A lot of business owners like to provide extra incentives and/or help in various ways for their employees. Often what they don’t realize is that this could be considered as “fringe benefits”, and as such is taxable. This is frustrating for both the employer and employee, but nevertheless it could be the law.
Some prime examples of what could be considered as such is as follows….
Board and Lodging:
If an employer offers an employee perhaps a reduced wage but gives them free lodging then this is considered as a form of payment as well. This is common for farmers who provide a place for their farmhands to live, or perhaps managers of Hotels. The value of the lodging has to be determined at fair market value, and the tax paid on it accordingly.
Gifts:
Many Companies will give gifts at Christmas to their employees for example. This is where the CRA plays scrooge and makes this taxable as well, although there are exceptions. If it doesn’t exceed the value of $100 and the employer is not claiming it as an expense then it may not be taxable. Tax laws are constantly changing and it is important that both employees and employers keep themselves aware of this.
Incentives:
Some companies like to run contests for example as an incentive. What may not be realized is that the prize in the end could be taxable. Maybe the prize is a week’s vacation at the boss’s time share in Mexico. This could be deemed as a taxable benefit.
Education:
In this case the benefit may or may not be classed as a taxable benefit. Generally if the training is taken so it benefits the employer who is paying for it then it is usually not taxable. However, if the training is not going to provide any benefit to the employer then it may very well be a taxable benefit.
The bottom line is if you as an employer are simply being kind to your employee’s in various different ways you really need to check out what the tax implications are for both you as the employer and for the employee.
Many wonder why the Canadian Government is going to such tax grabbing methods such as this. Mostly it is because they do not want employer incentives to be used to avoid taxes by claiming them as expenses to reduce the tax obligation of the business. Secondly, let’s face it when the Government sees ways of getting more money into the tax coffers they are going to do it.
