2023 TurboTax® Canada Tips

Common Taxable Benefits in Canada

TurboTax Canada
September 25, 2020 | 3 Min Read

What Are Taxable Benefits?

A taxable benefit is a payment from an employer to an employee that is considered a positive benefit and can be in the form of cash or another type of payment. A number of common benefits in Canada are actually taxable benefits and must be reported when an individual files his personal income taxes.

Employer Responsibilities

If an employer provides benefits or allowances to staff or individuals who hold an office in his company, he must take the following steps.

Once it is determined that a benefit is taxable, calculate the value of the specific benefit.

The value of a benefit is generally referred to as its fair market value. This FMV is the price obtained in an open market between two individuals dealing at arm’s length. The cost for the particular property, good or service may be used if it reflects the FMV of the item or service. Supporting documentation may be needed for the value of the benefit assigned.

The value of a benefit or allowance may have to be included in an employee’s income depending on the type of benefit or allowance and the reason it was given. Once the value of the benefit, including any taxes that may apply, is determined, add this amount to the employee’s income for each pay period or when the benefit is received. This gives the total amount of income subject to payroll deductions. The employer then withholds deductions from the employee’s total pay in the pay period in the normal manner. The deductions withheld, especially the employment insurance premiums, depend on whether the benefit provided is cash or non-cash.

Common Taxable Benefits

Some common benefits often considered taxable include:

Others include reimbursement for the cost of tools used in employment, loans to employees, tax equalization payments to relocate employees to offset higher taxes, income tax preparation fees and scholarships provided to children.

This is not an exhaustive list, but these benefits are considered common benefits in Canada.

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