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Jun 28, 2024 · Learning about what fringe benefits are and reviewing examples of some may help you assess job offers and negotiate your benefits. In this article, we share a definition of fringe benefits, review 16 examples of fringe benefits that your employer may offer, and highlight answers to frequently asked questions about fringe benefits.
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- Payroll topics
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- What's new
- Table of Contents
- Chapter 1 – General information
- Chapter 2 – Automobile and motor vehicle benefits and allowances
- Chapter 3 – Other benefits and allowances
- Transportation passes
- Chapter 4 – Housing and travel assistance benefits paid in a prescribed zone
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Go to the full version which has been optimized for online reading. Review payroll topics
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Scroll down to read the publication: T4130, Employers' Guide Taxable Benefits and Allowances.
Calculate payroll deductions and contributions
Learn about CPP contributions, EI premiums and income tax deductions, how to calculate the deductions on the amounts you pay, includes how to determine if you need to deduct CPP, EI and income from benefits and special payments Available electronically only T4130(E) Rev. 23 The CRA publications and personalized correspondence are available in braille, large print, e-text, and MP3. For more information, go to Order alternate formats for persons with disabilities or call 1-800-959-5525. Unless otherwise stated, all legislative references are to the Income Tax Act or, where appropriate, the Income Tax Regulations. The CRA uses the term "Indian" as it has legal meaning under the Indian Act. La version française de ce guide est intitulée Guide de l'employeur – Avantages et allocations imposables.
Use this guide if you are an employer and you provide benefits or allowances to your employees, including individuals who hold an office, for items such as:
•automobiles or other motor vehicles
•board and lodging
•gifts and awards
•group term life insurance policies
•interest-free or low-interest loans
A new taxable benefit policy applies to the following benefits:
•Certain gift cards which cannot be converted to cash can be treated as non-cash for the purposes of our gifts and awards policy
•Virtual and combined in-person and virtual social events
•A new ration has been introduced to clarify scramble parking
•Chapter 1 – General information
•What is a benefit, an allowance, or a reimbursement
•Benefit
•Allowance
•Reimbursement
•What are your responsibilities
What is a benefit, an allowance, or a reimbursement
Benefit Your employee has received a benefit if you pay for or give something that is personal in nature: directly to your employee to a person who does not deal at arm’s length with the employee (such as the employee’s spouse, child, or sibling) A benefit is a good or service you give, or arrange for a third party to give, to your employee such as free use of property that you own. A benefit includes an allowance or a reimbursement of an employee’s personal expense. Allowance An allowance or an advance is any periodic or lump-sum amount that you pay to your employee on top of salary or wages, to help the employee pay for certain anticipated expenses without having them support the expenses. An allowance or advance is: usually an arbitrary amount that is predetermined without using the actual cost usually for a specific purpose used as the employee chooses, since the employee does not provide receipts An allowance can be calculated based on distance, time or something else, such as a motor vehicle allowance using the distance driven or a meal allowance using the type and number of meals per day. Reimbursement A reimbursement is an amount you pay to your employee to repay expenses they incurred while carrying out the duties of employment. The employee must keep proper records (detailed receipts) to support the expenses and give them to you.
