[FAQ] Incentives in the form of gift cards


An employee receives incentives in the form of gift cards through the employer. Are these incentives taxable? If so, how should it be disclosed?


The Income Tax Act

The deciding factor is whether it was “received or accrued in respect of services rendered…” (paragraph (c) of the definition of gross income) or “… in respect of employment …” (paragraph (i)). If this was the case the amount would be gross income, also remuneration and subject to employees’ tax.

Application of the principles

In both instances, the Income Tax Act uses the term “in respect of”. Judge Howie (in the Stevens case) said “…there is no material difference between the expressions ‘in respect of’ and ‘by virtue of’ in paragraph (c). They connote a causal relationship between the amount received and the taxpayer’s services or employment.” ‘

We submit that the same principal will apply in this instance. In other words, if the amount accrued to the person in his or her capacity as an employee the causal relationship between the services and the voluntary award exists and it is gross income and remuneration.

Webinar Commentary

Further webinar commentary on The meaning of received by or accrued to in the context of the gross income definition can be accessed here.

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