Revenue I*I Canada CKZ%I Canada. Employers Guide to Payroll Deductions. Taxable Benefits 97-98

Transcription

1 Reveue I*I Caada CKZ%I Caada. Employers Guide to Payroll Deductios Taxable Beefits T41 30(E)Rev E

2 1s this guide for you? You cari use this guide if you provide taxable beefits or allowaces to your employees such as: w automobile m hous+, beefits; board, ad lodgig;. iter&-free or low-iterest loas;. group term life isurace policies; ad. tuitio fees. The istructios i this guide maily apply to employas. However, we also provide certai guidelies for trustees, admiistrators, ad corporate directors. Problem Resolutio Program Reveue Caada is always lookig at ways to make it casier for you to file your iformatio returs, deduct ad sed i your remittaces, ad resolve ay problems you may bave. If you bave a problem, you a 41, Write, or visit your tax services office. Also, you cari write or visit your tax cetre. You cari fid the telephoe umbers for your tax services office listed uder Reveue Caada i the Govermet of Caada sectio of the telephoe book. As for the address of your tax cetre, it is listed at the ed of this guide. However, if, after this step, your problem is et resolved to your satisfactio, you should get i touch with the Problem Resolutio Program co-ordiator of your tax services office. We welcome your suggestios We review this guide each year. If you bave ay commets or suggestios that would help us improve the iformatio it cotais, we would like to hear from you. Please sed your commets to: Cliet Services Directorate Reveue Caada Room Cumberlad Street Ottawa ON KlA OL5 Orderig publicatios Throughout this guide, we metio other publicatios that caver topics i more detail. TO order these publicatios, complete the order form at the back of the guide, ad sed it to your tax services office or ta cetre. If you do ot use the order form, you cari order the publicatios from your ta services office by mail, telephoe, or i perso. You a also Write or go to your tax cetre. You cari fid the telephoe rumbas for your tax services office listed uder Reveue Caada i the Govermet of Caada sectio of the telephoe book. As for the address of your ta cetre, it is listed at the ed of this guide. If you mail the order form, allow three weeks for delivery. Iteret access You cari fid may of Reveue Caada publicatios Iteret at: o the lly users If you bave a teletypewriter (TTY) attached to your telephoe, you cari cal1 our toll-free, biligual equiry service at I durig regular hours of service. Visually impaired persos cari get this publicatio i braille or large prit, or o audio cassette or computer diskette. TO order, please cal1 l weekdays betwee 8:15 a.m. ad 5:Oo p.m.~ (Easter Time). This guide uses plai laguage to explai the most commo tax situatios. please cotact your Reveue Caada tax services office or tax cetre. If you eed more help after you read this guide, La versio fraçaise de cette publicatio est ititul& Guide de l employeur -Reteues sur la paie : Avtages imposables.

3 Page Sample Forms Where Do You Fid... 4 T4 Supplemetary slip What s New?... 5 T4A Supplemetary slip Notice... 5 T4 Summary form Chapter 1 - Automobile Beefits... 5 T4A Summary form Chapter 2- Other Taxable Beefits Addresses of tax cetres Chapter 3 - GST/HST ad Employee Beefits Order Form Page Major chages that bave take place sie last year are outlied i red. 3

4 Page Addresses of tax cetres Advace for travel expeses Automobile allowace rates Automobile allowaces Automobile beefits... 5 Automobile costs for the employer... 6 Awards for employees suggestios Calculatig automobile beefits (work sheet) Defiitios... 5 Disability-related employmet beefits Discouts o merchadise ad commissios o sales Educatioal allowaces Employez cousellig services Employer-provided parkig Fleet operatios... 7 Foototes Gifts,..,,.,,.,,..,....<.....t Goods ad services tax/harmoized sales tax (GST/HST) Calculatie the amout of GST/HST vou are cosidered to bave collected a,,,.,,.,,.: Employez beefits GST/HST cosidered collected GST/HST ot cosidered collected Iput tax credit (ITC) Property acquired before 1991, OI from a o-registrat Summary Group term life isurace policies: Employer-paid premiums Holiday trips, other prizes, ad icetive awards Housig ad travel assistace beefits i a prescribed zoe Housig, board, ad lodgig How to complete the T4 Supplemetary slip Allowaces Beefits Isolvet isurer Iterest-free ad low-iterest loas Deductibility of deemed iterest beefit Pa.ge Home-purchase loa Home-relocatio loas How do you report these beefits o iterest-free ad low-iterest loas? Loas received because of employmet Loas received because of shareholdigs Prescribed rates of iterest Leasig costs... 6 Medical expeses the employer pays Movig expeses Muicipal officer s expese allowace No-taxable allowaces Operatig cost beefit... 7 Parterships... 7 Premiums uder a private health services pla Premiums uder provicial hospitalizatio, medical tare isurace, ad certai Govermet of Caada plas Professioal fees R ecreat1oai fac1l1t1es Reducig ta deductios at source o certai automobile allowaces Registered retiremet swigs plas (RRSPs) Reimbursemet for travel expeses Shareholder s beefit Spouse s travellig expeses Stadby charge... 6 Stock optios S u b s, d,ze d m e a 1 s Subsidized school services Trasportatio to the job Travellig allowaces to a part-time employee Tuitio fees, scholarships, ad bursaries Uiforms ad special clothig Voluteer firefighters Wage-loss replacemet plas or premiums paid to a icome maiteace pla

