Taxable Benefits Flashcards
Association fees/ membership dues
The question of taxable benefit is generally based on a “main purpose test”
If the primary reason for the membership is to enhance abilities and connections for the business’ benefit then there should be no taxable benefit
Automobile provided for personal and work use
Taxable benefit
Broken into:
Standby charge (2% x Cost of car x Number of 30-day periods available to the employee in the year)
Operating expense benefit (1/2 of standby charge or personal km driven x Rate for the year
Operating costs include gas, insurance and maintenance, but not parking
Employee loans
Taxable benefit
= prescribed rate at the time - actual interest paid
Stock options
Taxable benefit
Cash or near cash benefits regardless of the amount
Taxable benefit
Discuss the tax implications on the employee and employer:
Private health services plan
Employee: not a taxable benefit
Employer: deductible for the employer
Discuss the tax implications on the employee and employer:
Service gifts
Employee: not a taxable benefit as long as the gift is not cash and the value is under $500
Employer: typically deductible for the business
Discuss the tax implications on the employee and employer:
Training
Employee: not a taxable benefit if it helps the employees in their job
Employer: deductible as considered employee compensation
Discounts on merchandise
Not a taxable benefit, except to the extent that the price is reduced below the employer’s cost
Shareholder Loan
- Principal amount must be added to shareholder’s income ITA 15(2)
- No imputed interest under ITA 80.4(3)
- Can be deducted under ITA 20(1)(j) when it is repaid
- Exception: If loan repaid prior to second balance sheet date of corporation, then principal amount need not be added to shareholder’s income, per ITA 15(2.6), but imputed interest under ITA 80.4(2) would apply. However, it cannot be a series of loans and payments (as per ITA 15(2.6), 20(1)(j))
- Exception: Loan advanced as an employee, rather than shareholder, to acquire residence, auto for work or shares of the company, under ITA 15(2.4), as long as at the time the loan was made, bona-fide arrangements were made for repayment of the loan within a reasonable amount of time
Subsidized meals
Not a taxable benefit - As long as the price of meals covers the cost
If only available to one employee - is a taxable benefit
Cell phone service, if primarily for business purposes
Not a taxable benefit
Personal use with a reasonably priced basic plan with a fixed cost for a flat package of minutes is normally not taxable
Unifroms paid for or supplied by an employer
Not a taxable benefit
Computers provided by an employer
Not a taxable benefit
Discuss the tax implications on the employee and employer:
In house recreational facilities
Employee: not a taxable benefit
Employer: not deductible
Club dues when it is clearly to the employer’s advantage for the employee to be a member of the club
Not a taxable benefit
Tuition paid where courses benefits the employee (outside of their day-today activities at the job)
Taxable benefit
Employer paid
automobile expenses - Taxable benefit
Taxation
Employer paid automobile expenses – Taxable benefit (Taxation)
* A taxable benefit arises when an employee is given something that is personal in nature or if something that is personal in nature is paid for by the company
* A benefit may include an allowance or a reimbursement of an employee’s personal expense (e.g. personal fuel is reimbursed)
* The value of the benefit is generally its FMV
* If an employee is provided with a taxable benefit, the amount must be included in their income
Reference: ITA 6
