An employer gave out $25 gift certificates to its employees at a recognition event, as prizes awarded in a draw in which only the employees participated. CRA stated:
[A]n employee who receives a prize in a draw organized by the employee’s employer, which is open only to employees, must include the value of the prize in computing the employee’s employment income by virtue of subsection 5(1).
The CRA has a policy that an employer may give up to two non-cash gifts or awards per year on a tax-free basis. However, this policy does not apply to cash or cash equivalent gifts and awards. The CRA considers a cash equivalent item to include a gift certificate.