5 tax (GST) to create HST. Whe we refer to Newfoudlad. we iclude Labrador. HST applies to the same base of goods ad services as GST at a rate of 15%. Of this, 7% is the federal part ad 8% is the provicial part of HST. For Iformatio for G.ST/HST Registrats, which you cari get from ay tax services office or tax cetre. he beefit for a automobile you provide for the year is geerally the total of the followig amour&: a stadby charge for the yearl; ad For 1996 ad later taxatio vears, av tax payable bv you i buyig or leasig a employer-pr&ided &xobfie Busiess Number (BN) The BN is a umberig system that replaces the multiple umbers busiesses had to use to do busiess with the federal govermet. The BN is based o a simple priciple-oe busiess, oe umber. Al1 ew busiesses Will get a BN whe they ope ay of the followig busiess accouts with Reveue Caada:. corporate icome tax; import/export;. payroll deductios; ad. goods ad services tax/harmoized sales tax (GST/HST). The BN also icludes registered charity accouts. Evetually, busiesses Will be able to use their BN for other Reveue Caada accouts ad other federal ad provicial govermet programs. Work sheet - Calculafig automobile beefifs for 1997 ad lafer faxafio yeurs This work sheet bas bee revised to make it casier for you to complete. Please ote that it is available oly i this guide. You caot get oe from your tax services office or tax cetre. Goods ad services tax/harmoized sales tax (GST/HST) GST/HST applies to may of the taxable beefits you iclude i employmet icome of your employees for icome tax purposes. You bave to iclude ay tax (GST ad PST or HST) payable by you, as well as tax that would bave be payable if you were ot exempt from payig the tax because of the type of employer you are, or the ature of the use of the ~rooertv. ;hat would bave bee ;aiable et exempt from payig the tax because of the type of employer you are or the ature of the use of the property.. a operatig cost beefit for the year; mius ay reimbursemets employees make i the year for beefits you otherwise iclude i their icome for the stadby charge. If you are a employer registered for the GST/HST, you may bave to remit the GST/HST relatig to the stadby charge ad the operatig ccet beefit paid to your employees. For more iformatio, sec Chapter 3 GST/HST ad Employez Beefits. Defiitios Read through the followig defiitios. They Will help you uderstad the terms ad expressios we use i the iformatio that follows. Automobile A automobile meas a motor vehicle (sec the defiitio below) that is desiged or adapted primarily to carry et more tha a driver ad eight passegers o bighways ad streets. A automobile does ot iclude:. a ambulace;. a motor vehicle bought primarily to use as a taxi;. a bus used to trasport passegers;. a herse used for fuerals; or w a va, pick-up truck, or similar vehicle that: 1 You bave to calculate the GST/HST for the stadby charge based o thegrossamoucof the beefitwithoutcosidegay amouts the employee reimbursed. 5

6 - carries ot more tha the driver ad two passegers ad i the taxatio year it is bought is used primarily to trasport goods or equipmet i the course of busiess; or - i the year it is bought is used 90% or more of the time to trasport goods, equipmet, or passegers i the course of busiess. Motor vehicle A motor vehicle is a automotive vehicle desiged or adapted to be used o highways ad streets. It does ot iclude a trolley bus or a vehicle desiged or adapted to be used oly o rails. Automobile availability A automobile is available to employees if they bave access to OI cotrol over the vehicle. Access eds whe a employee returs a11 the automobile s keys. If the employee does et use the automobile for persoa1 drivig, there is o taxable beefit, eve if the vehicle was available to the employee for the etire year. This applies as log as you require the employee to use the automobile i the course of his or her employmet. Persoa1 drivig Persoa1 drivig is ay drivig by a employee, or a perso related to the employee, for purposes other tha i the course of his or her employmet. This icludes:. vacatio trips; m drivig for persoa1 use; ad travel betwee home ad work (eve if you isist that the employee drive the vehicle home). We do ot cosider it persoa1 drivig if you require OI allow the employee to travel directly from home to a poit of cal1 (e.g., a salesperso visitig customers) other tha your place of busiess to which the employee regularly reports, or to retur home from that poit. The employee &y bave to reimburse you for persoa1 use of the automobile. If this happas, reduce the total automobile beefit by the reimbursed amout. You ad your employees should keep records o the use of a automobile SO that you cari properly idetify the busiess ad persoa1 use amouts of the total kilometres driva i a caledar year by a employee or a perso related to the employee. Your automobile costs Your automobile costs i determiig the stadby charge are the total of the followig two amouh: the cost of the automobile whe you bought it, icludig optios, accessories, the goods ad services tax (GST), ad the provicial sales tax (PST), or the harmoized sales tax (HST), but ot icludig ay reductio for trade-i; plus. the cost of additios (icludig GST ad PST or HST) you made to the automobile after you bought it (whe you add the additios to the capital cost of the automobile for depreciatio). Whe you calculate the stadby charge, specialized eauitet vou add to the automobile to meet the,.a, reqwemets of the employmet (e.g., cellular phoes, two-way radios, heavy-duty suspesio, power wiches) is ot cosidered as part of the automobile s cost. Leasig costs Leasig costs i determiig the retal cost for the automobile; ad the stadby charge iclude:. ay associated costs, such as maiteace cotracts, excess mileage charges, termial charges, GST ad PST or HST that you pay to the lessor uder the leasig cotract. Leasig costs do ot iclude liability ad collisio isurace costs. Operatig costs Operatig costs iclude: - gasolie ad oil; - maiteace charges ad repair expeses less isurace proceeds; - liceces; ad - isurace.. Operatig costs do et iclude: - iterest; - capital cost allowace for a automobile you ow; - lease costs for a leased automobile; or - parkig costs. Stadby charge The stadby charge represets the beefit employees ejoy whe your automobile is available for their persoa1 use. You calculate the stadby charge differetly depedig o whether you ow or lease the automobile. For 1996 ad later taxatio years, ay tax payable by you i buyig or leasig a employer-provided automobile must be icluded whe you calculate the automobile stadbv charee beefit. You bave to iclude av ta (GST a;d PSTor HST), payable by you as well &tax that would bave bee payable if you were et exempt from the paymet of that tax because of the type of employer you are or the ature of the use of the property. Automobiles you ow Base the stadby charge o:. 2% of the automobile s cost to you; 6