What are your responsibilities
If you provide benefits to your employees, you always have to go through the same steps. If a step does not apply to you, skip it and go on to the next step: "Determine if the benefit is taxable" "Calculate the value of the benefit" "Calculate payroll deductions" "File an information return" Note In this guide, "employee" includes an individual who holds an office, unless otherwise noted. Determine if the benefit is taxable Your first step is to determine whether the benefit you provide to your employee is taxable and has to be included in their employment income when the benefit is received or enjoyed. Whether or not a benefit is taxable depends on whether an employee or officer receives an economic advantage that can be measured in money, and whether that individual is the primary beneficiary of the benefit. For more information, go to What is a taxable benefit. The benefit may be paid in cash (such as a meal allowance or reimbursement of personal cellular phone charges), or provided in a manner other than cash, such as a parking space or a gift certificate. For more information and examples, go to Pensionable and insurable earnings. The manner in which you pay or provide the benefit to your employee will affect the payroll deductions you have to withhold. For more information, see Calculate payroll deductions. Calculate the value of the benefit Once you determine that the benefit is taxable, you need to calculate the value of the specific benefit. The value of a benefit is generally its fair market value (FMV). This is generally the amount the employee would have had to pay for the same benefit, in the same circumstances, if there was no employer-employee relationship. The cost to you for the particular property, good, or service may be used if it reflects the FMV of the item or service. You must be able to support the value if you are asked. Calculate the GST/HST on taxable benefits When you calculate the value of the taxable benefit you provide to an employee, you may have to include: the GST/HST payable by you the PST that would have been payable if you were not exempt from paying the tax because of the type of employer you are or the nature of the use of the property or service Use the Benefits chart to find out if you should include GST/HST in the value of the benefit. Some benefits have further information about GST/HST in the topic specific section. The amount of the GST/HST you include in the value of the taxable benefits is calculated on the gross amount of the benefits, before any other taxes and before you subtract any amounts the employee reimbursed you for those benefits. You do not have to include the GST/HST for: cash remuneration (such as salary, wages, and allowances) a taxable benefit that is an exempt supply or a zero-rated supply as defined in the Excise Tax Act For more information on exempt or zero-rated supplies, go to Type of supply. If you are a GST/HST registrant, you may have to remit the GST/HST for the taxable benefits you provide to your employees. For more information, go to About the GST/HST on benefits or see Chapter 5 – Remitting the GST/HST on employee benefits. Calculate payroll deductions After you calculate the value of the benefit, including any taxes that may apply, add this amount to the employee's income for each pay period or when the benefit is received or enjoyed. This gives you the total amount of income from which you have to make payroll deductions. You then withhold deductions from the employee's total pay in the pay period in the normal manner. The deductions you withhold, especially the employment insurance (EI) premiums, will depend on whether the benefit you provide is cash, non-cash, or near-cash. Note If you provide your employee with a monthly taxable benefit, you may include a prorated value in your employee's income in each pay period in the month. Cash benefits Cash benefits include such things as: physical currency cheques direct deposit Canada Pension Plan (CPP) – When a cash benefit is taxable, it is also pensionable. This means you have to deduct CPP contributions from the employee's pay. It also means that you have to pay your employer's share of CPP to the Canada Revenue Agency (CRA). If the employment is not pensionable under the CPP, then any taxable benefits paid in cash are not pensionable and CPP contributions should not be withheld. For more information, go to How to calculate. Employment insurance (EI) – When a cash benefit is taxable, it is also insurable. This means you have to deduct EI premiums from your employee's pay. It also means that you have to pay the employer's share of EI to the CRA. If the employment is not insurable under the Employment Insurance Act, then any taxable benefits paid in cash are not insurable and EI premiums should not be withheld. For more information, go to How to calculate. Income tax – When a cash benefit is taxable, you have to deduct income tax from the employee's total pay in the pay period. Non-cash or near-cash benefits A non-cash (or “in kind”) benefit is the actual good, service, or property that you give to your employee. This includes a payment you make to a third party for the particular good or service if you are responsible for the expense. A near-cash benefit is one that functions as cash, or something that can easily be converted to cash, such as a security, stock, or gold nugget. For more information on near-cash benefits, see Gifts, awards, and long-service awards. CPP – When a non-cash or near-cash benefit is taxable, it is also pensionable. This means you have to deduct CPP contributions from the employee's pay. It also means that you have to pay your employer's share of CPP