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Calculate payroll deductions and contributions

Gifts, awards, and long-service awards

Content has been updated for clarity, completeness and plain language.

The changes are identified by the following tags:

  • Update to CRA administrative policy
  • New CRA administrative policy

On this page

Determine if the benefit is taxable

Generally, gifts, awards and long-service awards you provide to your employees are taxable.

Depending on your situation, the benefit arising from certain non-cash gifts and awards may not be taxable under the CRA's administrative policy .

What is a "gift"

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

What is an "award"

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.

What is a "reward"

A reward is provided to your employees for performance-related reasons and is a taxable benefit for the employee.

If you give your employee a non-cash gift or award for any other reason, the CRA’s administrative policy does not apply and you have to include the fair market value (FMV) of the gift or award in the employee’s income.

Situations

Situation: Gifts or awards you provide to your employees considered cash or near-cash On or after January 1, 2022 – Update to CRA administrative policy

The CRA's administrative policy does not apply if you provide an employee a gift or an award and it is considered cash or near-cash. The benefit is taxable.

Cash

Cash includes:

  • currency, or its equivalent
  • cheques which can be taken into any store or bank and deposited or spent as the employee wishes

This includes reimbursements, where the employee selects and purchases something and then submits a receipt to the employer, receiving cash in return.

Near-cash

Near-cash includes:

  • Something easily converted to cash such as bonds, securities, or precious metals/jewels.
  • A gift card that does not meet all conditions for the card to be considered non-cash .
  • A prepaid card issued by a financial institution to certain payment card networks (for example, MasterCard, Visa and American Express) that can be used to pay for purchases.
  • Digital currency which is electronic money (for example, cryptocurrencies which are not issued or governed by a government or central bank).

To calculate the benefit, go to Calculate the value of the benefit.

Situation: Non-cash gifts or awards provided to your employees On or after January 1, 2022 – Update to CRA administrative policy

Non-taxable situation

Under the CRA's administrative policy, if you provide your employee with a non-cash gift (including gift cards that meet the conditions for the card to be considered non-cash ) or an award, the benefit is not taxable if all of the following apply:

  • It is an unlimited number of non-cash gifts or awards with a combined total fair market value of $500 or less (including taxes) in the year. Do not include the following in the $500 limit:

  • If it is a:

    • gift, it is for a special occasion (includes a religious holiday, birthday, wedding, or birth of a child)
    • recognition award, it is for the employee's overall contributions to the workplace
  • It is not provided as rewards you provide to your employees related to the employee's job performance

Taxable situation

If the total of non-cash gifts and awards are more than $500, the amount over $500 is taxable. Long-service awards have their own $500 limit. The unused portion of the $500 limit for non-cash gifts and awards cannot be applied to long-service awards.

You cannot include the gift or award in the $500 limit in the following situations:

To calculate the benefit, go to Calculate the value of the benefit.

Situation: Gift cards you provide to your employees that are considered non-cash On or after January 1, 2022 – New CRA administrative policy

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

  • It comes with money already on it and can only be used to purchase goods or services from a single retailer or a group of retailers identified on the card
  • The terms and conditions of the gift card clearly state that amounts loaded to the card cannot be converted into cash
  • A log is kept to record gift card information containing all of the following:
    • name of the employee
    • date the gift card was provided to the employee
    • reason for providing the gift card (part of social event, gift or award)
    • type of gift card
    • amount of the gift card
    • name of the retailer(s)

This includes gift certificates, chip cards and electronic gift cards. If the gift card meets all these conditions, it is considered non-cash for the purpose of the CRA's administrative policy. If the card does not meet these conditions, it is considered a near-cash benefit and is taxable.

You must review the terms and conditions of the gift card to make sure it meets the conditions of the CRA's administrative policy above. You must complete this review on a case by case basis.

For general information about the regulations for each province and territory from the Financial Consumer Agency of Canada, go to: Gift cards.

