Liberal government to collect tax, CPP on employee discounts

October 9, 2017 7:02 pm

The Canada Revenue Agency is going to start taxing employee discounts.

Employer organizations long thought the new rule was a mistake, but a spokesperson for the CRA has clarified that employee discounts are now considered taxable benefits and therefore part of a person's income.

The change could prompt employers to drop discounts to avoid an "administrative nightmare," Retail Council of Canada vice-president Karl Littler said.

The CRA measure comes at the same time the Liberals are being criticized for their planned tax changes.

According to the Canada Revenue Agency "the taxable benefit is the difference between the fair market value of the goods and the price the employees pay."

CRA further explains "commissions that sales employees receive on merchandise they buy for personal use are not a taxable benefit.

The CRA policy notes that any employee discount on goods is taxable, but it does not apply to discounts on services.

"Where the benefit is taxable, it is also pensionable. Deduct income tax and CPP contributions," CRA advises

"If the taxable benefit is paid in cash, it is insurable. Deduct EI premiums. If it is a non cash benefit, it is not insurable. Do not deduct EI premiums.