7 . the umber of 30-day periods i the year the automobile was available to the employee (whe you divide the umber of days the automobile was available to the employee by 30, sec the Work sheet provided at page 9 to kow how to roud off the resultig amout); the persoa1 drivig the employee did while the automobile was available to the employee; ad. the amout of ay paymet (reimbursemet) you received from the employee for the stadby charge, Fleet operatios You may operate a fleet or pool of automobiles from which a employee uses several automobiles durig the year. If you assig a employee a automobile from a fleet or pool o a log-ta or exclusive bais, you bave to base the stadby charge o the automobile you bave assiged to the employee. However, if the fleet is mostly the same or if you group it ito a few similar groups, you cari calculate the stadby charge based o the average cost of the group from which you provide the automobile. You ad the employee must agree to this. For more iformatio, sec Iterpretatio Bulleti IT-63, Beefits, Icludig Stdby Charge for a Automobile,from the Persoa1 Use of a Motor Vehicle Supplied by a Employer - after 1992, which is available at your tax services office or tax cetre. Automobiles you lease Base the stadby charge o:. two-thirds of the cost of your automobile lease less the amout payable to the lessor for isurig agaist loss, damage, or liability resultig from use of the automobile;. the umber of 30.day periods i the year the automobile was available to the employa? (whe you divide the umber of days the automobile was available to the employee by 30, sec the Work sheet provided at page 9 to kow how to roud off the resultig amout); the persoa1 drivig the employee did wbile the automobile was available to the employee; ad. the amout of ay paymet (reimbursemet) you received from the employee for the stadby charge. Lump-sum lease paymets Lump-sum paymets you make at the begiig or ed of a lease that are ot a paymet to buy the automobile Will affect the stadby charge for the automobile. Prorate the lump-sum paymet you make at the begiig of a lease over the life of the lease. If you make a lump-sum paymet at the ed of a lease, we cosider it to be a termial charge. This meas your lease costs should bave bee higher ad the stadby charge for the automobile has bee uderstated. I this situatio, you CalIl:. prorate the paymet over the term of the lease ad amed the T4 or T4A Supplemetary slip of those idividu& who used the vehicle: or. add the termial charge to the lease costs i the year you termiate the lease. You cari choose which method to use as log as the employee agrees with your choie. Furthermore, oe of the relevat years cari be statute-barred, which meas that the employee cari still request a icome tax adjustmet for the year i questio. Whichever method you use, iclude GST/HST. A lump-sum paymet you receive at the ed of a lease is cosidered as a termial credit. Whe this occurs, the stadby charge for the automobile has bee overstated sie the lease costs should bave bee lower. I this situatio, you should amed the T4 ad T4A Supplemetary slips of the idividu& who used the automobile (as log as they agree) ad give them a letter explaiig the reductio. These idividu& cari the write to their ta services office or tax cetre ad ask us to adjust their returs for years that they cari still request a icome tax adjustmet. Reducig the stadby charge You cari reduce the stadby charge if the automobile is used at least 90% of the time for busiess purposes ad the total kilometres for persoa1 use are less tha 12,000 a year. You cari reduce the stadby charge for idividu& employ i sellig or leasig automobiles if: you. the idividual is employed pricipally to sel1 or lease automobiles;. a automobile you ow was made available to that idividual or to someoe related to that idividual; ad you acquired at least oe automobile durig the year. You cari choose the rate of 1.5% istead of 2% for the stadby charge, ad calculate the cost of your automobile as the greater of the followig two amouts: the average cost of a11 automobiles you acquired to sel1 or lease i the year; or. the average cost of all ew automobiles you acquired to sel1 or lease i the year. Partership s You bave to iclude a stadby charge beefit i the icome of a parter or a employee of a parter, if a partership makes a automobile available for persoa1 use ta. a parter or a perso related to the parter; or. a employee of a parter or a perso related to a employee of a parter. TO calculate the stadby charge beefit, you cari use the work sheet provided at page 9. Operatig cost beefit Whe you or a perso related to you provides a automobile to a employee ad pays for the operatig expeses related to persoa1 use (icludig GST ad PST or HST), this paymet represets a taxable beefit to the employee. 7

8 If you pay ay amout of operatig expeses for the persoa1 use of a automobile you provide to a employee, you bave to calculate the operatig cost beefit usig a charge based o a fixed rate for 1997 ad later taxatio years of 14~ per kilometre of persoal use (icludig GST ad PST OI HST). Example I 1997, your employee used a car to travel4,ooo kilometres for persoa1 use. The operatig cost beefit is: 4,000 km x 14~ per km = $560 If you pay ay amout of operatig expeses for the persoa1 use of a automobile you provide to a employee whose pricipal source of employmet is sellig or leasig automobiles, you bave to calcul& the operatig cost beefit usig a charge based o a fixed rate for 1997 ad later taxatio years of 11~ per kilometre of persoal use (icludig GST ad PST or HST). Reimbursemet for operatig costs If the employee reimburses you i the year OI o later tha 45 days after the ed of the year for a11 operatig expeses attributable to persoa1 use, o beefit Will accrue for operatig costs i the year. If the employee reimburses you for part of the vehicle s operatig costs i the year OI o Mer tha 45 days after the ed of the year, deduct the paymet from the calculated beefit. Example I 1997, you provide your employee with a automobile. The distace the employee drove durig the year was 30,000 kilometres. The persoa1 distace the employee drove durig the year was 10,000 kilometres. You paid 53,000 i costs associated with maiteace, liceces, ad isurace. Calculate the part of the operatig expeses that relates to the employee s persoa1 use of the automobile as follows: (10,000 km x 53,000) = $1,000 30,000km If the employee reimburses the total amout of 51,000 i the year or o later tha 45 days after the ed of the year, you do ot bave to calculate a operatig cost beefit for this employee. However, if the employee oly reimburses $800 of the expeses you paid i the year or o later tha 45 days after the ed of the year, you bave to calculate the operatig cost beefit as follows: 10,000 km x 14e per km = 51,400 $1, =$600 The operatig cost beefit Will be $600. Whe you use the fixed rate method, you still bave to keep records o this beefit. Optioal calculatio of the operatig cost beefit You cari reduce the vehicle s operatig cost beefit if:. you iclude a stadby charge i your employee s icome;. your employee uses the automobile more tha 50% i the course of his or her office or employmet; ad your employee otifies you i writig, before the ed of the taxatio year, to use this method. If your employee me& these three coditios, calculate the operatig cost beefit of the automobile at 112 of the stadby charge, before deductig ay paymets (reimbursemets) your employez or a perso related to your employee makes. I some cases, this calculatio may et give the employee possible largest deductio. If the employee reimburses you for part of the vehicle s operatig costs i the year or o later tha 45 days after the ed of the year, deduct the paymet from the calculated beefit. Work sheet - Calculatig aufomobik beefifs for 1997 ad /afer fc~xc~fio years The followig work sheet Will help you calculate the value of a employee s automobile beefits. The amout you determie is the taxable beefit you bave to report i boxes 14 ad 34 of the T4 Supplemetary slip or, if applicable, i box 28 of the T4A Supplemetary slip. This work sheet is available oly i this guide. You caot get oe from your tax services office or tax cetre.

