Employer\'s Guide Taxable Benefits and Allowances PDF

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Description

Employers’ Guide

Taxable Benefits and Allowances

Available electronically only

T4130(E) Rev. 21

Is this guide for you? Use this guide if you are an employer and you provide benefits or allowances to your employees, including individuals who hold an office, for items such as: automobiles or other motor vehicles board and lodging

Services Office in the province or territory of your residence or place of business. See the table found on Form CPT1 for the mailing addresses. For more information on employment status, see Guide RC4110, Employee or Self-Employed? A benefit or allowance can be paid to your employee in cash (such as a meal allowance) or provided to your employee in a manner other than cash (such as a parking space or a gift).

gifts and awards group term life insurance policies interest-free or low-interest loans

You may have to include the value of a benefit or allowance in an employee’s income, depending on the type of benefit or allowance and the reason you give it.

meals security options

This guide explains your responsibilities and shows you how to calculate the value of taxable benefits or allowances.

tool reimbursement or allowance transit passes tuition fees If you or a person working for you is not sure of the worker's employment status, either one of you can request a ruling to determine the status. If you are a business owner, you can use the “Request a CPP/EI ruling” service in My Business Account at canada.ca/my-cra-business -account. If you are an individual, you can use the “Request a CPP/EI ruling” service in My Account at canada.ca/my -cra-account. You can also fill out and mail Form CPT1, Request for a CPP/EI Ruling – Employee or Self-Employed? to the CPP/Rulings Division at the Tax

For information on calculating payroll deductions, go to canada.ca/payroll or see Guide T4001, Employers’ Guide – Payroll Deductions and Remittances. For information on filing an information return, go to canada.ca/taxes-slips or see the following guides: RC4120, Employers’ Guide – Filing the T4 Slip and Summary RC4157, Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary

Our publications and personalized correspondence are available in braille, large print, e-text, or MP3 for those who have a visual impairment. For more information, go to canada.ca/cra-multiple -formats or call 1-800-959-5525.

La version française de ce guide est intitulée Guide de l’employeur – Avantages et allocations imposables.

canada.ca/taxes

What’s new? We list the service enhancements and major changes below, including announced income tax changes that are not yet law at the time this guide was published. If they become law as proposed, they will be effective for 2021 or as of the dates given. For more information about these changes, see the areas outlined in colour in this guide. For information on changes regarding CRA’s Taxable, benefit administration policies due to COVID-19, go to canada.ca/en/revenue-agency/campaigns/covid-19-update/covid-19-benefits-credits-support-payments/employer -provided-benefits.

Security options deduction Effective on June 29, 2021, the CRA introduced some new tax rules for employees security options deduction. For security options granted on or after July 1, 2021, if you are not a Canadian-controlled private corporation and you have, or are part of a consolidated group that has, gross revenues of more than $500 million, the employee is subject to a $200,000 annual vesting limit. For more information about the changes that will take effect on July 1, 2021 for certain employers and how these changes affect the calculation of the deduction amount, go to canada.ca/taxes-security-options. For more information, see Security options deduction – Paragraph 110(1)(d) on page 32.

Automobile standby charge and operating cost benefits As a temporary COVID-19 response measure, if an employee used an automobile more than 50% of the distance driven for business purposes in the 2019 tax year, they will be considered to have used the automobile more than 50% of the distance driven for business purposes in the 2020 and 2021 tax year. For more information, go to canada.ca/taxes-auto-motor -benefits.

canada.ca/taxes

Table of contents Page Chapter 1 – General information ..................................... Do you give your employee a benefit, an allowance, or an expense reimbursement? ...................................... What are your responsibilities? ......................................... Determine if the benefit is taxable ................................. Calculate the value of the benefit .................................. Calculate payroll deductions .......................................... File an information return ............................................... Employee’s allowable employment expenses ................. Chapter 2 – Automobile and motor vehicle benefits and allowances .............................................. Definitions ............................................................................. Automobile ........................................................................ Employee ........................................................................... Motor vehicle..................................................................... Personal driving (personal use) ..................................... Vehicle ................................................................................ Keeping records .................................................................... Calculating automobile benefits ........................................ Calculating a standby charge for automobiles you own or lease ................................................................... Calculating an operating expense benefit .................... Benefit for motor vehicles not defined as an automobile ......................................................................... Motor vehicle home at night policy .............................. Reporting automobile or motor vehicle benefits ........ Automobile and motor vehicle allowances ..................... Reasonable per-kilometre allowance ............................ Per-kilometre allowance rates that are not considered reasonable.................................................. Flat-rate allowance ........................................................... Combination of flat-rate and reasonable per-kilometre allowances ............................................ Reimbursement or advance for travel expenses ......... Averaging allowances ......................................................... Reducing tax deductions at source on automobile or motor vehicle allowances ....................................... Reporting automobile or motor vehicle allowances on the T4 slip ................................................................. Chapter 3 – Other benefits and allowances ................... Aircraft Benefits .................................................................... Board and lodging................................................................ Exceptions to the rules ..................................................... Board and lodging allowances paid to players on sports teams or members of recreation programs ...... Board, lodging, and transportation – Special work sites and remote work locations .................................... Special work sites ............................................................. Remote work locations .................................................... Payroll deductions............................................................ Cellular phone and Internet services ................................ Child care expenses .............................................................. Counselling services ............................................................ Disability-related employment benefits ........................... Payroll deductions............................................................ Discounts on merchandise and commissions from personal purchases ........................................................... Education benefits ................................................................ Educational allowances for children ............................. 4

