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Effective URL: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances.html
Submission: On March 27 via manual from CA — Scanned from CA
Effective URL: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances.html
Submission: On March 27 via manual from CA — Scanned from CA
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YOU ARE HERE:
1. Canada.ca
2. Taxes
3. Payroll
4. Payroll deductions and contributions
CALCULATE PAYROLL DEDUCTIONS AND CONTRIBUTIONS
Sections
* Determine if a benefit is taxableDetermine if a benefit is taxable
* What is a taxable benefitWhat is a taxable benefit
* Motor vehicle – Allowances and reimbursementsMotor vehicle – Allowances and
reimbursements
* Automobile – Standby charges and operating expense benefitsAutomobile –
Standby charges and operating expense benefits
* Board and lodgingBoard and lodging
* Cell phone and internet servicesCell phone and internet services
* Child care expensesChild care expenses
* Counselling services and tax preparationCounselling services and tax
preparation
* Disability-related employment benefitsDisability-related employment
benefits
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* Employment insurance premium rebateEmployment insurance premium rebate
* Gifts, awards, and long-service awardsGifts, awards, and long-service
awards
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and other insurance plans
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* Meals – SubsidizedMeals – Subsidized
* Medical expensesMedical expenses
* Merchandise discounts and commissions from personal purchasesMerchandise
discounts and commissions from personal purchases
* Moving expenses and relocation benefitsMoving expenses and relocation
benefits
* ParkingParking
* Premiums under provincial hospitalization, medical care insurance, and
certain Government of Canada plansPremiums under provincial
hospitalization, medical care insurance, and certain Government of Canada
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allowances and rental payments
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benefits paid in a prescribed zone
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* Uniforms and protective clothingUniforms and protective clothing
Calculate payroll deductions and contributions
WHAT IS A TAXABLE BENEFIT
ON THIS PAGE
* What is a benefit, an allowance, or a reimbursement
* What are cash, near-cash, and non-cash benefits
* Steps to follow to determine if you provide benefits to your employees
* What is the CRA's administrative policy for the purpose of taxable benefits
* What are the different types of taxable benefits
* References
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:
* directly to your employee
* to a person who does not deal at arm's length with the employee (such as the
employee's spouse, child, or sibling)
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:
* usually an arbitrary amount that is predetermined without using the actual
cost
* usually for a specific purpose
* used as the employee chooses, since the employee does not provide receipts
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 has to keep
proper records (detailed receipts) to support the expenses and give them to you.
WHAT ARE CASH, NEAR-CASH, AND NON-CASH BENEFITS
Cash
Includes:
* Physical currency
* Cheques
* Direct deposit
Near-cash
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.
Non-cash
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.
Under the CRA administrative policy for gifts, awards, and long-service awards,
gift cards that meet all of the conditions may be considered non-cash.
Learn more: Gifts, awards, and long-service awards
STEPS TO FOLLOW TO DETERMINE IF YOU PROVIDE BENEFITS TO YOUR EMPLOYEES
If you provide benefits to your employees, you always have to go through the
same steps. An "employee" includes an individual who holds an office, unless
otherwise noted. If a step does not apply to you, skip it and go on to the next
step.
1. DETERMINE IF THE BENEFIT IS TAXABLE
Whether or not a benefit is taxable depends on:
* whether the employee or officer receives an economic advantage that can be
measured in money
* whether the individual is the primary beneficiary of the benefit
2. CALCULATE THE VALUE OF THE BENEFIT
* The value of a benefit is generally its fair market value (FMV)
* This is the price that can be obtained in an open market between two
individuals dealing at arm's length
GST/HST may need to be included in the value of the taxable benefit for
income tax purposes.
3. CALCULATE AND WITHHOLD PAYROLL DEDUCTIONS
* The employee can be paid or provided the benefit in cash, non-cash or
near-cash
* The manner in which the benefit is paid will affect the payroll deductions
withheld
4. REPORT THE BENEFIT ON A SLIP
You need to report the taxable benefit on a slip in both:
* Box 14 (Employment income)
* "Other information" area: the code used to report the benefit in the
"Other information" area depends on the benefit received
WHAT IS THE CRA'S ADMINISTRATIVE POLICY FOR THE PURPOSE OF TAXABLE BENEFITS
Generally, benefits that employers provide to their employees are taxable under
section 6 of the Income Tax Act (ITA), unless specifically excluded in the ITA.
The administrative policies of the CRA identify conditions under which some of
these benefits may not be taxable. CRA's administrative policies are detailed in
the specific topics.
WHAT ARE THE DIFFERENT TYPES OF TAXABLE BENEFITS
Refer to: Types of taxable benefits
REFERENCES
* Episode 1: Introduction to taxable benefits
* Answers to your taxable benefit questions
* Employer-employee relationship questions and answers
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Date modified: 2023-03-14
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