Although in effect since July 7, 2016, a new administrative position that the CRA included in Folio S2-F3-C2, Benefits and Allowances Received from Employment, has been a great source of controversy in the media these past few days. After the Globe and Mail published a detailed article on the policy change, the breaking news quickly spread to local news channels. The policy change relates to taxable employee benefits with respect to discounts on merchandise. The CRA’s previous position can still be found in Guide T4130, Employers’ Guide: Taxable Benefits and Allowances:
Discounts on merchandise and commissions from personal purchases
If you sell merchandise to your employee at a discount, the benefit he or she gets from this is not usually considered a taxable benefit. However, we consider discounts to be taxable in all the following situations:
- You make a special arrangement with an employee or a group of employees to buy merchandise at a discount.
- You make an arrangement that allows an employee to buy merchandise (other than old or soiled merchandise) for less than your cost.
- You make a reciprocal arrangement with one or more other employers so that employees of one employer can buy merchandise at a discount from another employer.