To determine if non-cash gifts are taxable, continue to one of the following:

Situation: Long-service awards you provide to your employees On or after January 1, 2023 – Update to CRA administrative policy

Non-taxable situation

Under the updated CRA's administrative policy, if you provide your employee with a long-service award, the benefit is not taxable if all of the following apply:

  • It is a non-cash gift or award, including gift cards that meet all conditions for the card to be considered non-cash 
  • It is a recognition of 5 or more years of service with the employer
  • It has been at least 5 years since the last time the employer gave the employee a long-term service award
  • The FMV of the award is $500 or less (including taxes)

Taxable situation

If the long-service awards you provide to your employees do not meet all of the conditions above, it is a taxable benefit.

Long-service awards have their own $500 limit. The unused portion of the $500 limit for long-service awards cannot be applied to non-cash gifts and awards.

Example

If the 15 year award was provided at 17 years of service, and then the next award is provided at 20 years of service, the 20 year award is a taxable benefit because 5 years will not have passed since the previous award.

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

Situation: Rewards you provide to your employees related to the employee's job performance

The CRA's administrative policy does not apply if you provide an employee with a gift or an award related to the employee's job performance, such as meeting or exceeding sales targets, or the completion of a project. It is considered a reward and the benefit is taxable.

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

Situation: Gifts and awards provided to non-arm’s length employees

The CRA's administrative policy does not apply if the gift or award is provided to a non-arm’s length employee, such as a relative, shareholder, or a person related to them.

Learn more: Income Tax Folio S1-F5-C1, Related persons and dealing at arm's length.

To calculate the benefit, go to Calculate the value of the benefit.

Situation: Gifts and awards you donate to a charitable organization at your employee's direction
  • had the option of receiving a non-cash gift or award or a long-service award
  • chose to have the employer directly donate the amount to a charity in lieu of the non-cash gift or award
  • the gift or award, if it had been received, would have met the conditions under the policy

Regardless of whether the donation is a non-cash gift or an award or a long-service award, any amount over the $500 limit is taxable.

To calculate the benefit, go to Calculate the value of the benefit.

Situation: Gifts and awards provided by manufacturers and other payers to your employees

Gifts and awards from a manufacturer passed on by the dealer

Manufacturers sometimes provide a gift or award to the dealer of the goods for the dealer to pass on to their employee. If the dealer passes a non-cash award to an employee, the benefit may not be taxable, depending on the circumstances. The gift or award is treated as though it was provided by the dealer to their employee. If the gift or award falls within our administrative policy, the benefit is not taxable.

To determine if taxable, go to Non-cash gifts or awards provided to your employees.

Gifts and awards from a manufacturer provided directly to an employee of the dealer

When gifts and awards are provided directly by a manufacturer to an employee, the benefit is not reported by the employer.

Manufacturer reports the benefit on a slip

If the total value of all remuneration (gifts, awards and other payments) provided by the manufacturer to the dealer's employee is more than $500 (under the CRA administrative policy for issuing T4A slips), the manufacturer has to report the value of the benefit on a T4A slip at the end of the year as follows:

  • Code 154 – Cash award or prize from payer, in Other Information

If any tax was deducted, it should be reported in box 22 of the T4A slip.

Lean more: Other information for the T4A slip.

Gifts and awards provided by a person other than the employer (for example, gift bag provided at a trade show)

If the gifts and awards are provided by a person other than the employer the benefit is not taxable if all of the following apply:

  • Recipients attend a trade show, convention, awards show, or similar event specific to their trade
  • They receive gifts, gift bags or other promotional items at the event
  • The person giving them the gift is not their employer
  • The fair market value is $500 or less
Payer reports the benefit on a slip

If the total value of all remuneration (gifts, awards and other payments) provided by the payer is more than $500 (under the CRA administrative policy for issuing T4A slips), the payer has to report the value of the benefit on a T4A slip at the end of the year as follows:

  • Code 28 – Other income

If any tax was deducted, it should be reported in box 22 of the T4A slip.

Situation: Gifts and awards you provide to your employees through a prize draw

The CRA's administrative policy does not apply in this situation. If the draw is only open to employees of the company, then any item won is a benefit of employment and is taxable.

To calculate the benefit, go to Calculate the value of the benefit.

