Taxable Benefits

Question 1

Association fees/ membership dues

Answer 1

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

Question 2

Automobile provided for personal and work use

Answer 2

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

Question 3

Employee loans

Answer 3

Taxable benefit

= prescribed rate at the time - actual interest paid

Question 4

Stock options

Answer 4

Taxable benefit

Question 5

Cash or near cash benefits regardless of the amount

Answer 5

Taxable benefit

Question 6

Discuss the tax implications on the employee and employer:

Private health services plan

Answer 6

Employee: not a taxable benefit

Employer: deductible for the employer

Question 7

Discuss the tax implications on the employee and employer:

Service gifts

Answer 7

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

Question 8

Discuss the tax implications on the employee and employer:

Training

Answer 8

Employee: not a taxable benefit if it helps the employees in their job

Employer: deductible as considered employee compensation

Question 9

Discounts on merchandise

Answer 9

Not a taxable benefit, except to the extent that the price is reduced below the employer’s cost

Question 10

Shareholder Loan

Answer 10

• 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

Question 11

Subsidized meals

Answer 11

Not a taxable benefit - As long as the price of meals covers the cost

If only available to one employee - is a taxable benefit

Question 12

Cell phone service, if primarily for business purposes

Answer 12

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

Question 13

Unifroms paid for or supplied by an employer

Answer 13

Not a taxable benefit

Question 14

Computers provided by an employer

Answer 14

Not a taxable benefit

Question 15

Discuss the tax implications on the employee and employer:

In house recreational facilities

Answer 15

Employee: not a taxable benefit

Employer: not deductible

Question 16

Club dues when it is clearly to the employer’s advantage for the employee to be a member of the club

Answer 16

Not a taxable benefit

Question 17

Tuition paid where courses benefits the employee (outside of their day-today activities at the job)

Answer 17

Taxable benefit

Question 18

Employer paid
automobile expenses - Taxable benefit

Taxation

Answer 18

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