Principal Issues: Request for clarification regarding our position that there is no taxable benefit to be included in the calculation of employees’ income when an employer offers free of charge, to all it’s employees, a party or other social event whose cost per person for the party or social event does not exceed $150.
Position: The cost "per person" of $ 150 is calculated based on the total number of attendees at the party or the social event. When the cost for the party or social event exceeds $ 150 per attendee, we are of the view that a person who is invited to a party or social event but does not attend has not received or enjoyed a benefit.
Reasons: CRA’s position and the wording of the Act.
XXXXXXXXXX I. Landry, M. Fisc.
2017-073125
April 9, 2018
Dear Madam,
Subject: Taxable Benefits - Social Events
This is in response to our October 25, 2017 telephone conversation in which you asked for clarification of our position that there is no taxable benefit to be included in the income of employees when an employer offers, free of charge, to all its employees, a party or other social event whose cost per person does not exceed $150.
All legislative references herein are to the provisions of the Income Tax Act ("the Act").
Your questions
You wish to know if the cost of $150 is calculated based on the total number of people who were invited or rather based on the total number of people attending the party or social event. In the event that the cost for the party or social event exceeds $150 per person, you wish to know if the resulting taxable benefit is included in computing the income of the employees who were invited or rather in the computation of the income of the employees who attended the party or social event.
Our Comments
Our position appears inter alia in the T4130 Employers’ Guide (footnote 1), which states:
“If you provide a free party or other social event to all your employees and the cost is $150 per person or less, we do not consider it to be a taxable benefit. Additional costs such as transportation home, taxi fare, and overnight accommodation are not included in the $150 per person amount. If the cost of the party is greater than $150 per person, the entire amount, including the additional costs, is a taxable benefit.”
We confirm that the "per person" cost of $150 for this position is based on the total number of people attending the party or social event.
With respect to the taxable benefit resulting from participation in a party or activity for which the cost per individual exceeds $150, paragraph 6(1)(a) provides, inter alia, that the value of any benefits received or enjoyed by the taxpayer, or by a person who does not deal at arm’s length with the taxpayer, in the year in respect of, in the course of, or by virtue of the taxpayer’s office or employment is to be included in the computation of the taxpayer’s income. It should be noted that paragraph 6(1)(a) states certain exceptions, but none of them apply in this situation.
Although the application of this paragraph is a question of fact, we are of the view that a person who is invited to a party or a social event but who does not attend has not received or enjoyed a benefit.
Best regards,
Michel Lambert, CPA, CA, M. Fisc.
Manager
Employment Income Section
Business and Employment Income Division
Income Tax Rulings Directorate
Legislative Policy and
Regulatory Affairs Branch
FOOTNOTES
Due to our system requirements, footnotes contained in the original document are reproduced below:
1 CANADA REVENUE AGENCY, T4130 «Employers' Guide – Taxable Benefits and Allowances», 2017, Chapter 3, under "Social events".