9 CALCULATING AUTOMOBILE BENEFITS FOR 1997 AND LATER TAXATION YEARS Complete Step 1, Stadby charge, oly if yo provide your employees a automobile for their persoal use. Otherwise, go to Step 2, Operatig cost beefit. Step 1 - Stadby charge Simplified calculatio DO,hiS ca,c la,io if tile followig coditios are met:. the a tomobile you provide your employee 1s owed by you:. me emplayea SKI the sale a fomobile thm gho f the year;. the emp~oyee s pricipal source of employmet is et sellig or leasig automobiles; ad * the emplayee is et eligible for the reduced stadby charge rate as he or she does et meet the coditios set 0 t i d) below. mst of a tomobile yau provtded * (icludig GST ad PST 01 HC 5 I XX% $2 Mius: ~mployee reimbursemets attribulable fo stadby charge 5- Stadby charge beefit (if oegative. eter 0 ) $ I@ Detaited calculatio d) Calcuiate the stadby charge a, a reduced rate if yo meef the followig coditios: * pu require employees to use the automobile 10 perfarm their duties; f the employee ses the automobile a, least 90% of the time for b Si ess ~ r~oses: ad.,hp lmdx, Of persoal-use kilometres i a taxatio year 1s less vla 12,000!damet,es. 3) * Whe pu divide the total days available by 30, roud off the result 10 the earest whole umber if it is more tha oe. Examples: Available 20 days + 30 = 0.67 (do et roud off) Available 130 days i 30 = 4.33 (roud to 4) A ailab,e 135 days i 30 = 4.50 (roud fo 4) Available 140 days + 30 F 4.67 (roud 10 5, Choose 1,2, or 3 1. Employer-owed automobile: Cost of automobile (icludlg GST ad PST or HST) $ I X2% 5-i 2. Employer-leased a forobil~ (lessee): Mothly leasig cost (ictudig GST ad PST or ST, excludig Is raee, $ I x

10 Amouf 6,7.0r8above.. $2 Mius: Employee reimbursemets for the operafig cost beefit made olatertha 45daysaftertheedofthsyear..<<...<<...<... $ OwratiQ cost bem (if w3ah eter 0 ) $ 20 Total of amouts (employee taxable beefit you report i box 14 the T4 Supplemetary or, if applicable, i box 28 of the T4A Supplemetary) $2 10

11 How to complete slip - Beefits the T4 Supplemetaty Whe you pay a taxable automobile beefit, prepare the T4 Supplefietary slip i the followig way: After you estimate the value of the automobile beefit, prorate the amout to the employee s psy period. Add the resultig amout ad the value of other beefits to the employee s salary to determie the total amout subject to payroll deductios of tax ad Caada Pesio Pla (CPI ) cotributios per psy period. The automobile beefit is ot isurable ad is ot subject to Employmet Isurace premiums (EI). At the ed of the year, or whe that perso is o loger your employee, recalculate the beefit usig the automobile s actual availability ad the kilometres driva for the taxatio year. Adjust the last pay accordigly. After you bave calculated the fial amout, report it i box 14, Employmet icome before deductios, ad i box 34, Persoa1 use of employer s auto o the employee s T4 Supplemetary slip for the taxatio year. Shareholder s beefit The automobile beefit to the shareholder of a corporatio (or a perso related to the shareholder) has to be icluded i the icome of the shareholder. You must report the beefit o a T4 Supplemetary slip whe the idividual is both a shareholder ad a employee ad the automobile is provided to the idividual (or a perso related to that idividual) i his or her capacity as a employee. However, you must report the beefit o a T4A Supplemetary slip whe: m the shareholder is ot a employee; or. the idividual is both a shareholder ad a employee, ad you provide the automobile to the idividual i his or her capacity as a shareholder. TO calcul& the stadby charge ad the operatig cost beefits, you cari use the work sheet provided at page 9. Automobile allowaces A allowace meas ay periodic or other paymet that employees receive from a employer for usig their ow motor vehicle i coectio with or i the course of their office or employmet, i additio to their salary or wages, without havig to accout for its use. A allowace is subject to tax uless it falls withi the coditios of o-taxable allowaces as we defie them i the ext sectio. There is o GST/HST o automobile allowaces. No-taxable allowaces If you psy your employees a reasoable allowace for usig their ow motor vehicle i coectio with or i the course of their office or employmet, you do ot bave to iclude this amout o a T4 Supplemetary slip. A allowace for usig a motor vehicle is cosidered as reasoable oly if all of the followig coditios apply:. it is based solely o the umber of busiess kilometres driva i a year;. the rate per kilometre is reasoable; ad you did ot reimburse the employee for expeses that relate to the same use. A exceptio to this rule applies if you reimburse a employee for toll or ferry charges or supplemetary busiess isurace if you bave determied the allowace without icludig these reimbursemets. The type of vehicle ad the drivig coditios usually determie whether we cosider a motor vehicle allowace to be reasoable. The automobile allowace rates per kilometre that we usually cosider reasoable are the amouts prescribed i sectio 7306 of the home Tax Regultios. Automobile allowace rates For 1997 ad later taxatio years, the rates are: 35~ per kilometre for the first 5,000 kilometres; 29Q per kilometre thereafter; ad. a additioal4t per kilometre for travel i the Yuko Territory ad Northwest Territories. Use these rates to determie the maximum amout you a deduct. The rates are a guidelie to help you determie if a motor vehicle allowace paid to a employee is reasoable. Reimbursemet for travel expeses A reimbursemet is a paymet you make to your employees as a repaymet for amouts they spet while coductig your busiess. Geerally, the employee completes a claim or expese report detailig the amouts spet. Do ot iclude a reasoable reimbursemet, which becomes part of your busiess expeses, i the employee s icome. Advace for travel expeses A advace is a amout you give to employees for expeses they Will icur o your busiess. They Will accout for their expeses by producig vachers ad returig ay amout they did ot sped. Usually, a reimbursemet or a accoutable advace for travellig expeses is ot icome for the employee receivig it uless it represets paymet of the employee s persoa1 expeses (sec Averagig automobile allowaces later i this sectio). For more iformatio o automobile allowaces, see Iterpretatio Bulleti IT-522, Vehicle, Ravel ad Sales Expeses of Employees. 11

