transit company, the FMV of a pass given to a current employee in the city's accounting department would be a taxable benefit, while a pass given to a current employee in the accounting department of the transit business operations would not be a taxable benefit.

For examples of situations where transit passes are considered taxable benefits, go to Transportation and airline passes

Travel allowance

Part-time employee

You may give a part-time employee a reasonable allowance or reimbursement for travelling expenses incurred by the employee going to and from a part-time job. If so, and you and the part-time employee are dealing at arm's length, you do not have to include that amount in the employee's income. This applies to:

Salesperson and clergy

You may pay a reasonable travel allowance for expenses other than for the use of an automobile (such as meals, lodging, per diem allowance) to a salesperson or member of the clergy. You do not have to include the allowance in the employee's income if it was for expenses related to the performance of duties of the office or employment and the employee is either of the following:

Other employees

You have to include reasonable travel allowances in the income of employees, other than a salesperson or member of the clergy, who travel to perform the duties of the office or employment, unless the allowances are received by the employee for travelling away from the municipality and the metropolitan area where the employer's establishment is located and where the employee ordinarily works or reports.

In some situations, you may provide an allowance to your employee for travel (other than an allowance for the use of a motor vehicle) within a municipality or metropolitan area so your employee can perform their duties in a more efficient way during a work shift.

This allowance is not a taxable benefit and can be excluded from the employee's income if all of the following conditions are met:

This means that you do not have to include this type of travel allowance if its main reason is so that your employee's duties are performed in a more efficient way during a work shift.

For examples of situations where a travel allowance is considered a taxable benefit, go to Examples – Travel allowance.

Reasonable travel allowances

Whether an allowance for travel expenses is reasonable is a question of fact. You should compare the reasonable costs for travel expenses that you would expect your employee to incur against the allowance you pay to the employee for the trip.

If the travel allowance is reasonable, you do not have to include it in your employee's income. If it is not reasonable, the allowance has to be included in your employee's income.

For more information, see paragraph 48 in archived Interpretation Bulletin IT-522R, Vehicle, Travel and Sales Expenses of Employees.

Your employee may be able to claim certain employment expenses on their income tax and benefit return. For more information, see Employee's allowable employment expenses.

Uniforms and protective clothing

Your employee does not receive a taxable benefit if either of the following conditions apply:

If you reimburse or pay an accountable advance to your employee to buy uniforms or protective clothing and require receipts to support the purchases, the reimbursement or accountable advance is not a taxable benefit if the following conditions are met:

If you pay an allowance to your employee for the cost of protective clothing and did not require receipts to support the purchases, the allowance is not a taxable benefit if all of the following conditions apply:

You may pay a laundry or dry cleaner to clean uniforms and protective clothing for your employee or you may pay a reasonable allowance to your employee (when they do not have to provide a receipt). You may also reimburse the employee for these expenses when they present a receipt. If you do either of these, the amounts you pay are not taxable benefits for the employee.

Chapter 4 – Housing and travel assistance benefits paid in a prescribed zone

This chapter applies to you if you meet both of the following conditions:

If your employee works at a special site or a remote work location that is not in a prescribed zone, this chapter does not apply to you. For more information, see Board, lodging, and transportation – Special work sites and remote work locations.

For a list of places in prescribed northern zones and prescribed intermediate zones, go to Northern residents.

Accommodation or utilities provided by the employer

If you provide accommodation or utilities free of charge, it is a taxable benefit to your employee. The method you use to determine the value of the benefit depends on whether or not the place in a prescribed zone has a developed rental market.

Places with developed rental markets

Some cities and towns in prescribed zones have developed rental markets. When that is the case, you base the value of the benefit for any rent or utility you provide on its fair market value.

The cities and towns in prescribed zones that have developed rental markets are:

Cities and towns in prescribed zones that have developed rental markets
Dawson Creek              Fort McMurray              Fort St. John
Grande Prairie   Labrador City   Thompson
Wabush   Whitehorse   Yellowknife

Places without developed rental markets

In places in prescribed zones without developed rental markets, you have to use other methods to set a value on the housing benefit. The method you use depends on whether you own the residence or rent it from a third party.

If you provide both rent and utilities and can calculate their cost as separate items, you have to determine their value separately. Add both items to get the value of the housing benefit.

If your employee reimburses you for all or part of their rent or utilities, determine the benefit as explained below. Subtract any amount reimbursed by your employee and include the amount that remains in their income.

Accommodations you own

If you own a residence that you provide rent free to your employee, report as a benefit whichever of the following amounts is less:

Similarly, the amount you have to report as a benefit for utilities is whichever of the following amounts is less:

Accommodations you rent from a third party

If you rent a residence from a third party and provide it rent free to your employee, report as a benefit whichever of the following amounts is less:

Similarly, the amount you have to report as a benefit for utilities is whichever of the following amounts is less:

Allowable ceiling amounts

There are allowable ceiling amounts for different types of accommodation. Use these ceiling amounts to help determine the value of the housing benefit you provide in places in prescribed zones that do not have developed rental markets.

