2017-0729161M4 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. The longstanding position mentioned above is still valid.

Author: El-Kadi, Randa
Section: -

March 21, 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.

These media reports led to a perception that the Government of Canada is targeting individuals working in retail. I assure you that this is not the case, and that the Government truly values the contributions made by these hard-working individuals.

The Canada Revenue Agency (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.

I note your comments about discounts on meals for restaurant employees. The media reports also led to confusion about the taxation of subsidized meals for employees. The CRA does not consider these meals a taxable benefit if the employee pays a reasonable charge. A reasonable charge is one that covers the cost of the food, its preparation, and service.

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 the opportunity to respond to 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
2017-072916

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