12 How to complete slip - Allowaces the T4 Supplemetary I the followig sectios, the term allowace refus to a amout you pay your employees to use their automobiles to carry o your busiess. l repare the T4 Supplemetary slip i the followig way whe: w You psy your employee a automobile allowace that you calculated oly o a reasoable per-kilometre rate. Do ot iclude this amout i icome. It is ot taxable ad is ot subject to icome tax deductios, Caada Pesio Pla (CPI ) cotributios, or Employmet Isurace (EI) premiums. Do ot report this amout o the employee s T4 Supplemetary slip.. You pay your employee a flat-rate automobile allowallce. This allowace is ot cosidered to be a reasoable allowace. The total amout you pay is subject to icome tax, CPI, ad EI deductios. Iclude the yearly total of the flat-rate allowace i box 14, Employmet icome before deductios, ad i box 40, Other ad beefits, o the employee s T4 Supplemetary slip. Whe your employees complete idividual icome tax returs, they may be able to deduct the allowable expeses. They bave to complete l art A of Form T2200, Declamtio ofcoditios of Employmet. You bave to complete Part B ad sig the forms to certify that your employees met the required coditios durig the year. They do ot bave to submit tbis form with their icome tax retur. However, they bave to keep it i case we ask to see it. For more iformatio o allowable expeses, see the guide called Employmet Expeses.. You psy your employee a automobile allowace based o a per-kilometre rate that we do ot cosider to be reasoable. I this case, the total amout is subject to icome ta, CFP, ad EI deductios. Iclude the yearly total of these allowsces i box 14, Employmet icome before deductios, ad i box 40, Other taxable allowaces ad beefits, o your employee s T4 Supplemetary slip. Whe your employees complete idividual icome tax returs, they may be able to deduct the allowable expeses. They bave to complete Part A of Form T2200, Declartio of Coditios of Employmet. You bave to complete Part B ad sig the forms to certify that your employees met the required coditios durig the year. They do ot bave to submit this form with their icome tax retur. However, they bave to keep it i case we ask to sec it. For more iformatio o allowable expeses, see the guide called Employmet Expeses. = You psy your employez a flat-rate automobile allowace ad a reasoable per-kilometre automobile allowace. These allowaces are cosidered to be two separate allowaces. Iclude the flat-rate allowace i icome, ad exclude the reasoable per-kilometre allowace from icome. Employees i this situatio would ot usually be able to claim automobile expeses, sice they received a allowace that you excluded from their icome. However, we offer admiistrative relief to employees who receive both types of allowaces. Whe employees complete idividual icome tax returs, they iclude both automobile allowaces i icome ad they cari claim allowable expeses. They bave to complete Part A of Fo T2200, Declmtio of Coditios of Employmet. You bave to complete Part B ad sig the forms to certify that your employees met the required coditios durig the year. They do ot bave to submit this form with their icome tax retur. However, they bave to keep it i case we ask to see it. You bave to deduct icome tax, CFP, ad EI from the flat-rate allowace. The reasoable per-kilometre allowace is ot subject to these deductios. Report the yearly total of the allowaces o the employee s T4 Supplemetary slip as follows: - Iclude the yearly total of the employee s flat-rate allowace i box 14, Employmet icome before deductios, ad i box 40, Other taxable allowaces ad beefits. - Do ot iclude the yearly total of the employee s reasoable allowace i box 14, Employmet icome before deductios, or i box 40, Other taxable allowaces ad beefits. Eter the yearly total of the reasoable per-kilometre allowaces i the foototes area oly, as follows: Plus total reasoable per-kilometre allowace of $ -. Averagig automobile allowaces A automobile allowace must be based o a reasoable per-kilometre amout to be excluded from a employee s icome. A flat-rate or lump-sum automobile allowace cari ot be averaged at the ed of the year to determie a reasoable per-kilometre rate. TO comply with the rules o automobile allowaces, employees must file expese claims with you o a ogoig basis to claim a per-kilometre allowace. However, we uderstad the admiistrative problems that cari result from this. As a result, we are providig you with a alterative. If you make accoutable advaces to employees for automobile expeses, you do ot bave to iclude them i the employee s icome if the followig coditios are met:. there is a pre-established per-kilometre rate that is ot more tha a reasoable amout;. the rate ad the advaces are reasoable uder the circumstaces;. you documet this method i the employee s record; ad o other provisio of the Icome Tax Act requires you to iclude the advaces i the employee s icome. If you meet all these coditios, we Will ot tax the accoutable advaces for the automobile allowace. Employees bave to accout for the busiess kilometres they travelled ad ay advaces they received. They must do $0 o the date they cesse employmet i the year, or by the 12