The amounts are considered to include any GST/HST that applies, so you do not have to calculate this amount. If the amount of the housing benefit you report is based on the fair market value, you have to calculate and report any GST/HST that applies. If the total of the fair market value, plus the GST/HST, is more than the allowable ceiling amount, report the allowable ceiling amount as the housing benefit.

For a list of the ceiling amounts for rent and utilities and definitions for different types of accommodation, go to Allowable ceiling amounts.

Note

If more than one employee occupies the same accommodation, divide the total housing benefit by the number of occupants.

Board, lodging, and transportation at a special work site in a prescribed zone

If an employee received a benefit or an allowance for working at a special work site that is excluded from income, this amount may affect their claim for a northern residency deduction.

If the employee worked at a special work site in a place in a prescribed zone and kept their principal place of residence in a place outside of a prescribed zone, you will have to identify the exempt part of the board and lodging benefit or allowance on the employee's T4 or T4A slip.

In the "Other information" area of the T4 slip, enter under code 31, the exempt part that is related to work sites within 30 kilometres from the nearest urban area with a population of at least 40,000 persons. Do not include this in box 14, "Employment income."

If you are a third-party payer and are completing a T4A slip for the employee of another employer, report the exempt part using code 124 "Board and lodging at special work sites," in the "Other information" area at the bottom of the T4A slip.

You have to do this even though you did not include the excluded amount in income. This way, the employees will have all the information required to correctly calculate their residency deduction.

Example

You paid your employee $4,000 for board and lodging at a special work site that is in a prescribed zone. You and the employee filled out Form TD4, Declaration of Exemption – Employment at a Special Work Site.

Since the benefit is not included as income, you did not enter the amount of the benefit in box 14, "Employment income," or in the "Other information" area under code 30 at the bottom of the T4 slip.

Of the $4,000 you paid, $1,200 relates to a special work site that was located 27 kilometres from a town with a population of 43,000 people (the 30-kilometre part).

You have to enter $1,200 in the "Other information" area under code 31 at the bottom of the T4 slip, even though it was not entered in the "Other information" area under code 30. The employee will then enter $1,200 on their Form T2222, Northern Residents Deductions.

Note

An amount that is not included as income for allowances at a remote work location does not affect the employee's claim for a northern residency deduction.

Travel assistance benefits

If you provide an employee with travel assistance in a prescribed zone, the benefit is taxable unless it was for business travel. The travel assistance could be for such things as vacation, bereavement, medical, or compassionate reasons.

If employees travel using transportation that you own or charter, determine the value of the benefit by assigning a fair market value to the transportation.

When employees travel by some means other than air, the cost of travel may include automobile expenses, meals, hotel and motel accommodations, camping fees, taxi fares, and road and ferry tolls.

When you give employees travel assistance benefits other than cash or refundable tickets (such as travel warrants, vouchers, or non-refundable tickets), the employees do not receive any benefit until they or members of their household take the trip. The benefit is income for the employees in the year the trip starts, and you should report it in that year.

There are many ways of providing travel assistance benefits. You can pay your employee a travel allowance before the trip, such as a certain amount per hour, or on some other periodic basis. You can also make lump-sum payments to your employee before or after the trip is taken. You should report such payments in your employee's income in the year they receive them, no matter when your employee or members of their household travel. For more information, go to Housing and travel assistance benefits paid in a prescribed zone.

You have to report these benefits in box 14, "Employment income," and in the "Other information" area under code 32 at the bottom of the employee's T4 slip.

If you are a third party who supplies travel benefits to the employee of another employer, report these benefits under code 028 "Other income," in the "Other information" area at the bottom of the T4A slip.

An employee who qualifies for the northern residents travel deduction will use this amount to calculate their claim. An employee can claim two trips per year, unless the trips were for medical reasons. Therefore, you have to show the value of medical travel benefits separately on the slip, as explained below.

If the travel assistance is a taxable benefit, include any GST/HST that applies in the value of the benefit. Do not include the GST/HST in the value of the travel allowances.

Medical travel assistance

Medical travel includes any trip your employee or members of their household take to get medical services that are not available in the area where they live. Medical travel benefits are considered to be the cost of transportation from the place in a prescribed zone to the place where medical treatment is available. This includes the transportation cost of an attendant if the patient needs one while travelling.

You have to identify the portion of the travel assistance that refers to the medical travel benefits you provide to your employee.

For a T4 slip, enter the entire travel assistance benefit under code 32 in the "Other information" area. Enter the medical part under code 33.

