CRA guidelines on whether or not two office perks are taxable worker advantages

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Staff are taxable on their salaries, bonuses and every other sort of direct compensation they might obtain, however they might additionally find yourself paying tax on numerous non-cash employment advantages or perquisites.

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Beneath the Earnings Tax Act, workers should embrace of their earnings the worth of any advantages of any form acquired by the worker “in respect of, in the middle of, or by advantage of his or her employment.” In figuring out whether or not an worker should embrace the worth of a profit acquired, the Canada Income Company appears at three figuring out components: Does the profit give the worker an financial benefit? Is the profit measurable and quantifiable? And does it primarily profit the worker or the employer?

Two latest CRA technical interpretation letters, every launched previously month, mentioned whether or not sure employer-provided advantages can be thought-about taxable. The primary involved employer-provided COVID-19 testing, and the second was employer-provided id theft safety providers. Let’s check out what the CRA mentioned about each.

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COVID-19 testing

The taxpayer, presumably an employer, wrote to the CRA asking about employer-paid COVID-19 testing, particularly a polymerase chain response check the place workers mail within the pattern to a laboratory for evaluation. The outcomes take a number of days to course of and are available again. The testing is totally funded by the employer, participation by workers is voluntary, and an unfavourable check consequence (that’s, a constructive COVID-19 check consequence) would forestall the worker from coming into the employer’s premises. Notably, the worker would nonetheless have the ability to preserve their employment standing by way of another work association if a constructive check consequence had been to happen.

The CRA responded that it was the company’s “long-standing view” that an employer is taken into account to be the first beneficiary of medical testing in conditions the place such testing is critical to fulfil a situation of employment. Within the state of affairs described within the letter, nonetheless, workers will not be required to take a COVID-19 check and the check outcomes (whether or not constructive or destructive) haven’t any impression on an worker’s employment standing. Because of this, voluntary COVID-19 testing doesn’t create an employment situation.

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That mentioned, within the context of the pandemic, “appreciable effort is being made to manage the unfold of the virus,” with governments encouraging employers to make testing obtainable to workers. Because of this, the CRA concluded that the place the outcomes of employer-provided COVID-19 testing are primarily for the usage of an employer, it’s “each unlikely and unintended that an worker can be enriched or thought-about to have acquired an financial benefit,” and so the CRA doesn’t view employer-provided COVID-19 testing as a taxable profit to workers. (Phew.)

Id theft protect premiums

The second technical interpretation letter was written by an employer asking whether or not id theft protect premiums it presumably would pay to a 3rd occasion on behalf of its workers can be thought-about a taxable profit to workers, and whether or not these premiums can be thought-about a tax-deductible enterprise expense for the employer.

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Id theft safety providers usually present id or credit score monitoring providers to find out if a person’s private data has been compromised. Based on the main points of the plan, the issuer of the coverage offers privateness and safety monitoring, id session providers and id restoration providers. Particularly, the service screens for matches of a person’s personally identifiable data: title, date of beginning, social insurance coverage quantity, driver’s licence quantity, as much as 5 passport numbers, and as much as 10 of every of the next: checking account numbers, worldwide checking account numbers, credit score/debit card numbers, medical identification numbers, e-mail addresses and telephone numbers.

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The CRA, after reviewing the main points of the plan and providers on provide, and within the absence of further data suggesting a heightened danger of id theft for the corporate’s workers or some sort of hyperlink between the non-public data monitored and the employer’s enterprise, decided that the employer-paid plan would seem to offer an financial benefit primarily for the good thing about the staff. Because of this, the CRA concluded that employer-paid premiums would, certainly, be included within the worker’s earnings as a taxable employment profit.

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The CRA then turned to the query as as to if the premiums paid can be tax deductible to the employer as a enterprise expense. Typically, with a view to qualify as a tax-deductible enterprise expense, it should be incurred for the aim of incomes enterprise earnings, should be neither a capital expenditure nor a private expense, and should be cheap within the circumstances.

Based mostly on the main points of the id theft safety plan described above, the CRA felt that the providers relate to defending a person’s private and monetary data, and weren’t associated to both the worker’s employment or enterprise data. That mentioned, the CRA concluded that to the extent the employer-paid premiums are included within the workers’ earnings as a taxable profit, the premiums would even be tax deductible for enterprise functions offered they’re additionally thought-about cheap. This conclusion is in keeping with most employer-paid perquisites, that are usually tax deductible to the employer.

Jamie Golombek, CPA, CA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Personal Wealth in Toronto. Jamie.Golombek@cibc.com

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