to the CRA. Notes Except for security options, if a non-cash taxable benefit is the only form of remuneration you provide to your employee in the year, there is no remuneration from which to withhold deductions. You do not have to withhold CPP contributions on the amount of the benefit, even if the value of the benefit is pensionable. Also, you do not have to remit your share of the CPP amounts. Always report the value of the non-cash benefit in box 14 "Employment income," and box 26 "CPP/QPP pensionable earnings," of the T4 slip, even if you did not have to deduct CPP/QPP contributions. EI – A taxable non-cash or near-cash benefit is generally not insurable. Do not deduct EI premiums. Exceptions to this rule are: The value of board and lodging an employee receives during a period in which you pay the employee a salary in cash. For more information, see Board and lodging Employer-paid RRSP contributions when the employee can withdraw the amounts. For more information, see Registered retirement savings plans (RRSPs) Income tax – When a non-cash or near-cash benefit is taxable, you have to deduct income tax from the employee's total pay in the pay period. Except for security options, if a non-cash or near-cash benefit is of such a large value that withholding the income tax will cause undue hardship, you can spread the tax you withhold over the balance of the year. The CRA considers undue hardship to occur if the required withholding results in your employee being unable to pay reasonable expenses related to basic family needs. Basic family needs are those related to food, clothing, shelter, health, transportation, and childcare. Note Except for security options, if a non-cash or near-cash taxable benefit is the only form of remuneration you provide to your employee, there is no remuneration from which to withhold deductions. You do not have to withhold income tax on the amount of the benefit, even if the value of the benefit is taxable. For more information on calculating payroll deductions, go to Payroll deductions and contributions. Benefits chart Use the Benefits chart to find out if you should deduct CPP contributions and EI premiums on the taxable amounts, and which codes to use to report the taxable amounts on an employee's T4 slip. The chart also shows whether to include GST/HST in the value of the benefit for income tax purposes. File an information return If you are an employer, report the value of the taxable benefit or allowance on a T4 slip in box 14, "Employment income." Also report the value of the taxable benefit or allowance in the "Other information" area at the bottom of the employee's slip and use code 40, unless the CRA tells you to use a different code. If you are a third-party payer providing taxable benefits or allowances to employees of another employer, report the benefits in the "Other information" area at the bottom of the T4A slip. Use the code provided for the specific benefit. Example If you are a third party who provides travel benefits (travel assistance in a prescribed zone) to the employee of another employer, report these benefits under code 028 "Other income," in the "Other information" area at the bottom of the T4A slip. If a benefit or an allowance described in this guide is non-pensionable, non-insurable, and non-taxable, do not include it in income and do not report it on an information slip. For more information on reporting benefits and allowances, go to: Calculate payroll deductions and contributions When to file information returns Claiming deductions, credits, and expenses Travel allowance
Employee's allowable employment expenses
Your employee may be able to claim certain employment expenses on their income tax and benefit return if, under the contract of employment, the employee had to pay for the expenses in question. This contract of employment does not have to be in writing but you and your employee have to agree to the terms and understand what is expected. Examples You allow your employee to use his personal motor vehicle for business and pay him a monthly motor vehicle allowance to pay for the operating expenses and you include the allowance in the employee's employment income as a taxable benefit You have a formal telework arrangement with your employee that allows this employee to work at home. Your employee pays for the expenses of this work space on their own You have to fill out and sign Form T2200, Declaration of Conditions of Employment, and give it to your employee so they can deduct employment expenses from their income. By signing the form, you are only certifying that the employee met the conditions of employment and had to pay for the expenses under their employment contract. It is the employee's responsibility to claim the expenses on their income tax and benefits return and to keep records to support the claim. For more information on allowable employment expenses, see: Claiming deductions, credits, and expenses Travel allowance
Information on the topics discussed in this chapter can be found at:
•Automobile and motor vehicle benefits
•Archived Interpretation Bulletin IT-63R5, Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer – After 1992
•What is a taxable benefit
Aircraft Benefits
If you give your employee access to an aircraft for personal purposes, the employee receives a taxable benefit. You have to add to the employee’s salary the fair market value of the benefit, minus any amount the employee paid. The value of the benefit is determined on the basis of what is reasonable in relation to the facts of the case and the manner in which the aircraft is used. For more information about aircraft benefits, go to Taxable benefit for the personal use of an aircraft.
