2017-0726641M4 Taxability of employee discounts

Principal Issues: Whether the Canada Revenue Agency has changed its longstanding administrative position that employee discounts on merchandise and subsidized meals for employees are generally not taxed.

Position: No.

Author: El-Kadi, Randa
Section: 6(1)(a)

March 5, 2018

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your correspondence about media reports on the taxation of discounts on merchandise received by employees, and for your understanding regarding the delay of this response.

In your correspondence, you mention a Canada Revenue Agency (CRA) income tax folio and its implications for employee discounts. Income Tax Folio S2-F3-C2, Benefits and Allowances Received from Employment, includes an explanation of the law about merchandise discounts for employees. Along with certain media reports, this led to a perception that retail employees are being targeted. I assure you that this is not the case, and that the Government of Canada truly values the contributions made by these hard‑working individuals.

The Benefits and Allowances Received from Employment folio explains the existing law, which requires that, with some exceptions, the value of benefits received from employment be included in income. However, the CRA has a longstanding administrative policy that employee discounts on merchandise are generally not taxed. This policy is still in place and is explained in Guide T4130, Employers’ Guide – Taxable Benefits and Allowances, available at canada.ca/en/revenue-agency/services/forms-publications/publications/t4130/employers-guide-taxable-benefits-allowances.html. 

The CRA is reviewing and clarifying the wording in the Benefits and Allowances Received from Employment folio. During this review, the CRA will carefully consider the views and concerns of the retail industry and members of the public, and it will provide the opportunity for comments.

The media reports also led to confusion about the taxation of subsidized meals for employees. I assure you that an employee meal is not considered a taxable benefit when an employee working in a restaurant or at a food court counter purchases food from their employer for a reasonable charge.

The Government is committed to ensuring tax fairness, and it recognizes the importance of the retail community in creating jobs and supporting the economy. I appreciate your taking the time to share your concerns and trust that I have clarified the position of the CRA on this matter.

Sincerely,

The Honourable Diane Lebouthillier
Minister of National Revenue 

Lita Krantz
905-721-5091
2017-072664

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