Month: September 2018

SUBSIDIZED MEALS: Are They a Taxable Benefit?

Do you have an employee dining room or cafeteria? In a March 21, 2018 Technical Interpretation, CRA stated that they do not consider meals subsidized by the employer to be a taxable benefit provided the employee pays a reasonable charge. This charge should be sufficient to cover the cost of the food, its preparation and service.

Where the charge is less than the cost, the difference would be considered a taxable benefit and should be included on the employee’s T4. It is also important to note that the taxable benefit would be pensionable (CPP remittance required), but not insurable (no EI remittance required).

 Action Item: Due to the tax cost to the employee, in addition to the administrative tracking costs, one should consider having employees pay at least a reasonable amount for meals provided.

The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional.

No individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

EMPLOYER-SPONSORED SOCIAL EVENTS: After the Party

In an April 9, 2018 French Technical Interpretation, CRA clarified their position on taxable benefits arising from employer-sponsored social events, such as a holiday party or other event.

Where the cost of the social event does not exceed $150/person (previously the limit was $100), excluding incidentals such as transportation, taxi fares and accommodations, there would be no taxable benefit to employees. CRA indicated that the cost should be computed per person who attended, and not per person invited.

If the cost exceeds $150/person, the entire amount, including the additional cost, is a taxable benefit to the employee. In these cases, only employees attending the function would be subject to the taxable benefit.

Action Item: Ensure the cost of employer-sponsored events do not exceed this threshold to avoid a surprise tax cost for employees.

The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional.

No individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

PERSONAL USE OF BUSINESS AIRCRAFT: How Big of a Taxable Benefit Is It?

A CRA communication dated March 7, 2018 provided updated commentary on taxable benefits arising from the personal use of a business aircraft.

CRA categorized the types of flights into three groups, as follows:

• Mixed-use flights – If a shareholder or employee takes a flight which has a clear business purpose, they would not generally be subject to a taxable benefit. An individual’s purpose is a question of fact. If others take the same flight (such as a non-employee spouse or child) for purely personal purposes, the taxable benefit would be equal to the highest priced ticket available for an equivalent commercial flight available in the open market for the accompanying individual(s).
• Full personal use flights – Where there is no business purpose to the flight, the shareholders or employees will be considered to have received a taxable benefit equal to the price of a charter on an equivalent aircraft for an equivalent flight in the open market (split among relevant individuals on the flight). Limited exceptions may apply where an open market charter is not a viable option.
• Full personal use by non-arm’s length persons – For shareholders or employees who do not act at arm’s length with the business (such as an owner who controls the business), where the aircraft is used primarily for personal purposes relative to the aircraft’s total use, the taxable benefit will equal their portion of the aircraft’s operating costs plus an available-for-use amount. The available-for-use amount is computed as the original cost multiplied by the prescribed interest rate for the percentage of personal usage. The available-for-use amount on leased aircrafts is based on the monthly leasing costs of the actual usage multiplied by the proportion of personal usage.

Taxable benefits in respect of passengers that are non-employee family members or friends would be assessed on the shareholder or employee.

Action Item: If employees are using a business aircraft for personal use, attention should be paid to whether employment benefits are being properly calculated and reported.

The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional.

No individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.