For a T4A slip, enter the entire travel assistance benefit under code 028 "Other income," in the "Other information" area at the bottom of the slip. Enter the medical part under code 116 "Medical travel assistance."

Notes

If you do not identify which part of the benefit was for medical travel, the CRA will consider all travel assistance as vacation (or other) travel and the employee will not be entitled to claim a deduction for medical travel. As well, the CRA will limit the deduction for the employee and the members of the household to two trips each.

Amounts you pay or reimburse your employee for medical travel or any associated cost under the terms of a private health services plan are not taxable benefits. Payments you make due to an obligation you have under a collective agreement may be considered a private health services plan. If this is the case, you should not report them on the employee's T4 slip.

For more information, go to:

Payroll deductions

When travel assistance benefits are in the form of non-refundable tickets or travel vouchers, you have to make payroll deductions when the benefit becomes taxable, i.e. when the employee or member of their household takes the trip. However, when you give travel assistance in the form of cash, the CRA considers it to be a cash advance, and you have to make the payroll deductions when the advance is paid to the employee.

You may waive the requirement to deduct income tax from the full travel assistance payment you give to your employee who lives in a prescribed northern zone (or from 50% of the payment received by an employee who lives in a prescribed intermediate zone). To do this, the employee has to agree, in writing, to use the payment entirely for vacation or medical travel when they receive it. If the employee does not agree, you have to deduct income tax.

Whether or not you have to make income tax deductions, you have to deduct CPP contributions and EI premiums on cash payments. You have to deduct CPP contributions on non-cash benefits if the employee also receives cash remuneration from you during the year. If the non-cash benefit is the only form of remuneration you provide to your employee in the year you do not have to make payroll deductions. For more information about the non-cash benefits withholding policy, go to Chapter 1 – General information.

Form TD1, Personal Tax Credits Return

Employees who live in a prescribed zone during a continuous period of at least six months (that begins or ends in the tax year) may be entitled to claim the northern residents deductions when filing their income tax and benefit returns. As a result, these employees can ask for a reduction in payroll deductions by completing the back of Form TD1, Personal Tax Credits Return.

The residency deduction is equal to whichever is less:

Note

Employees cannot claim a residency amount for both the principal place of residence and the special work site for the same period, even if they are both located in prescribed zones.

For 2023, an employee living in a prescribed northern zone can claim the total of:

For 2023, employees living in a prescribed intermediate zone can claim 50% of the total of the above amounts.

Note

Employees who receive board and lodging benefits from employment at a special work site in a prescribed zone have to reduce their residency amount by the value of the 30-kilometre part of the benefit they receive if they keep a principal residence that is not in a prescribed zone. The 30-kilometre part of the excluded benefit will be shown in the "Other information" area under code 31 at the bottom of the employee's T4 slip. For more information, see Board, lodging, and transportation at a special work site in a prescribed zone.

To calculate the amount of tax you should deduct if an employee is claiming a residency deduction on Form TD1:

Chapter 5 – Remitting the GST/HST on employee benefits

This chapter discusses the GST/HST treatment of employee benefits.

The Canada Revenue Agency is responsible for administering the GST/HST. In Quebec, Revenu Québec administers the GST/HST unless you are a person that is a selected listed financial institution (SLFI) for GST/HST or QST purposes or both. If the physical location of your business is in Quebec, contact Revenu Québec, at 1-800-567-4692. Also see the Revenu Québec publication IN-203, General Information Concerning the QST and the GST/HST, available at Revenu Québec.

Employee benefits

Salaries, wages, commissions, and other cash remuneration (including gratuities) you make to employees are not subject to the GST/HST.

However, the cost of benefits or non-cash compensation provided to an employee, commonly referred to as fringe or employee taxable benefits may be subject to the GST/HST. For the most part, the GST/HST treatment of these benefits is based on their treatment under the Income Tax Act.

Generally, if a benefit is taxable for income tax purposes, the CRA consider you to have made a supply of a property or service to the employee.

If the property or service that gives rise to the taxable benefit is subject to GST/HST, you are considered to have collected the GST/HST on that benefit. However, there are situations where you will not be considered to have collected the GST/HST on taxable benefits given to employees. These situations can be found in the section titled Situations where you are not considered to have collected the GST/HST.

Employee does not pay the GST/HST on taxable benefits

The employee does not pay the GST/HST that you have to remit on taxable benefits. However, as explained in previous chapters, an amount for the GST/HST has already been included in the taxable benefits you will report on your employee’s T4 slip.

Find out if you have to remit GST/HST on employee taxable benefits

The following steps will help you determine whether you have to remit the GST/HST on employee taxable benefits.

Step 1 – Determine whether the benefit is taxable under the Income Tax Act and the Excise Tax Act (see the previous chapters).

Step 2 – For each taxable benefit, determine whether any of the situations where you are not considered to have collected the GST/HST applies.