Situation: Gifts and awards provided to your employees through a workplace social committee

Non-taxable situation – Social committees funded entirely by the employees

If the committee is funded entirely by the employees and not controlled by the employer:

  • gifts or awards given by the social committee are non-taxable, similar to a return of contributions
  • a prize won via lottery from a social committee is considered to be a windfall

For more information about the tax treatment of lotteries and prize draws go to Income Tax Folio S3-F9-C1, Lottery Winnings, Miscellaneous Receipts, and Income (and Losses) from Crime.

Taxable situation – Social committees funded wholly or partly by the employer

If you fund wholly or in part the social committee, the portion of the benefit funded by you is taxable and the CRA's administrative policy would apply to that portion of the gift or award given to the employee.

Learn more: Non-cash gifts or awards provided to your employees.

To calculate the benefit, go to Calculate the value of the benefit.

 

Calculate the value of the benefit

If the benefit is taxable, the value of the benefit is equal to the combined total fair market value (FMV) of the gifts and awards provided in the year.

Where our policy on non-cash gifts and awards applies, only amounts over the $500 limit must be included in the employee's income.

For example, if you provide gifts and awards with a total value of $650, there is a taxable benefit of $150 ($650 – $500). Include items whose FMV may have been altered by a logo or engraving in the calculation.

Do not include

Do not include the following in the $500 limit:

You also cannot include the gift or award in the $500 limit in the following situations:

Example 1 – Calculations for gifts, awards and long-service awards

In 2019, Steve received a non-cash gift with a value of $450 from his employer as well as a T-shirt with the company logo worth $15. He also received a long-service award worth $400 on November 2, 2019, recognizing his time with the company since starting on November 1, 2013.

Calculations for gifts and awards

  • $450 for non-cash gift
  • plus $15 for T-shirt with company logo (nominal value)
  • equals $465 is the value of the non-cash and nominal value gifts
  • minus $15 because the company t-shirt is an item of nominal value and does not need to be included in the taxable benefit calculation
  • equals $450 is the total value of the non-cash gift

 The non-cash gift is not a taxable benefit because the value is $500 or less (including taxes) in the year and the gift met all the conditions to be included in the $500 annual limit for non-cash gifts and awards.

Calculations for long-service awards

  • equals $400 is the value of the non-cash long-service award

 The non-cash long-service award is not a taxable benefit because the cost is $500 or less (including taxes) and met all the conditions for the long-service award to be not taxable.

Example 2 – Calculations for gifts, awards and long-service awards

In 2017, Judith received two non-cash gifts of values of $450 and $250 respectively as well as a T-shirt with the company logo with $15. She also received a long-service award worth $400 on November 2, 2017, recognizing her time with the company since starting on November 1, 2013.

Calculations for gifts and awards

  • $450 for non-cash gift
  • plus $250 for non-cash gift
  • plus $15 for T-shirt with company logo (nominal value)
  • equals $715 is the value of the non-cash and nominal value gifts
  • minus $15 because the company t-shirt is an item of nominal value and does not need to be included in the taxable benefit calculation
  • equals $700 is the total value of the non-cash gifts
  • minus $500 (maximum for non-cash gifts and awards in the year)
  • equals $200 is the value of the benefit to be included on the T4 slip for the non-cash gifts

The non-cash gifts are partly taxable benefits because the value is $500 or more (including taxes) in the year and the gifts and awards met all the conditions to be included in the $500 annual limit for non-cash gifts and awards.

Calculations for long-service awards

  • equals $400 is the value of the benefit to be included on the T4 slip for the non-cash long-service award

The non-cash long-service award is a taxable benefit because the long-service award must be in recognition of five or more years of service with the employer to be not taxable.

Total calculations

  • $200 for the non-cash gifts
  • plus $400 for the long-service award
  • equals $600 is the total value of the benefit to be included on the T4 slip

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

Example 3 – Calculations for gifts, awards and long-service awards

In 2021, Jeremiah received a non-cash gift with a value of $450 as well as a T-shirt with the company logo with $15. He also received a long-service award worth $400 on November 2, 2021, recognizing his time with the company since starting on November 1, 2013. He previously received a $400 long-service award on November 2, 2019.

