March 20, 2018

CRA to Back off on Taxing Employee Benefits

12 October 2017, 09:08 | Hattie Nash

Many fast food workers receive discounts at their place of work

Many fast food workers receive discounts at their place of work

The Canada Revenue Agency has changed how it is interpreting existing tax law concerning taxable employee discounts. "We are not going to be doing anything to hurt retail workers", he said. "This document was not approved by the minister and we are deeply disappointed that the agency posted something that has been misinterpreted like this", said a statement.

The updated CRA guidance document for employers, known as a tax folio, states that when an employee receives a discount on merchandise due to their employment, "the value of the discount is generally included in the employee's income".

"There have been no changes to the laws governing taxable benefits to retail employees".

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However, there is an exception when the same discounts are offered to members of the public at some point during the year, for example: when vehicle companies offer "employee pricing" promotions. If it's not available to the public, it's a benefit, and the CRA says that should be stated on employees' tax filings.

The exception to this being: if the discount was available to members of the public at any point during the year, the discount doesn't have to be reported, as it's no longer considered a taxable benefit.

The 2016 update to the language around employee discounts is the result of the CRA changing its interpretation of the existing tax law, not a change to the law itself.

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In the contentious document at the heart of this, the CRA advised employers that, in certain instances, employee discounts count as part of income and the Agency considers them fair game to tax. A revised edict explaining the CRA's expectations for what employers have to report will then be put out for stakeholder consultation.

However, they say retail sector employers shouldn't expect to find themselves subject to a CRA audit over their reporting on employee benefits.

Political rivals and business lobby groups, including the Retail Council of Canada, have voiced strong concerns that new wording in a government document could lead to higher taxes on retail workers, many of whom earn lower wages. "It's not clear what they're trying to do", says Littler, noting the administrative burdens of complying with the guidance.

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One example cited in the CRA's tax "folio", which included the updated interpretation, referred to a 2011 Federal Appeal Court ruling on a case involving teachers at a private school.

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