If none of the situations apply, you are considered to have collected the GST/HST on the taxable benefit and must calculate the amount of the GST/HST due. Go to Step 3.

Step 3 – If you are considered to have collected the GST/HST on a taxable benefit, you have to calculate the amount of the GST/HST due. More information on how to calculate the amount of GST/HST due can be found in the sections Automobile operating expense benefits and Benefits other than automobile operating expense benefits.

Step 4 – Include the amount of the GST/HST due on your GST/HST return and send your remittance, if applicable, with your GST/HST return for the reporting period that includes the last day of February 2024.

Note

If the GST/HST is for a reimbursement made by an employee or an employee’s relative for a taxable benefit other than a standby charge or the operating expense of an automobile, the amount may be due in a different reporting period. For more information, see Benefits other than automobile operating expense benefits.

Situations where you are not considered to have collected the GST/HST

You are not considered to have collected the GST/HST on taxable benefits provided to employees in any of the following situations:

Example

You, as an employer who is a GST/HST registrant, would like to reward an employee for outstanding performance, and you have agreed to pay for hotel accommodations and three meals a day, for one week, in London, England. An amount will be included in the income of the employee as a taxable benefit. However, you will not be considered to have collected tax in respect of the benefit provided to the employee, since the supplies were made outside of Canada.

Also, if the taxable benefit is for the standby charge or operating expense benefit of an automobile or an aircraft, you are not considered to have collected the GST/HST on this benefit in the following situations:

Note

To make this choice, fill out Form GST30, Election for Passenger Vehicles or Aircraft to be Deemed to be Used Exclusively in Non-Commercial Activities, or state in writing the information required on the form. You do not have to file this form or statement, but you have to keep it with your records for audit purposes. For more information about this election, contact the CRA at 1-800-959-5525.

How to calculate the amount of the GST/HST you are considered to have collected

The amount of the GST/HST you are considered to have collected on a taxable benefit is based on a percentage of the value of the benefit for GST/HST purposes. The percentage rate you use depends on:

Value of the benefit

The value of the benefit for GST/HST purposes is the total of the following two amounts:

Note

When an employee or an employee's relative has reimbursed an amount equal to the entire taxable benefit for a standby charge or the operating expense of an automobile and, as a result, no benefit is reported on the T4 slip, the value of the benefit for GST/HST purposes is equal to the amount of the reimbursement.

Automobile operating expense benefits

If the last establishment where your employee ordinarily worked or to which they ordinarily reported in the year is located in a participating province (Prince Edward Island, New Brunswick, Newfoundland and Labrador, Nova Scotia, or Ontario), you are considered to have collected an amount equal to a percentage of the value of the benefit for GST/HST purposes, based on one of the following rates:

If the last establishment where your employee ordinarily worked or to which they ordinarily reported in the year is located in a non-participating province or territory (the rest of Canada), you are considered to have collected 3% of the value of the benefit for GST/HST purposes.

When and how to report the GST/HST you are considered to have collected

You are considered to have collected the GST/HST, on a taxable benefit subject to the GST/HST, at the end of February in the year after the year you provided the benefit to the employee. This corresponds with the deadline for issuing T4 slips.

Include the amount of the GST/HST due in your GST/HST return for the reporting period that includes the last day of February 2024.

Example

You are a GST/HST registrant and have a monthly reporting period. Although you calculated the taxable benefits, including any GST/HST and PST, for each applicable pay period provided to your employees during 2023, you are considered to have collected the GST/HST on the taxable benefits at the end of February 2024. In your GST/HST return for the reporting period that includes the last day of February 2024, you have to include the GST/HST for the taxable benefits given to your employees in the prior calendar year on line 103 (line 105 if filed electronically) of your GST/HST return.

Note

If the GST/HST is for a reimbursement made by an employee or an employee’s relative for a taxable benefit other than a standby charge or the operating expense of an automobile, the amount may be due in a different reporting period. For more information, see Benefits other than automobile operating expense benefits.

Automobile benefits – standby charges, operating expense benefit, and reimbursements

The benefit for an automobile you provide is generally made up of a standby charge benefit plus an operating expense benefit minus any reimbursements employees make in the year for these benefits, as discussed in Chapter 2. When you are calculating the amount of GST/HST that you are considered to have collected on an automobile benefit you must take all three factors into consideration. The standby charge will be calculated at a certain percentage, and the operating expense benefit will be calculated at another. For more information, go to Calculating a standby charge for automobiles you own or lease.

In addition, the percentages used to calculate the amount of GST/HST will depend on the province or territory in which the automobile is provided as discussed above. Additional information on the GST/HST implications on automobile benefits can be found in GST Memorandum 9.2, Automobile benefits.