Calculations for gifts and awards

  • $450 for non-cash gift
  • plus $15 for T-shirt with company logo (nominal value)
  • equals $465 is the value of the non-cash and nominal value gifts
  • minus $15 because the company t-shirt is an item of nominal value and does not need to be included in the taxable benefit calculation
  • equals $450 is the total value of the non-cash gifts

 The non-cash gift is not a taxable benefit because the value is $500 or less (including taxes) in the year and the gift met all the conditions to be included in the $500 annual limit for non-cash gifts and awards.

Calculations for long-service awards

  • $400 for long-service award provided in 2019
  • plus $400 for long-service award provided in 2021
  • equals $800 is the value of the long-service award
  • minus $400 is the value of the first long-service award that was eligible to be considered as non-taxable
  • equals $400 is the value of the benefit to be included on the T4 slip

The first non-cash long-service award is not a taxable benefit because it met all the conditions for the long-service award to be non-taxable. The second non-cash long-service award is a taxable benefit because it had not been five years since the last time the employer had given the employee a long-service award.

Total calculations

  • $0 for the non-cash gifts
  • plus $400 for the long-service award
  • equals $400 is the total value of the benefit to be included on the T4 slip

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

Example 4 – Calculations for gifts, awards and long-service awards

In 2019, Brigitte received two non-cash gifts of values of $450 and $250 respectively as well as a T-shirt with the company logo with $15. She also received a cash gift from her employer of $200. She received a long-service award worth $840 on November 2, 2019, recognizing her time with the company since starting on November 1, 2013.

Calculations for gifts and awards

  • $450 for non-cash gift
  • plus $250 for non-cash gift
  • plus $15 for T-shirt with company logo (nominal value)
  • equals $715 is the value of all non-cash gifts
  • minus $15 because the company t-shirt is an item of nominal value and does not need to be included in the taxable benefit calculation
  • minus $500 (maximum for non-cash gifts and awards in the year)
  • equals $200 is the value of the benefit to be included on the T4 slip for the non-cash gifts

The non-cash gifts are partly taxable benefits because their value is $500 or more (including taxes) in the year and the gifts met all the conditions to be included in the $500 annual limit for gifts and awards.

Calculations for long-service awards

  • $840 for long-service award provided in 2019
  • minus $500 (maximum for long-service award and must have been at least five years since the last time the employer gave the employee a long-service award)
  • equals $340 is the value of the benefit to be included on the T4 slip for the long-service awards

The non-cash long-service award is a partly taxable benefit because the long-service award was worth more than $500 and had met the conditions for the $500 limit for long-service awards to apply. The value of the long-service award above the $500 limit is a taxable benefit.

Total calculations

  • $200 for the non-cash gift
  • plus $200 for the cash gift
  • plus $340 for the long-service award
  • equals $740 is the total value of the benefit to be included on the T4 slip

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

Example 5 – Calculations for gifts, awards and long-service awards involving gift cards

In 2020, Joanne received a gift card from her employer with a value of $200 as a gift to celebrate her 30th birthday. She also received another gift card from her employer with a value of $300 as a long-service award, recognizing her 10 years of service with the company. She had never received a long-service award before. Both of these gift cards met all conditions for the card to be considered non-cash.

She received one other gift in the year with a value of $100. This was also a gift card, but it did not meet the conditions to be considered non-cash as it could also be converted into cash.

Calculations for gifts and awards

  • equals $200 is the total value of the non-cash gifts (gift card meeting all conditions)

The gift card which met all conditions to be considered non-cash is not a taxable benefit because the value is $500 or less (including taxes) in the year and the gift met all the conditions to be included in the $500 annual limit for non-cash gifts and awards.

Calculations for long-service awards

  • equals $300 is the value of the non-cash long-service award

The non-cash long-service award is not a taxable benefit because the value is $500 or less (including taxes) and met all the conditions for the long-service award to be not taxable.