13 caledar year ed, whichever is earlier. At that time, you bave ta pay ay amouts you owe the employee, ad the employee must repay ay amout over expeses. You do ot bave to report the excess advaces employee s T4 Supplemetary slip. Reducig tax deductios automobile allowaces at source o o the I may cases, automobile allowaces that are ot based solely o a reasoable per-kilometre rate ca later be substatially offset by the employees expese deductios whe employees complete idividual icome tax returs. Employees ca ask you to reduce or elimiate their payroll deductios (commoly called a waiver) from the dlowei Cl3. TO do this, a employee has to sed a request to the Cliet Services Divisio at his or her tax services office ad iclude the followig iformatio:. the type of employmet for which you Will pay the allowace;. a estimate of the total automobile allowaces the employee Will receive i the year;. a estimate of the busiess kilometres the employee Will drive i the year; a estimate of the employee s automobile expeses for the year; ad the amout for which the employee is requestig the waiver. If you bave a umber of employees i the same situatio, you cari obtai a bulk waiver for the group istead of idividual waivers. For more iformatio, cotact your tax services office. I this guide, whe we refer to GST/HST, please remember that where applicable, you still bave to calculate the provicial sales tax PST) ad add it to the beefit. Calculate the GST before ay PST. T. here are may types of beefits that you may have to mclude 1 a employee s icome. Whether or et the beefits are taxable depeds o the type of beefit ad the reaso a employee or officer receives it. I this chapter, we list ad describe certai beefits ad tel1 you if they are taxable or ot. Uless otherwise oted, you must report taxable beefits o a T4 Supplemetary slip i box 14, Employmet icome before deductios, ad i box 40, Other taxable allowaces ad beefits, or i some cases o the T4A Supplemetary slip i box 28, Other icome. Goods ad services tax (GST) or harmoized sales tax (HST) applies to may of the taxable beefits you iclude i employmet icome for icome tax purposes. The GST is 7% ad the HST is 15% of the amout of the taxable beefit. However, this does ot appiy to: cash remueratio (such as salary, wages, ad allowa ces);. a taxable beefit that is a exempt supply as defied i the Excise Tax Act; or. a zero-rated supply as defied i the Excise Tx Act. You have to calculate the GST/HST o beefits you paid to employees based o the gross amout of the beefits without takig ito accout ay amouts the employee reimbursed you for those beefits. You ca fid more iformatio about the GST/HST throughout this chapter whe we explai each taxable beefit. If you are a employer registered for the GST/HST, you mav bave to remit the GST/HST relatie to taxable beiefits paid to your empl&ees. Form&e iformatio, see chapter 3 GST/HST ad Employee Beefits. Educatioal allowaces If you pay ay amouts to a employee as a educatioal allowace for the employee s Child, you bave to iclude these amouts i the employee s icome for the year. However, the educatioal allowace may ot be taxable whe employees bave to live i a specific locatio, by reaso of their employmet, where educatjoal istructio is ot available i the employees officia] laguage. The laguage of educatioal istructio primarily used i the school must be oe of the two officia1 laguages of Caada. Other coditios are also related to that exemptio. If you would like more iformatio, cotact your tax services office or tax cetre. There is o GST/HST o educatioal allowaces. Employee cousellig services The fees you pay to provide services such as fiacial cousellig or icome tax preparatio for a employee are usually cosidered as a taxable beefit. This applies whether you directly or idirectly pay the fees. You have to iclude the GST/HST i such a beefit. Some employee cousellig services are exempt from tax. Cousellig services are ot a taxable beefit if they relate to: L the metal or physical health (e.g., tobacco, drug, ad alcohol abuse, as well as stress maagemet) of a employee or a perso related to a employee (this does ot iclude amouts for usig recreatioal or sportig facilities ad club dues);. a employee s reemploymet; ad a employee s retiremet. 13