Example 1 – Remitting the GST/HST on automobile benefits in a non-participating province

As a corporation registered for the GST/HST, you buy a vehicle that is used more than 50% in commercial activities and is made available to your employee during 2023. The last establishment where the employee ordinarily reported in the year for the corporation was located in Manitoba.

You calculated a taxable benefit (including GST and PST) of $4,800 on the standby charge and an operating expense benefit of $600. Your employee reimbursed you $1,800 for the automobile operating expenses within 45 days of the end of 2023, so the operating expense benefit to be reported was reduced by this amount.

You claimed an input tax credit (ITC) for the purchase of the automobile and also on the operating expenses. Since the benefit is taxable under the Income Tax Act, and no situations described in Situations where you are not considered to have collected the GST/HST apply, you calculate the GST remittance as follows:

Standby charge benefit

$4,800

GST considered to have been collected on the standby charge benefit

$4,800 × 4/104 = $184.62

Operating expense benefit

Taxable benefit reported on T4

$600

Employee’s partial reimbursement of operating expenses

$1,800

Total value of the benefit

$2,400

GST considered to have been collected on the operating expense benefit

$2,400 × 3% = $72.00

Total GST to be remitted on the automobile benefit

$256.62

You are considered to have collected GST in the amount of $256.62 at the end of February 2024. You have to include this amount on your GST/HST return for the reporting period that includes the last day of February 2024.

Example 2 – Remitting the GST/HST on automobile benefits in a participating province 

Using the same facts as in Example 1, assume that the last establishment to which the employee ordinarily reported in the year for the corporation was located in New Brunswick. The corporation is not a large business for the purpose of recapturing input tax credits for the provincial part of the HST. In this case, you would calculate the HST remittance as follows:

Standby charge benefit

$4,800

HST considered to have been collected on the standby charge benefit

$4,800 × 14/114 = $589.47

Operating expense benefit

Taxable benefit reported on T4

$600

Employee’s partial reimbursement of operating expenses

$1,800

Total value of the benefit

$2,400

HST considered to have been collected on the operating expense benefit

$2,400 × 11% = $264.00

Total HST to be remitted on the automobile benefit

$853.47

You are considered to have collected HST in the amount of $853.47 at the end of February 2024. You have to include this amount on your GST/HST return for the reporting period that includes the last day of February 2024.

Input tax credits (ITCs)

As a registrant, you can claim an ITC to recover the GST/HST paid or payable on the purchases and operating expenses related to your commercial activities.

Generally, commercial activities include the making of supplies of taxable property and services. For more information about what are considered to be commercial activities, go to GST/HST for businesses.

For employee benefits, you can usually claim an ITC for the GST/HST paid or payable on property and services you supply to your employees or their relatives as a benefit if it is related to your commercial activities.

However, in some situations, you will not be able to claim an ITC for the GST/HST paid or payable for property or services that give rise to taxable benefits you provide your employees. For information on these situations, read the rest of this section.

ITC restrictions

Remember, if you cannot claim an ITC for the GST/HST paid or payable for property or services that give rise to a taxable benefit due to the restrictions described in one of the following paragraphs, you are not considered to have collected the GST/HST and, as a result, you do not have to remit the GST/HST on that benefit.

Club memberships

You may pay or reimburse fees for membership to any club whose main purpose is to provide dining, recreational, or sporting facilities. In such cases, you cannot claim an ITC for the GST/HST paid or payable, regardless of whether the club membership fees or dues are a taxable benefit for the employee for income tax purposes.

However, you can claim ITCs for the GST/HST paid or payable on such memberships if you acquire the memberships exclusively for supply in the ordinary course of a business of supplying them.

Exclusive personal use

You cannot claim an ITC for the GST/HST paid or payable on property or services you acquire, import, or bring into a participating province for the exclusive personal consumption, use, or enjoyment (90% or more) of an employee or an employee's relative.

However, you can claim an ITC in the following situations:

Property supplied by way of lease, licence, or similar arrangement

You cannot claim an ITC for the GST/HST paid or payable on property supplied by way of lease, licence, or similar arrangement that is more than 50% for the personal consumption, use, or enjoyment of one of the following:

However, you can claim an ITC if, during the same GST/HST reporting period, you make a taxable supply of the property to that individual for consideration that becomes due in that period and that is equal to its fair market value.

For more information on ITCs related to employee benefits, see GST/HST Memorandum 9.1, Taxable Benefits (Other than Automobile Benefits).

Property acquired before 1991 or from a non-registrant

If you acquired property before 1991, you did not pay the GST/HST. Also, you do not generally pay the GST/HST when you acquire property from a non-registrant. As a result, you cannot claim an ITC under these circumstances. However, if you make this property available to your employee and the benefit is taxable for income tax purposes, you may still be considered to have collected the GST/HST on this benefit.