Total calculations

  • $0 for the non-cash gift
  • plus $0 for the long-service award
  • plus $100 for the non-cash gift, gift card that does not meet all conditions
  • equals $100 is the total value of the benefit to be included on the T4 slip

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

Example 6 – Calculations for gifts or awards through a social committee

A social committee had a total funding of $18,000, $12,000 (66.67%) of which came from the employer and $6,000 (33.3%) came from the employees. The social committee provided an employee, Nicolae, with a series of gifts over the course of the year:

  • a non-cash gift for a special occasion (religious holiday) worth $360
  • a cash gift of $800
  • a gift certificate of $60 convertible to cash (near-cash)

The employer did not provide Nicolae with any other gifts, awards, or long-service awards in the year.

The portion of the benefit received from the gifts provided by the social committee funded by the employer is a taxable benefit. The portion of the benefit received from the gifts provided by the social committee funded by the employees is not a taxable benefit. The taxable benefit is calculated as follows:

  • $576.20 is the taxable benefit from the employer’s share of the cash and near-cash gifts ($860 x 66.67%)
  • plus $0 is the taxable benefit from the employer’s share of the non-cash gift ($360 x 66.67% = $240, which is less than the $500 limit for non-cash gifts and awards which can be provided in the year as the employer provided no other gifts and awards)
  • equals $576.20 is the value of the benefit to be included on the T4 slip

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

Example 7 – Calculations for gifts or awards through a social committee

A social committee had a total funding of $18,000, $12,000 (66.67%) of which came from the employer and $6,000 (33.3%) came from the employees. The social committee provided an employee, Diane, with a series of gifts over the course of the year:

  • a non-cash gift for a special occasion (religious holiday) worth $1,500
  • a cash gift of $800
  • a gift certificate of $60 convertible to cash (near-cash)

The employer did not provide Diane with any other gifts, awards, or long-service awards in the year.

The portion of the benefit received from the gifts provided by the social committee funded by the employer is a taxable benefit. The portion of the benefit received from the gifts provided by the social committee funded by the employees is not a taxable benefit. The taxable benefit is calculated as follows:

  • $576.20 is the taxable benefit from the employer’s share of the cash and near-cash gifts ($860 x 66.67%)
  • plus $500.00 is the taxable benefit from the employer’s share of the non-cash gift ($1,500 x 66.67% = $1,000, less the $500 limit for non-cash gifts and awards which can be provided in the year as the employer provided no other gifts and awards)
  • equals $1,076.20 is the value of the benefit to be included on the T4 slip

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

Withhold payroll deductions and remit GST/HST

You must withhold the following deductions. The amounts must be included in the pay period they were received or enjoyed.

The withholding and remitting requirement depends on the type of remuneration: cash , non-cash , or near-cash .

  • Non-cash and near-cash: Option 1

    Withhold:

    • Income tax
    • CPP
    • EI (do not withhold)

    Remit:

    • GST/HST in certain situations

  • Cash: Option 2

    Withhold:

    • Income tax
    • CPP
    • EI

    Do not remit:

    • GST/HST

 Learn how to calculate deductions and the GST/HST to remit on benefits: How to calculate – Calculate payroll deductions and contributions.

Report the benefit on a slip

If the benefit is taxable, you must report the following on the slip.

 Learn more: Fill out the slips and summaries – File information returns (slips and summaries).

References

Related

Legislation

ITA: 6
Amounts to be included as income from office or employment
ITA: 6(1)(a)
Value of benefits
ITA: 6(1)(b)
Personal or living expenses (allowances)
ITA: 56(2)
Indirect payments
CPP: 12(1)
Amount of contributory salary and wages
ETA: 173
Taxable benefit is considered a supply for GST/HST purposes
IECPR: 2(1)
Amount of insurable earnings
IECPR: 2(3)
Earnings from insurable employment
IECPR: 2(3)(a.1)
Earnings from insurable employment – amount excluded as income under 6(1)(a) or (b), 6(6) or (16) of the ITA

What is the CRA's administrative policy for the purpose of taxable benefits

Cash

Near-cash

Non-cash

Conditions for the card to be considered non-cash

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