14 Professioal fees If you pay or reimburse professioal membership dues because membership i the orgaizatio or associatio is a coditio of employmet, there is o taxable beefit to the employee. Whether or ot membership is a coditio of employmet depeds o each situatio. As the employer, you are resposible for makig tbis determiatio. You must be prepared to justify your positio if we ask you to do SO. I all other situatios whe you pay or reimburse a employee s professioal membership dues, there is a taxable beefit to the employee. You have to iclude the GST/HST i such a beefit. You should advise your employees that they ca et deduct from their employmet icare professioal fees paid or reimbursed by you. For more iformatio, see Iterpretatio Bulleti IT-158, Employees Professioal Membership Dues. Gifts A gift, either i cash or i kid, that you give to a employee is cosidered as a taxable beefit from employmet. If the gift is ail i cash, do et iclude GST/HST i the beefit. However, if the gift or ay part of the gift is i kid, ad is ot a exempt or zero-rated supply, GST/HST applies o that part of the gift. If the gift is for Christmas (or a occasio like Christmas) or a weddig ad is $100 or less, you do ot bave to iclude the amout i the employee s icome if you do ot claim the cost of the gift as a expese whe you calculate your taxable icome. This admiistrative policy oly applies to oe gift per year. However, you are allowed to give two gifts (with a value of $100 or less each) i the year a employee marries, as log as oe of them is a weddig gift. Whe the gift s value is more tha $100, or if the gift is ot for Christmas (or a occasio like Christmas) or a weddig, the value of the gift is a taxable beefit. For more iformatio, see Iterpretatio Bulleti IT-470, Employees Frige Beefits. Awards for employees suggestios May employers bave plas to ecourage the makig of suggestios by employees for the improvemet of processes, the swig of mat&&, etc., uder wbich awards or paymets are made to employees for acceptable ideas. Such awards, where there is o acquisitio of capital property, are icome of the employees. This is the case eve whe suggestios are ot directly coected with the employees duties. There is o GST/HST o the part of a award that you give i cash. However, if ay part of the award is i kid, ad is ot a exempt or zero-rated supply, GST/HST applies o that part of the award. Your employee suggestio pla may be ope geerally to all employees ad awards give for each suggestio that is helpful to sales, efficiecy, etc. I this case, you ca deduct the amout of the award as a busiess expese uless it ca be cosidered to be a paymet to acquire a capital asset. However, if the award is ot more tha $100, the paymerd cm be allowed as a expese to the employer eve whe it is to acquire capital property. For more iformatio, see Iterpretatio Bulleti IT-316, Awards for E~ployees Suggestios ad kmtios. Group term life isurace policies: Employer-paid premiums There is o loger a icome tax exemptio for the first 525,000 of coverage uder a group term life isurace policy. Tbis chage applies to both curret ad former employees (retirees) who receive group term life isurace beefits from their preset or former employer. The employee beefit is the total of the followig. the employee s term isurace beefit; the employee s prepaid isurace beefit; ad items: the total of all sales taxes ad excise taxes that apply to the employee s isurace coverage mius the premiums ad ay taxes the employee paid, either directly or through reimbursemets to you. The taxable beefit for group term life isurace premiums that a employer or former employer pays is ot subject to Employmet Isurace premiurs. However, this beefit is subject to CPP cotributios ad icome tax deductios. You bave to report this beefit for curret employees o a T4 Supplemetary slip, ad for former employees o a T4A Supplemetary slip. The $500 reportig threshold for T4A Supplemetary slips described i Chapter 6 of the Employer~ Guide to P~yroll Deductios -Basic Iformatio Will et apply. M&i-employer pla admiistrators or trustees that provide taxable beefits from group term life isurace to employees or former employees uder such a pla, bave to prepare a T4A Supplemetary slip oly if the beefit is more tha 525. They bave to eter the group term life isurace beefits i box 28, Other icome, of the T4A Supplemetary slip. For more iformatio, see the publicatio called Employer-Provided Group Term Life Isurace, which available at your tax services office or tax cetre. There is o GST/HST o this beefit.. I Otario, the 8% provicial sales tax affects the taxable beefit for certai isurace premiums that employers pay. The Provice of Quebec has adopted ew measures for employers located i this provice. These employers ow bave to calculate a taxable beefit o the total amout of group life isurace premiums that they pay for their employees. is 14

15 Holiday trips, other prizes, ad icetive awards A holiday trip, a all-expeses-paid vacatio, or ay other award you give to a employee is cosidered as a taxable beefit from employmet. The value of the beefit is the fair market value of the trip or vacatio. If you give a employez a prix or a award related to sales OI other work performace, the amout the employee receives is a employmet icome. This applies whether the paymet is i cash or i kid. If a maufacturer of items or goods gives prizes, cash awards, or awards i kid to the dealer of the items or goods, the maufacturer does ot bave to report the prizes or awards o a iformatio slip. However, if the dealer passes the prizes or awards o to a employee, the dealer bas to report the cash paymet OI the value of the beefit i boxes 14 ad 40 o the employee s T4 Supplemetary slip. If a maufacturer gives a cash award or a prize directly to the employee of a dealer or other sales orgaizatio, the maufacturer has to report the value of the award or.prize as a beefit i box 28, Other icore, o a T4A Supplemetary slip. For more iformatio, sec Iterpretatio Bulleti IT-470, Employees Frige Beefits, ad its Special R&ase. There is o GST/HST o the part of a prix or award that you give i cash. However, if the prize or award or ay part of the prize or award is i kid, ad js ot exempt or zero-rated supply, GST/HST applies o that part of the prize or award. Housig, board, ad lodgig For 1997 ad later taxatio years, taxable beefits i kid are o loger isurable for EI purposes, except for the value of board ad lodgig ejoyed i a period if there are cash earigs paid i the period. Housig If you provide a employee with a house, apartmet, or similar accommodatio rat-free or for less tha the fair market value of such accommodatio, the employee is cosidered as receivig a taxable beefit. As the employer, you bave to estimate a reasoable amout for the beefit. Tbis is usually the fair market value for the same type of accommodatio mius ay ret the employez paid. Report the taxable beefit o the employee s T4 Supplemetq slip i box 14 ad box 30, Housig, board, ad lodgig. Whe you provide a house, apartmet, or similar accommodatio to a employee, the value of the accommodatio is usually ot subject to GST/HST, if the employee occupies it for at le& oe moth. TO fid out if the accommodatio you provide to your employee is subject to GST/HST, cotact your ta services office. If GST/HST applies to the accommodatio, add the GST/HST to the value of the beefit. You bave to iclude that amout i the employee s icome without cosiderig ay amouts he or she reimbursed you. Member of the clergy If by virtue of his or her employmet, you provide a ret-free or Iow-ret residece or other accommodatio to a member of the clergy who is i charge of, or miisters to, a diocese, parish, or cogregatio, you bave to estimate the value of the beefit ad report it o the idividual s T4 Supplemetary slip. This also applies to clergy members who occupy a full-time admiistrative positio by appoitmet of a religious order or deomiatio. If the clergy members iform you i writig that they Will claim a deductio from icome for the residece or other accommodatio, do et iclude the value of this beefit i their icome for icome tax deductios purposes. For iformatio about the Caada Pesio Pla ad Employmet Isurace, sec Chapters 2 ad 3 of the Employer~ Guide to Payroll Deductios - Basic Iformatio. For more iformatio, sec Iterpretatio Bulleti IT-141, Clergymm s Residem. Free board ad lodgig If you provide free board ad Iodgig to a employez, the employee receives a taxable beefit. As a result, you must add to the employee s remueratio the fair market value of the board ad lodgig you provide. Report tbis amout o the employee s T4 Supplemetary slip i box 14 ad box 30, Housig, board, ad lodgig. Subsidized board ad lodgig If you provide subsidized board ad lodgig to a employee, determie the value of the beefit for board as described i the ext sectio, Subsidized me&. The lodgig beefit is the fair market value of the accommodatio, mius ay amout the employez paid. Report the beefits o the employee s T4 Supplemetary slip i box 14 ad box 30, Housig, board, ad lodgig. Subsidized meals If you provide subsidized mals to a employez (eg., i a employee diig room or cafeteria), these meals are et cosidered as a taxable beefit if the employee pays a reasoable charge. A reasoable charge is oe that covers the cost of the food, its preparatio, ad service. The value of the beefit is the cost of the me& mius ay paymet the employee makes. Iclude the taxable beefit i box 14 ad box 30, Housig, board, ad lodgig, o the employee s T4 Supplemetary slip. If GST/HST appljes o subsidized mals, add the GST/HST to the value of the beefit. You bave to iclude that amout i the employee s icome without cosiderig ay amouts he or she reimbursed you. Exceptio to the rules There is a exceptio to these rules whe you provide board ad Iodgig to a employee who works at a remote locatio or a special work site. For more iformatio, sec Empfoymet at special work sites ad remote work locatios i Chapter 8 of the Employer~ Guide to Puyroll Deductios - Basic Iformtio. 15

