When is a gift or reward considered a taxable benefit to an employee in Québec?

When is a gift or reward considered a taxable benefit to an employee in Québec?

How does Québec define a gift and reward?  Did you know they view gift cards and certificates given to employees differently than the rest of Canada?

Revenu Québec (RQ) has a gifts and rewards (as opposed to CRA's award) policy that allows an exemption of unlimited gifts and rewards at fair market value, including taxes, of $500 annually.  If an employee is given a combined value of $500 of gifts and rewards in a year,  only the fair market value over $500 needs to be included in the employee's income.  How are gifts and rewards that qualify defined?

As defined by the RQ "Non-monetary gifts are those given to an employee for a special occasion (such as christmas, a birthday, a wedding or similar
occasion). Non-monetary rewards are those given to an employee in recognition of certain accomplishments (such as reaching a certain number of years of service, meeting or exceeding safety requirements, or achieving similar objectives)."  Gifts and rewards that fall within these definitions qualify to be included in the $500 exemption.  Gifts and rewards given for other reasons are deemed a taxable benefit.

Furthermore, unlike the CRA, gift certificates, gift coupons and gift cards that must be used to purchase goods or services from a designated business or list of businesses are not considered to be easily convertible into cash.

Certain items such as a reward (other than a reward in recognition of certain accomplishments) that is personalized with the employee's name, a corporate logo or a message, may have a reduced value by an amount that is reasonable in the circumstances. A plaque, trophy or other memento of nominal value for which there is no market, it is not considered a taxable benefit and doesn't need to be included in the total value of gifts and rewards for the year.

Regardless of the fair market value, RQ considers the following gifts and rewards to be fully taxable to the employee:

  • Cash or near-cash gifts and rewards, near cash is defined by anything easily convertible into cash.
  • Premiums paid on the employee's behalf under a plan providing insurance of persons.
  • Given for work performance.
  • Given to the employee directly from a supplier or client, you must include the fair market value (fmv) of the gift or reward in the employee's income. In this case the $500 exemption cannot be applied to the amount.
  • Sales and incentive bonuses, and other prizes (in cash or in kind)
    related to sales made in the course of employment or a business,
    If a portion of a prize or an incentive bonus is paid in kind, gst and qst must be included, where applicable, in the calculation of the benefit.

RQ's policy is silent on employer reimbursements to an employee for a gift or reward, hospitality rewards such a employer provided team building lunches, loyalty points an employee may earn and gifts and rewards given by closely held corporations.

  • Natasha Smyth, B.SC.(Agr.), CPM

For more information contact Info@onpayroll.ca