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Subsidized school services .............................................. Scholarships, bursaries, tuition, and training .............. Scholarship and tuition fees ............................................ Employment insurance premium rebate .......................... Gifts, awards, and long-service awards ............................ Rules for gifts and awards ............................................... Value.................................................................................... Policy for non-cash gifts and awards............................. Long-service awards ......................................................... Awards from a manufacturer ......................................... Group term life insurance policies – Employer-paid premiums............................................................................ Calculating the benefit ..................................................... Reporting the benefit ........................................................ Housing or utilities ............................................................... Housing or utilities – benefit ........................................... Housing or utilities – allowance ..................................... Reporting the benefit ........................................................ Clergy residence ................................................................ Income maintenance plans and other insurance plans .................................................................................... Non-group plans ............................................................... Group sickness or accident insurance plans................. Employee-pay-all plans ................................................... Group disability benefits – insolvent insurer ............... Loans – interest-free and low-interest ............................... Exceptions .......................................................................... Loans received because of employment ....................... Loans received because of shareholdings ..................... Home-purchase loan ........................................................ Home-relocation loans ..................................................... Forgiven loans ................................................................... Reporting the benefit ........................................................ Prescribed interest rates ................................................... Loyalty and other points programs ................................... Meals ....................................................................................... Overtime meals or allowances ........................................ Subsidized meals ............................................................... Medical expenses .................................................................. Moving expenses and relocation benefits ......................... Moving expenses paid by employer that are not a taxable benefit ................................................................ Moving expenses paid by employer that are a taxable benefit ................................................................ Non-accountable moving allowances ............................ Municipal officer’s expense allowance ............................. Parking .................................................................................... Pooled registered pension plans (PRPP)........................... Power saws and tree trimmers ........................................... Premiums under provincial hospitalization, medical care insurance, and certain Government of Canada plans .................................................................................... Private health services plan premiums ............................. Professional membership dues ........................................... Recreational facilities and club dues ................................. Registered retirement savings plans (RRSPs) .................. Payroll deductions ............................................................ Security options ..................................................................... Taxable benefit ................................................................... Cash-outs ............................................................................

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Payroll Deductions ........................................................... Security options deduction – Paragraph 110(1)(d) ..... Security options deduction for the disposition of shares of a Canadian-controlled private corporation – Paragraph 110(1)(d.1) .......................... Designation of non-qualified securities........................ Notification requirements for non-qualified securities...................................................................... .. Charitable donations...................................................... . Social events .......................................................................... Spouse’s or common-law partner’s travelling expenses ............................................................................. Tax-free savings account (TFSA) ....................................... Tickets..................................................................................... Reporting the benefit ....................................................... Tool reimbursement or allowance..................................... Transportation passes .......................................................... Airline passes for employees and retirees of an airline company ............................................................ Transit passes .................................................................... Transit passes – employees of a transit company ....... Travel allowance................................................................... Part-time employee .......................................................... Salesperson and clergy .................................................... Other employees ............................................................... Reasonable travel allowances ......................................... Uniforms and protective clothing ..................................... Chapter 4 – Housing and travel assistance benefits paid in a prescribed zone............................ Accommodation or utilities provided by the employer ............................................................................ Places with developed rental markets .......................... Places without developed rental markets .................... Allowable ceiling amounts ............................................. Board, lodging, and transportation at a special work site in a prescribed zone ........................................ Travel assistance benefits .................................................... Medical travel assistance ................................................. Chapter 5 – Remitting the GST/HST on employee benefits ........................................................... Employee benefits ................................................................ Employee does not pay the GST/HST on taxable benefits............................................................................ Do you have to remit GST/HST on employee taxable benefits? ............................................................

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Situations where you are not considered to have collected the GST/HST ........................................... How to calculate the amount of the GST/HST you are considered to have collected ..................................... Value of the benefit ........................................................... Automobile operating expense benefits ........................ Benefits other than automobile operating expense benefits ............................................................................ When and how to report the GST/HST you are considered to have collected ........................................... Automobile benefits – standby charges, operating expense benefit, and reimbursements ....................... Input tax credits (ITCs) ........................................................ ITC restrictions .................................................................. Property acquired before 1991 or from a non-registrant .................................................................... Benefits chart ........................................................................

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Digital services ..................................................................... 46 Handling business taxes online .......................................... 46 CRA BizApp ....................................................................... 46 Receiving your CRA mail online .................................... 46 Authorizing the withdrawal of a pre-determined amount from your Canadian chequing account ...... 46

For more information .......................................................... What if you need help? ........................................................ Addresses ............................................................................... Tax services offices ............................................................ 35 Tax centres .......................................................................... Direct deposit......................................................................... 35 Forms and publications ....................................................... 35 Electronic mailing lists ......................................................... 36 Related publications ............................................................. 36 Tax Information Phone Service (TIPS) .............................. Teletypewriter (TTY) users ................................................. 36 Complaints and disputes ..................................................... 37 Service complaints ............................................................ 37 Formal disputes (objections and appeals)..................... Reprisal complaints .......................................................... Due dates ................................................................................ 38 Cancel or waive penalties or interest ................................. 38

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Chapter 1 – General information Do you give your employee a benefit, an allowance, or an expense reimbursement? 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. 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 him or her support the expenses. An allowance or advance is: usually an arbitrary amount that is predetermined witho...