16 Housig ad travel assistace beefits i a prescribed zoe If you bave employees who live i prescribed zoes ad you psy them housig ad travel assistace beefits, you bave to iclude these amouts o their T4 Supplemetary slips as taxable beefits. There are four beefits that employers usually pay or give to employees i these zoes. a) Media1 travel assistace - Employees ad members of their households use this beefit to travel to other areas to take advatage of medical services that are ot available where they reside. Iclude this amout i boxes 32 ad 14 of the T4 Supplemetary slip. I the foototes area, eter Box 32, Media1 travel $ II You bave to separate media1 travel assistace from other types of travel. If you do ot do this, we Will cosider ail travel assistace as vacatio travel, ad the employee Will ot be etitled to claim a deductio for medical travel. I additio, we Will limit the employee s deductio, as well as that of the members of the household, to two trips each. b) Other travel assistace - This beefit is for travel for ay purpose other tha busiess or medical reasos. It icludes travel for vacatio, bereavemet, ad compassio& reasos. Iclude this amout i boxes 32 ad 14 of the T4 Supplemetary slip. c) The valuatio of the housig beefit - You bave to put a value o ad report a11 housig beefits you provide to your employee. This icludes ay utilities you subsidize or provide. Iclude this amout i boxes 30 ad 14 of the T4 Supplemetary slip. d) Board ad lodgig at a special work site that is also cosidered as a prescribed zoe - Do ot iclude i boxes 30 ad 14 of the T4 Supplemetary slip ay board ad lodgig beefits a employee receives while workig at a special work site. Show this amout as a footote oly. I the foototes area, eter Box 30, Special work site $. ldude ay GST/HST that applies to related beefits. Beefits supplied by a third party If you are a third party (a prime cotracter or a subcotractor) ad you supply beefits for board ad lodgig, or trasportatio to employees of aother subcotractor, there are special istructios for reportig o the T4A Supplemetary slip. For details, see How to complete the T4A Supplemetary slip, box 28 - item 10, i Chapter 6 of the Employer~ Guide fo Payroll Deductios - Basic Iformatio. For more iformatio, see the guide called Employer~ Guide - Housiq d Truel Assistace Beefits Daid i Prescribed ZOlES. Iterest-free ad low-iterest loas You bave to iclude i icome ay beefits that a idividu1 receives as a result of a iterest-free Or low-iterest loa because of a office, employmet, or shareholdigs. The beefit is the amout of iterest that the idividual would bave paid for the year at the prescribed iterest rates (sec l rescribed rates of iterest o page 18) mius the amout of iterest that the borrower pays o the loa i the year (or o later tha 30 days after the ed of the y&. Special rules apply to certai loas ad to home-relocatio loas (sec Exceptios ad Home-relocatio loas later i this sectio.) Iclude the beefit for employees i box 14, ad eter it i box 36 of the T4 Supplemetary slip. If you file a T4A Supplemetary for a shareholder, eter the beefit i box 28, Other icome. There is o GST/HST o these beefits. Loas received because of employmet A employee receives a taxable beefit if he or she receives a loa because of a office or employmet or iteded office or employmet. The loa a be received by the employee or the employee s spouse. A loa icludes ay other idebtedess (e.g., the upaid purchase price of goods or services). The taxable beefit the employee receives i the taxatio year is the total of the followig two amouts: b) C) d) the iterest o each loa ad debt, calculated at the prescribed rate for the period i the year durig which it was outstadig; ad the iterest o the loa or debt that was paid or payable for the year by you the employer (for this purpose, a employer is a perso or partership that employed or iteded to employ the idividual, ad also icludes a, perso related to the perso or partership); mius the total of the followig two amouts: the iterest for the year that ay perso or partership paid o each loa or debt o later tha 30 days after the ed of the year; ad ay part of the amout i b) that the employez pays back to the employer o later tha 30 days after the ed of the year. Sometimes these rules do ot apply. For more iformatio, see the sectio called Exceptios o the ext page For iformatio about similar taxable beefits resultig from loas received because of services performed by a corporatio that caries o a persoal services busiess, sa? Iterpretatio Bulleti IT-421, Beefits to Idividu&, Corporatios ad Shareholdersfrom Loas or Debt. Example of calculatig taxable beefit Joshua is your employee. He borrowed $150,000 from you o Jauary 2,1997. The prescribed rate for the loa for is 4% for the first quarter of the year, 3% for the secod quarter, ad 4% for the third ad the fourth quarters. Joshua paid you $3,000 iterest o,the loa o later tha 30 days after the ed of the year. Durig the year, a compay related to you paid $1,000 iterest o the loa for 16