Board and lodging
You may give your employee board and lodging which means that you provide them with accommodations and, in some cases, food. If you provide only meals to an employee, see Meals. If you provide free lodging, or free board and lodging, to an employee, the employee receives a taxable benefit. As a result, you have to add to the employee's salary the fair market value of the board and lodging you provide. Report this amount in box 14, "Employment income," and in the "Other information" area under code 30 at the bottom of the employee's T4 slip. If you provide subsidized lodging, or subsidized board and lodging, to an employee, the employee receives a taxable benefit. As a result, you have to add to the employee's salary the fair market value of the board and lodging you provide, minus any amount the employee paid. Report this amount in box 14, "Employment income," and in the "Other information" area under code 30 at the bottom of the employee's T4 slip. Exceptions to the rules There are certain situations that can affect the value of the taxable benefit your employee gets if you provide free or subsidized board and lodging. The exceptions are as follows: If you provide allowances for board and lodging to players on sports teams or members of recreation programs, see the next section If you provide board, lodging, or transportation, or allowances for board, lodging, or transportation to an employee who works at a special work site or a remote location, see Board, lodging, and transportation – Special work sites and remote work locations
Board and lodging allowances paid to players on sports teams or members of recreation programs
You can exclude up to $411 (for 2023) per month from income for a board and lodging allowance for a participant or member of a sports team or recreational program if all of the following conditions are met: you are a registered charity or a non-profit organization participation with, or membership on the team or in the program is restricted to persons under 21 years of age the allowance is for board and lodging for participants or members that have to live away from their ordinary place of residence the allowance is not attributable to any services, such as coaching, refereeing, or other services to the team or program Do not report the excluded income on a T4 slip.
Airline passes for employees and retirees of an airline company
If you provide standby airline passes to a current airline employee for their personal travel, there is no taxable benefit for the employee. If you provide space-confirmed airline passes to a current airline employee for personal travel, the passes are a taxable benefit. The value of the benefit to be included in the employee’s income is the fair market value of the pass (including any fees and taxes), less any amount paid by the employee. If you provide standby or space-confirmed airline passes to a retired airline employee for their personal travel, there is no taxable benefit for the retired employee.
Transit passes
If you pay for or provide your employee with public transit passes, it is usually a taxable benefit for the employee. Public transit includes transit by local bus, streetcar, subway, commuter train or bus, and local ferry. Report the taxable benefit on the employee's T4 slip in box 14, "Employment income," and in the "Other information" area under code 40 at the bottom of the slip. Transit passes – employees of a transit company If your company is in the business of operating a bus, streetcar, subway, commuter train or bus, or ferry service, and you provide free transit passes to your employees or their families, special rules apply. If you provide free or discounted passes to a current or a retired employee of one of the businesses mentioned above, and the passes are only for the employee's or the retiree's use, there is no taxable benefit for the employee or the retiree. Note To qualify as a non-taxable benefit under this special rule, ferry passes are limited to passenger (walk on) fares only. If you provide free or discounted passes to a member of your employee's or retired employee's family, the fair market value (FMV) of the pass is a taxable benefit for the employee. Report the retiree's benefit using code 028, "Other income" in the "Other information" area at the bottom of the T4A slip. Note If you provide free or discounted passes to a current employee in an area other than the transportation business or its operations, their FMV is a taxable benefit for the employee. For example, if a city owns a transit company, the FMV of a pass given to a current employee in the city's accounting department would be a taxable benefit, while a pass given to a current employee in the accounting department of the transit business operations would not be a taxable benefit. For examples of situations where transit passes are considered taxable benefits, go to Transportation and airline passes
Travel allowance