Example

You bought a passenger vehicle from a non-registrant and made it available to your employee throughout 2023. The passenger vehicle is used more than 90% in the commercial activities of your business. You report the value of the benefit, including the GST/HST and if applicable, the PST, on the employee's T4 slip. For GST/HST purposes, you will be considered to have collected the GST/HST on this benefit even if you could not claim an ITC on the purchase of the passenger vehicle.

Examples for remitting GST/HST on employee benefits

The following examples will help you apply the rules for remitting the GST/HST on employee benefits.

Automobile benefit – See examples in the section on “Automobile benefits – standby charges, operating expense benefit, and reimbursements”.

Motor vehicle benefit – A Prince Edward Island employer provided a motor vehicle to an employee who drove it for personal and business use. The employer has never been a large business. The taxable benefit for the personal use is $5,100. As Prince Edward Island is a participating province, the HST considered to have been collected is calculated as follows:

HST considered to have been collected on the motor vehicle benefit = $5,100 × 14/114 = $626.32

You are considered to have collected the HST in the amount of $626.32 at the end of February 2024. You have to include this amount on your GST/HST return for the reporting period that includes the last day of February 2024.

Note

The calculation of the amount of GST/HST you are considered to have collected on the motor vehicle benefit differs from that of an amount calculated on an automobile benefit.

Subsidized Meals – An Ontario employer provides subsidized meals to employees (such as in an employee dining room or cafeteria), and the employee does not pay any amount for these meals. The cost of food, preparation and service per employees over the course of the year is $2,052 including HST. The ITCs will not be restricted on property or services purchased to make supplies of meals if the employer is acquiring the property or service generally for the use of employees, but not specifically for any particular employee.

As Ontario is a participating province, the HST considered to have been collected is calculated as follows:

HST considered to have been collected on the subsidized meals benefit = $2,052 × 12/112 = $219.86

You are considered to have collected the HST in the amount of $219.86 at the end of February 2024. You have to include this amount on your GST/HST return for the reporting period that includes the last day of February 2024.

Cell phone – An employer located in Manitoba provides the general manager of the company with a cell phone both for business and personal use.

The value of the taxable benefit for personal use of the cell phone for the year is $617. The employee reimbursed the employer $200 for the cell phone in December. The amount of the benefit shown on the T4 is $417.

As Manitoba is a non-participating province, the GST considered to have been collected is calculated as follows:

GST considered to have been collected on the cell phone benefit = $417 × 4/104 = $16.04

GST collected for the reimbursement – $200 × 5/105 = $9.52

In this situation you have to include the GST for the reimbursement in your GST return for the reporting period that includes the date of the reimbursement (December) = $200 × 5/105 = $9.52. You are considered to have collected the GST on the cell phone benefit in the amount of $16.04 at the end of February 2024. You have to include this amount on your GST/HST return for the reporting period that includes the last day of February 2024.

Long-service award – You bought a watch for $560 (including the GST/HST and PST) for your employee to mark the employee’s 25 years of service. It was the only gift or award provided to the employee in the year. You reported a taxable benefit of $60 in box 14 and under code 40 on the employee’s T4 slip.

There is no GST considered to have been collected on the long service award.

In this situation, you cannot claim an ITC because you bought the watch for the employee’s exclusive personal use and enjoyment. Therefore, there is no GST/HST to remit on the benefit.

Special clothing – You provided safety footwear designed to protect your employee from hazards associated with their employment. The footwear is not considered to be a taxable benefit for the employee, so you are not considered to have collected the GST/HST on the footwear and you do not have to remit any tax. However, you can claim an ITC for any GST/HST that you paid for the footwear.

There is no GST considered to have been collected on the special clothing.

Benefits chart

This chart indicates whether you need to deduct Canada Pension Plan (CPP) and employment insurance (EI) from the taxable allowances and benefits discussed in this guide, and shows which codes you should use to report them on the employee's T4 slip. The chart also indicates whether the GST/HST has to be included in the value of the taxable benefit for income tax purposes. Cash reimbursements and non-cash benefits are subject to GST/HST, unless they are for exempt or zero-rated supplies. Cash allowances are not subject to GST/HST.

