Discounts on merchandise granted to employees - Canada Revenue Agency will publish soon a new wording

October 15, 2019
Category :  Articles

Revision of the position of the Canada Revenue Agency (“CRA”) in progress

Certain employers grant to their employees’ discounts on products they usually offer to their customers. Can these discounts be considered a form of additional remuneration for the employee and therefore be taxable? At the moment, the CRA is in the process of revising its guidelines regarding the treatment of such discounts granted to employees. The purpose of this revision is to address the inconsistency of the CRA’s recommendations, who made a contradictory statement on the subject.

Conflicting publications regarding the taxation of discounts

First of all, the Income Tax Folio S2-F3-C2, “Benefits and Allowances Received from Employment”, mentions that “if an employee receives a merchandise discount because of their job, the value of the discount is usually added to his income.” (Our underlining)

On the other hand, the publication T4130, “Employers’ Guide – Taxable Benefits and Allowances”, establishes that “If you sell merchandise to your employee at a discount, the benefit they get from this is not usually considered a taxable benefit.” (Our underlining)

How to consider these discounts before the new CRA publication

Since the Income Tax Folio S2-F3-C2 “Benefits and Allowances Received from Employment” has been removed in order to be modified, the CRA will apply the position stated in Guide T4130 until the modifications are published. Therefore, the discounts granted to employees are not a taxable benefit as long as the new CRA publication does not specify a different treatment.

To make sure the discounts on the merchandise granted to employees are treated properly, or to find out more, communicate with your FBL representative.

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