Part-time employee You may give a part-time employee a reasonable allowance or reimbursement for travelling expenses incurred by the employee going to and from a part-time job. If so, and you and the part-time employee are dealing at arm's length, you do not have to include that amount in the employee's income. This applies to: teachers and professors who work part-time in a designated educational institution in Canada, providing service to you as a professor or teacher, and the location is not less than 80 kilometres from the employee's home part-time employees who had other employment or carried on a business, and they did the duties at a location no less than 80 kilometres from both the place of the employee's home and the place of the other employment or business Salesperson and clergy You may pay a reasonable travel allowance for expenses other than for the use of an automobile (such as meals, lodging, per diem allowance) to a salesperson or member of the clergy. You do not have to include the allowance in the employee's income if it was for expenses related to the performance of duties of the office or employment and the employee is either of the following: an agent selling property or negotiating contracts for the employer a member of the clergy Other employees You have to include reasonable travel allowances in the income of employees, other than a salesperson or member of the clergy, who travel to perform the duties of the office or employment, unless the allowances are received by the employee for travelling away from the municipality and the metropolitan area where the employer's establishment is located and where the employee ordinarily works or reports. In some situations, you may provide an allowance to your employee for travel (other than an allowance for the use of a motor vehicle) within a municipality or metropolitan area so your employee can perform their duties in a more efficient way during a work shift. This allowance is not a taxable benefit and can be excluded from the employee's income if all of the following conditions are met: The employee travels away from the office The allowance is reasonable. The CRA generally considers a value of up to $23 for the meal portion of the travel allowance to be reasonable You are the primary beneficiary of the allowance The allowance is not an additional form of remuneration This means that you do not have to include this type of travel allowance if its main reason is so that your employee's duties are performed in a more efficient way during a work shift. For examples of situations where a travel allowance is considered a taxable benefit, go to Examples – Travel allowance. Reasonable travel allowances Whether an allowance for travel expenses is reasonable is a question of fact. You should compare the reasonable costs for travel expenses that you would expect your employee to incur against the allowance you pay to the employee for the trip. If the travel allowance is reasonable, you do not have to include it in your employee's income. If it is not reasonable, the allowance has to be included in your employee's income. For more information, see paragraph 48 in archived Interpretation Bulletin IT-522R, Vehicle, Travel and Sales Expenses of Employees. Your employee may be able to claim certain employment expenses on their income tax and benefit return. For more information, see Employee's allowable employment expenses.
This chapter applies to you if you meet both of the following conditions:
•You are an employer or a third-party payer who provides employment benefits for board, lodging, transportation, or travel assistance
•You provide these benefits to an employee who works or lives in locations that are in prescribed zones for purposes of the northern resident's deductions
If your employee works at a special site or a remote work location that is not in a prescribed zone, this chapter does not apply to you. For more information, see Board, lodging, and transportation – Special work sites and remote work locations.
GST/HST may need to be included in the value of the taxable benefit for income tax purposes. Calculate and withhold payroll deductions. The employee can be paid or provided the benefit in cash, non-cash or near-cash; The manner in which the benefit is paid will affect the payroll deductions withheld; Report the benefit on a slip. You need to ...
May 30, 2024 · Some fringe benefits are for all the employees, whereas others are offered only to certain categories of employees. ... Most fringe benefits are taxable at fair market value but some benefits ...
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Oct 9, 2024 · Tax implications of fringe benefits. Whether a fringe benefit is taxable depends on its nature and value. Some fringe benefits, like health insurance and retirement contributions, are often tax-free for employees. However, perks like personal use of a company car or subsidized meals might be subject to fringe benefit tax.
May 5, 2021 · 17 Common Types of Tax-Free Fringe Benefits . There is a long list of tax-free fringe benefits that do not need to be included in the employee's compensation. What are some examples of tax-free fringe benefits? Examples include: Accident insurance; Certain Achievement awards; Disability insurance
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Aug 21, 2024 · Taxable fringe benefits. Taxable fringe benefits are included in the employee's gross income and are subject to federal income tax, Social Security, Medicare, and FUTA taxes. Examples of taxable fringe benefits include: Bonuses like cash rewards given to employees for performance or holidays; Employer-provided vehicles for personal use