The chart indicates whether the taxable allowances and benefits are subject to CPP and EI withholdings
Taxable allowance or benefit Deduct
CPP Footnote 1
Deduct
EI
Code for
T4 slip
Include
GST/HST
Automobile and motor vehicle allowances – in cash yes yes 40 no
Automobile standby charge and operating expense
benefits – non-cash
yes no 34 yes
Board and lodging, if earnings also paid yes Footnote 2  
30 Footnote 3 
Cellular phone and Internet services – in cash yes yes 40 yes
Cellular phone and Internet services – non-cash cash yes no 40 yes
Child care expenses – in cash yes yes 40 Footnote 4 
Child care expenses – non-cash yes no 40 Footnote 4   
Counselling services – in cash yes yes 40 Footnote 5 
Counselling services – non-cash yes no 40 Footnote 5 
Disability-related employment benefits – in cash yes yes 40 Footnote 6 
Disability-related employment benefits – non-cash yes no 40 Footnote 6 
Discounts on merchandise and commissions on
sales–non-cash
yes no 40 yes
Educational allowances for children – in cash yes yes 40 no
Employment insurance premium rebate – in cash yes yes 40 no
Gifts and awards – in cash yes yes 40 no
Gifts and awards–non-cash and near-cash yes no 40 yes
Group term life insurance policies – employer-paid
premiums – non-cash
yes no 40 no
Housing allowance, clergy – in cash Footnote 7 
yes 30 no
Housing allowance – in cash yes yes 30 Footnote 8 
Housing benefit, clergy, rent-free or low-rent – non cash

Footnote 7 

Footnote 9 
30 Footnote 8 
Housing benefit, rent-free or low-rent – non cash yes Footnote 9 
30 Footnote 8 
Housing loss – in cash yes yes 40 no
Interest-free and low-interest loans Footnote 6 yes no 36 no
Loans – Home purchase yes no 36 no
Loans – Home relocation yes no 36 no
Loans – Forgiven – in cash yes yes 40 no
Meals – Overtime allowances – in cash yes yes 40 no
Meals – Overtime–in cash yes yes 40 yes
Meals – Overtime – non-cash yes no 40 yes
Meals – Subsidized – non-cash yes no 40 yes
Medical expenses – in cash yes yes 40 Footnote 10 
Medical expenses – non-cash yes no 40 Footnote 10 
Moving expenses and relocation benefits – in cash yes yes 40 yes
Moving expenses and relocation benefits – non-cash yes no 40 yes
Moving expenses – non-accountable allowance
over $650 – in cash
yes yes 40 no
Municipal officer's expense allowance yes no 40 no
Parking – in cash yes yes 40 no
Parking – non-cash yes no 40 yes
Pooled registered pension plan contributions (paid to
a plan not registered with the Minister of National Revenue)
yes yes 40 no
Power saws and tree trimmers; rental paid by employer for employee-owned tools – in cash yes yes 40 yes
Premiums for income maintenance plans and other
insurance plans – non cash
yes no 40  no
Premiums under provincial hospitalization, medical care insurance, and certain federal government plans – in cash yes yes 40 no
Premiums under provincial hospitalization, medical care insurance, and certain federal government plans – non-cash yes no 40 no
Professional membership dues – in cash yes yes 40 Footnote 11 
Professional membership dues – non-cash yes no 40 Footnote 11 
Recreational facilities (in house) – non-cash yes no 40 yes
Recreational facilities or club membership dues – in cash yes yes 40 yes
Registered retirement savings plan (RRSP)
contributions – in cash
yes Footnote 12 
40 no
Registered retirement savings plan (RRSP) administration
fees – non-cash
yes no 40 Footnote 11 
Scholarships and bursaries – in cash yes yes 40 no
Security option (Cash-outs) yes yes Footnote 13 
no
Security options yes no Footnote 13 
no
Social events – in cash yes yes 40 no
Social events – non-cash yes no 40 yes
Spouse or common-law partner's travelling
expenses – in cash
yes yes 40 no
Spouse or common-law partner's travelling
expenses – non-cash
yes no 40 yes
Tax-Free Savings Account – contributions–in cash yes Footnote 12 
40 no
Tax-Free Savings Account – administration
fees – non-cash
yes no 40 Footnote 11 
Tickets yes no 40 yes
Tool allowance – in cash yes yes 40 no
Tool reimbursement – in cash yes yes 40 yes
Transportation passes – in cash yes yes 40 yes
Transportation passes – non-cash yes no 40 yes
Transportation to and from the job – in cash yes yes 40 yes
Transportation to and from the job – non-cash yes no 40 yes
Travel assistance in a prescribed zone – non-cash yes no 32 yes
Travel assistance in a prescribed zone – in cash yes yes 32 yes
Travelling allowances other employees, unreasonable yes yes 40 no
Tuition fees – in cash yes yes 40 Footnote 11 
Tuition fees – non-cash yes no 40 Footnote 11 
Uniforms and protective clothing – in cash yes yes 40 yes
Uniforms and protective clothing – non-cash yes no 40 yes
Utilities allowance, clergy – in cash Footnote 7 
yes 40 no
Utilities allowance – in cash yes yes 40 no
Utilities benefit, clergy – non cash Footnote 7 
no 40 Footnote 8 
Utilities benefit, rent-free or low-rent – non cash yes no 40 Footnote 8 

 Notes

Digital services

Handle your business taxes online

My Business Account lets you view and manage your business taxes online.

