Are the Gift Cards You Buy for Employees Taxable?
Employers are always on the lookout for creative ways to motivate or say “thank you” to their staff. Giving gift cards is always a good idea because everyone loves them and they can be customized with your company logo and message. Even better, in many cases, gift cards are also tax deductible. You just have to understand the rules.
The rules in Canada have changed
Before 2022, in Canada, gift cards that were given to employees by their employer were considered near-cash, and resulted in a taxable benefit to the employee. Recently, however, the Canada Revenue Agency (CRA) has updated their administrative policy with respect to the tax treatment of gift cards, and now may consider gift cards as non-cash. To be considered a non-cash gift, a gift card must meet all of the following conditions:
- It comes with money already on it and can only be used to purchase goods or services from a single retailer or a group of retailers identified on the card (like our Blackhawk Originals™ multi-brand cards)
- The terms and conditions of the gift card clearly state that the amounts loaded to the card cannot be converted into cash
- You keep a log of all gift cards, which must include all of the following information:
- Name of the employee
- Date the gift card was provided to the employee
- Reason for providing the gift card (part of social event, gift or award)
- Type of gift card
- Amount of the gift card
- Name of the retailer(s) on the gift card
Cash or near-cash are not deductible
The new CRA administrative policy does not apply if you provide an employee a gift or reward that is considered cash or near-cash. The benefit is taxable. Cash includes cheques or any kind of financial reimbursement. Near-cash is defined by the CRA as follows:
- Something easily converted to cash such as bonds, securities or precious metals/jewels
- A gift card that does not meet all conditions for the card to be considered non-cash (see above)
- A prepaid card issued by a financial institution to certain payment card networks (for example, Mastercard® and Visa*) that can be used to pay for purchases
- Digital currency which is electronic money (for example, cryptocurrencies which are not issued or governed by a government or central bank)
Your company has rules, too
Besides government rules, your company may have limitations or rules about employee gifts, cash, near-cash or non-cash. So, it’s always a good idea to check before you give.
That aside, taking note of what your company purchases, how much you spend and each gift’s business intent, as with other tax credits, are all important to ensure that you get any deductions coming to you.
Follow these simple rules and gift cards can easily be a win-win situation-a tiny token of gratitude that makes a lasting impact, as well as a nice tax deduction that helps your company’s bottom line. Just make sure you keep detailed data so your generosity doesn’t come back to haunt you during tax season.
Do you want to buy gift cards in bulk for your employees?
Blackhawk Network On Demand is the industry leader in employee prepaid cards and gift cards throughout Canada. We offer a full portfolio of comprehensive gift cards unsurpassed in the industry-all the options you need-including cards that are exclusively ours. Just click here to get started or call 833.727.6540.
In Canada, Prepaid Mastercard®️ is issued by Peoples Trust Company under license from Mastercard International Incorporated. In the U.S., Prepaid Mastercard and Mastercard Gift Card is issued by Pathward, N.A., Member FDIC, pursuant to license by Mastercard International Incorporated. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
In Canada, Visa* Prepaid Card is issued by Peoples Trust Company pursuant to licence by Visa Int. *Trademark of Visa International Service Association and used under licence by Peoples Trust Company. In the U.S., Visa prepaid card and Visa gift card is issued by Pathward, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc.