As the end of the year and the holidays approach many employers are looking for ways to mark the occasion and thank their employees for another successful year. Gift cards are always a great choice; they’re devoid of possible allergens, they offer a world of possibilities, and they’re tax-exempt.

Or are they?

Effective January 1, 2022, CRA released new guidelines for gifts that employers may give, tax-free. These include:

  • An unlimited number of non-cash gifts per year.
  • Maximum combined total value for gifts of $500.00 before an amount becomes taxable.
  • $500.00 is an exemption.

CRA’s updated policy was rereleased recently to offer more clarity on the subject matter. The policy now clearly states that if you give an employee a gift card the gift is considered non-cash and is eligible for the $500 exemption if all the following apply:

  • The gift card is provided to recognize a special occasion.
  • It comes with money already loaded onto it and can only be used to purchase goods or services from a single retailer or a group of retailers identified on the card. 
  • The terms and conditions of the gift card clearly state that amounts loaded to the card cannot be converted into cash.
  • A log is to be kept recording the gift card and all the following information including:
    • Name of the employee.
    • Date the gift card was provided to the employee.
    • Reason for providing the gift card (part of social event, gift or award).
    • Type of gift card.
    • Amount of the gift card.
    • Name of the retailer(s).

This includes gift certificates, chip cards and electronic gift cards. If the gift card meets all these conditions, it is considered non-cash for the purpose of the CRA’s administrative policy. If the card does not meet these conditions, it is considered a near-cash benefit and is therefore taxable.

This Policy does not apply to Long Service Awards or prepaid cards issued by financial institutions.

For more information on the admin policy on gift cards visit CRA’s website here.