Use the my Business Account throughout the year to:

To sign in to or register for the CRA's digital services, go to:

For more information, go to Digital services for businesses.

Receive your CRA mail online

Register for email notifications to find out when your CRA mail, like your PD7A – Statement of account for current source deductions, and remittance voucher is available online in My Business Account.

For more information, go to Email notifications from the CRA – Businesses

Create a pre-authorized debit agreement from your Canadian chequing account

A pre-authorized debit (PAD) is a secure online, self-service, payment option for individuals and businesses to pay their taxes. A PAD lets you authorize withdrawals from your Canadian chequing account to pay the CRA. You can set the payment dates and amounts of your PAD agreement using the CRA’s secure My Business Account service at My Business Account, or the CRA BizApp at Mobile apps – Canada Revenue Agency. PADs are flexible and managed by you. You can use My Business Account to view your account history and modify, cancel, or skip a payment. For more information, go to Pay by pre-authorized debit.

For more information

If you need help

If you need more information after reading this guide, go to Taxes or call 1-800-959-5525.

Direct deposit

Direct deposit is a fast, convenient, and secure way to get your CRA payments directly into your account at a financial institution in Canada. For more information and ways to enrol, go to Direct deposit – Canada Revenue Agency or contact your financial institution.

Forms and publications

The CRA encourages filing your return electronically. If you need a paper version of the CRA's forms and publications, go to Forms and publications or call 1-800-959-5525.

Electronic mailing lists

The CRA can send you an email when new information on a subject of interest to you is available on the website. To subscribe to the electronic mailing lists, go to Canada Revenue Agency electronic mailing lists

Related publications

Tax Information Phone Service (TIPS)

For tax information by telephone, use the CRA's automated service, TIPS, by calling 1-800-267-6999.

Teletypewriter (TTY) users

If you use a TTY for hearing or speech impairment, call 1-800-665-0354.

If you use an operator-assisted relay service, call the CRA's regular telephone numbers instead of the TTY number.

Formal disputes (objections and appeals)

If you disagree with an assessment, determination, or decision, you have the right to file a formal dispute.

For more information about objections or formal disputes, and related deadlines, go to Objections, appeals, disputes, and relief measures.

CRA service feedback and program

Service complaints

You can expect to be treated fairly under clear and established rules, and get a high level of service each time you deal with the CRA. For more information about the Taxpayer Bill of Rights, go to Taxpayer Bill of Rights.

You may provide compliments or suggestions and if you are not satisfied with the service you received:

1. Try to resolve the matter with the employee you have been dealing with or call the telephone number provided in the correspondence received from the CRA. If you do not have contact information for the CRA, go to Contact the Canada Revenue Agency.

2. If you have not been able to resolve your service-related issue, you can ask to discuss the matter with the employee’s supervisor.

3. If the problem is still not resolved, you can file a service-related complaint by filling out Form RC193, Service Feedback. For more information and to learn how to file a complaint, go to Submit service feedback.

If you are not satisfied with how the CRA has handled your service-related complaint, you can submit a complaint to the Office of the Taxpayers’ Ombudsperson.

Reprisal complaints

If you have received a response regarding a previously submitted a service complaint or requested a formal review of a CRA decision and feel you were not treated impartially by a CRA employee, you can submit a reprisal complaint by filling out Form RC459, Reprisal Complaint.

For more information about complaints and disputes, go to Service feedback, objections, appeals, disputes, and relief measures.

Due dates

When a due date falls on a Saturday, Sunday, or public holiday recognized by the CRA, your payment is considered on time if the CRA receives it on or if it is processed at a Canadian financial institution on or before the next business day.

For more information, go to Payroll.

Cancel or waive penalties and interest

The CRA administers legislation, commonly called taxpayer relief provisions, that allows the CRA discretion to cancel or waive penalties or interest when taxpayers cannot meet their tax obligations due to circumstances beyond their control.

The CRA’s discretion to grant relief is limited to any period that ended within 10 calendar years before the year in which a request is made.

For penalties, the CRA will consider your request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make your request. For example, your request made in 2023 must relate to a penalty for a tax year or fiscal period ending in 2013 or later.

For interest on a balance owing for any tax year or fiscal period, the CRA will consider only the amounts that accrued during the 10 calendar years before the year in which you make your request. For example, your request made in 2023 must relate to interest that accrued in 2013 or later.

Taxpayer relief requests can be made online using the CRA’s My Account, My Business Account (MyBA), or Represent a Client digital services:

You can also fill out Form RC4288, Request for Taxpayer Relief - Cancel or Waive Penalties or Interest, and send it with one of the following ways:

For more information about how to submit documents online, go to Submit documents online.

For more details on the required supporting documents about relief from penalties and interest, and the related forms and publications, go to Cancel or waive penalties and interest at the CRA.

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