Benefits and allowances
An employer can give employees benefits, allowances or reimbursements for expenses. In general, these are considered taxable income. However, there are exceptions where benefits or allowances can be excluded from the employee’s taxable income. You can find the complete here. In this article, we highlight the most relevant topics: board and lodging and meals.
Board and lodging
In general, providing free or subsidized board and lodging is considered a taxable benefit. An employer has to add to the employee’s income the fair market value of the board and lodging the employer provides (if subsidized: minus the amount the employee paid).
There are however certain exceptions for players on sports teams or members of recreation programs and employees working at a special work site or a remote work location. You can find more information on these exceptions in the Guide.
Providing overtime meals or an allowance for overtime meals is not considered a taxable benefit if the following requirements are met:
- The allowance, or the cost of the meal, is reasonable. The CRA generally considers a value of up to $23 (including the GST/HST and PST) to be reasonable. Higher amounts are considered reasonable if the relative cost of meals in that location is higher, or under other significant extenuating circumstances
- The employee works two or more hours of overtime right before or right after their scheduled hours of work
- The overtime is not frequent and is occasional (usually less than three times a week)
If the employer provides subsidized meals, these are not considered tax benefits if the employee pays a reasonable charge. A reasonable charge is considered a charge that covers the cost of the food, its preparation and service. If the charge is not reasonable, the value of the benefit is the cost of the meals, minus any payment the employee makes.
The CRA lists some illustrative examples of taxable or non-taxable meal benefits on their website.
In Canada, there are multiple different indirect sales taxes:
- Federal Goods and Services Tax (GST): Federal tax that applies to the supply of most goods and services in Canada.
- Harmonised Sales Tax (HST): Tax where federal and provincial tax is combined into one sales tax. This tax is in effect in five provinces: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario and Prince Edwards Island.
- Provincial Sales Tax (PST): Provincial tax levied in addition to GST. This tax is levied by British Columbia, Saskatchewan and Manitoba.
- Québec Sales Tax (QST): Provincial tax specifically for Québec and levied in addition to the GST.
Province Type Rate Provincial sales tax Federal GST
|Province||Type||Rate||Provincial sales tax||Federal GST|
|British Columbia||GST + PST||12%||7%||5%|
|Manitoba||GST + PST||12%||7%||5%|
|Prince Edward Island||HST||15%||10%||5%|
|Québec||GST + QST||14.975%||9.975%||5%|
|Saskatchewan||GST + PST||11%||6%||5%|
To find out whether a certain supply is taxable or exempt, you can check on the Canadian government‘s website.