Tuesday, July 19, 2022
HomePersonal FinanceCRA guidelines on whether or not two office perks are taxable worker...

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

[ad_1]

Jamie Golombek: Workers may find yourself paying tax on varied non-cash employment advantages

Article content material

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

Commercial 2

Article content material

Below the Earnings Tax Act, workers should embrace of their earnings the worth of any advantages of any sort obtained by the worker “in respect of, in the midst of, or by advantage of his or her employment.” In figuring out whether or not an worker should embrace the worth of a profit obtained, the Canada Income Company seems to be 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 current CRA technical interpretation letters, every launched up to now 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 identification theft safety providers. Let’s check out what the CRA mentioned about every one.

Commercial 3

Article content material

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 optimistic COVID-19 check consequence) would stop the worker from coming into the employer’s premises. Notably, the worker would nonetheless have the ability to keep their employment standing via another work association if a optimistic 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 are usually not required to take a COVID-19 check and the check outcomes (whether or not optimistic or adverse) don’t have any impression on an worker’s employment standing. Consequently, voluntary COVID-19 testing doesn’t create an employment situation.

Commercial 4

Article content material

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

Id theft defend premiums

The second technical interpretation letter was written by an employer asking whether or not identification theft defend 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.

Commercial 5

Article content material

Id theft safety providers usually present identification or credit score monitoring providers to find out if a person’s private data has been compromised. In line with the small print of the plan, the issuer of the coverage gives privateness and safety monitoring, identification session providers and identification restoration providers. Particularly, the service displays for matches of a person’s personally identifiable data: title, date of start, 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.

Commercial 6

Article content material

The CRA, after reviewing the small print of the plan and providers on supply, and within the absence of further data suggesting a heightened danger of identification theft for the corporate’s workers or some kind 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 workers. Consequently, the CRA concluded that employer-paid premiums would, certainly, be included within the worker’s earnings as a taxable employment profit.

Commercial 7

Article content material

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 affordable within the circumstances.

Based mostly on the small print of the identification 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 supplied they’re additionally thought-about affordable. This conclusion is per 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

_____________________________________________________________

 Should you like this story, join the FP Investor E-newsletter.

_____________________________________________________________

Commercial

Feedback

Postmedia is dedicated to sustaining a vigorous however civil discussion board for dialogue and encourage all readers to share their views on our articles. Feedback could take as much as an hour for moderation earlier than showing on the positioning. We ask you to maintain your feedback related and respectful. We now have enabled e-mail notifications—you’ll now obtain an e-mail in the event you obtain a reply to your remark, there may be an replace to a remark thread you observe or if a person you observe feedback. Go to our Neighborhood Tips for extra data and particulars on how you can regulate your e-mail settings.

[ad_2]

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisment -
Google search engine

Most Popular

Recent Comments