Canadian Payroll Reporter

5 Canadian HR Reporter, a Thomson Reuters business 2017 Taxable benefits from supplier discounts QUESTION: One of our suppliers has offered to provide a discount to any of our employees who purchase items from them as a way to say thank you for the amount of business we give them. They sell laptops and related supplies. Are there any taxable benefit issues that could arise from this or do the taxable benefit rules not apply since it is the supplier offering the discount and not the employer? ANSWER: Even though the supplier is not the employer, a discount that it offers to an employer's staff will result in a taxable ben- efit to the employees if the supplier does not also offer the discount to the public at large or to specific public groups. The Canada Revenue Agency (CRA) says that the basis for this comes from s.6(1)(a) of the federal Income Tax Act, which states that an individual's employment income gener- ally includes the value of benefits "of any kind whatever received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment." In Income Tax Folio S2-F3-C2, Benefits and Allowances Received from Employ- ment, the CRA explains that it interprets the phrase "in respect of employment" broadly, meaning that an employer may have to in- clude benefits in an employee's income even if the employer was not the one who pro- vided them. If a taxable benefit arises from a third-par- ty discount, the value of the benefit would be the fair market value of the item(s) that the employee bought from the supplier (includ- ing the GST/HST/QST, as applicable), less the amount the employee paid. If the supplier also provides the discount to the general public or to specific public groups, the CRA states that the discount would then not be a taxable benefit for the employees. CPR | September 2017 ASK AN EXPERT Annie Chong MANAGER OF CARSWELL'S PAYROLL CONSULTING GROUP annie.chong@thomsonsreuters.com | (416) 298-5085 ANSWER: The CRA advises that meals provided to employees in employer cafete- rias are not taxable benefits if the amount that the employees pay for the food is rea- sonable. When considering if the amount paid is reasonable, the CRA says it takes into account how much it costs to buy the food, prepare it and serve it. If the amount the cafeteria charges is un- reasonably low, a taxable benefit will arise. The value of the benefit will be the cost of the meals (including the GST/HST/QST) less any amount that the employee paid for them. If taxable, besides income tax deduc- tions, the benefit must be included when calculating Canada/Quebec Pension Plan contributions. Do not include the taxable benefit when calculating Employment In- surance or Quebec Parental Insurance Plan premiums since the meal would be a non- cash benefit. At year end, include the value of the tax- able benefit in box 14 on the employee's T4, as well as in the "Other information" area, using code 40. For Quebec employees, also report the taxable benefit in boxes A and V on an RL-1. ANSWER: The answer depends on the juris- diction in which the employees work, since maternity leave requirements are governed by provincial/territorial labour standards and the Canada Labour Code for federally regu- lated workplaces. Refer to the table below: Should employer-subsidized cafés be a taxable benefit? QUESTION: We recently opened a cafeteria for employees at our office. Both employees and visitors are welcome to use it. The food served is not free, although we do subsidize it to encourage employees to use it. Is this a taxable benefit? Maintaining benefits during a maternity leave QUESTION: Are employers required to continue benefits coverage (such as dental or prescription drugs) for employees who are on an unpaid maternity leave? Jurisdiction Employer required to maintain benefits during a maternity leave Federal Yes, if the employee continues to pay any contributions that she would normally pay. Alberta No British Columbia Employers must continue to make payments to medical, pension and other benefit plans if either the employer pays the total plan costs or, if the employer and employee share the cost, the employee opts to keep paying her portion. Manitoba No New Brunswick No Newfoundland and Labrador No Northwest Territories No Nova Scotia Employers must give employees the option of maintaining benefits and may require the employee to pay 100 per cent of the cost. 1 Nunavut No Ontario Yes, unless the employee notifies the employer, in writing, that she does not want to continue to make the employee contributions (if any) to the plan. Prince Edward Island Employers must give employees the option of maintaining benefits while on leave, but are not required to pay the contributions. 2 Quebec Yes, as long as the employee continues to make the required (if any) contributions to the benefits plan. Saskatchewan Yes, as long as the employee pays the contributions required by the plan. Yukon No 1 To avoid an interruption of benefits, the employer must give the employee written notice that she has the option to maintain benefits and the date beyond which the option would expire. The em- ployer must provide the notice at least 10 days before the expiry date. If the employee chooses to maintain the benefits, the employee may be required to pay 100 per cent of the cost. 2 Employers must give employees written notice of the option and the date it will no longer apply at least 10 days before the last day the employee may exercise the option without an interruption in benefits. Employees opting to continue will have to pay the cost to maintain the benefits plus the employer's share. The employer is responsible for processing the documents and the payment as arranged.

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