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.
If you determine the discount is taxable or you sell merchandise to your employee below cost, the taxable benefit is the difference between the fair market value of the goods and the price the employees pay.
Essentially, general employee discounts would not be considered a taxable benefit under the old policy provided that employees could not buy goods below their cost. The new position can be found in the folio:
2.28 When an employee receives a discount on merchandise because of their employment, the value of the discount is generally included in the employee’s income under paragraph 6(1)(a). The discount may be provided by the employer or by a third-party. The value of the benefit is equal to the fair market value of the merchandise purchased, less the amount paid by the employee. However, no amount is included in the employee’s income if the discount is also available to the general public or to specific public groups.
Minister of National Revenue, Diane Lebouthillier promptly responded to the matter. Her office will be reviewing and clarifying the wording in the document.
The folio has also been removed from the CRA website and has been replaced by this message:
Please note that Folio S2-F3-C2, Benefits and Allowances Received from Employment, is currently under review. Employers should continue to follow current practices consistent with the information available in Guide T4130, Employers’ Guide – Taxable Benefits and Allowances. 
