As a business owner, you may be providing your employees non-monetary benefits that may give rise to a taxable benefit that is subject to GST/HST. A benefit is a good or service you give, or make available through a third party to give to your employee, that the employee can enjoy the personal use of, without any cost to themselves, resulting in the employee having an economic advantage that others would otherwise have to pay for out of pocket.

Common taxable benefits include:

personal use of an employer’s automobile
gifts and awards – only the amount above $500 (combined) is deemed a taxable benefit
subsidized meals
employer-provided free parking
cell phone services
social events – If the cost is greater than $100 per person, the entire amount, including the additional costs, is a taxable benefit
membership fees
subsidized residential accommodation
vacations or spouse’s travel expenses
trades tool reimbursement or allowance

For a detailed list of what are considered employment related taxable benefits, visit Canada Revenue Agency Income Tax FolioS2-F3-C2, Benefits and Allowances Received from Employment

Generally, if an employer provides a taxable benefit to employees or shareholders, it is considered that the employer has made a supply of a property or service to the employee. If the property or service that gives rise to the taxable benefit is subject to GST/HST, the employer is considered to have collected the GST/HST on that benefit, and as such, is required to calculate the applicable GST/HST by the end of February following the year they were incurred (when T4 slips are prepared), and remit it with the GST/HST return that includes the month of February.

One thing to note, is that, even if an employer is required to calculate and remit the GST/HST on the taxable benefit, the employee does not actually pay the GST/HST that must be remitted, as it has already been, or will be included in the taxable benefits you will report on the employee’s T4 slip.

Steps in calculating the GST/HST on taxable benefits

Identify the taxable benefit and determine the value. If it is not a taxable benefit, then there are not GST/HST implications
Determine if a GST/HST input tax credit (ITC) is available to the employer (see CRA Input Tax Credits). (Note: there is no requirement to remit GST/HST on a benefit where the employer cannot claim an input tax credit)
If no exclusions apply to the taxable benefit, calculate the amount of the GST/HST due on the benefit using the prescribed rates below.
Include the amount of the GST/HST deemed collectible on the return which includes the month of February

Prescribed Tax Rates used to calculate the GST/HST deemed collectible on taxable benefits

Province Automobile Operating Costs Benefits Automobile Standby Charge Benefit Other Benefits
ON 9% (small businesses)

7.2% (large businesses)
12/112 (small businesses)

8/108 (large businesses)
12/112 (small businesses)

8/108 (large businesses)
NS 11% 14/114 14/114
NB and NL 10% 13/113 13/113
PEI 10.25% (small businesses)

6.63% (large businesses)
13.25/113.25 (small businesses)

4/104 (large businesses)
13.25/113.25 (small businesses)

4/104 (large businesses)
Other provinces and territories 3% 4/104 4/104

Example: Motor Vehicle Benefit (modified from Guide T4130, Employers’ Guide – Taxable Benefits and Allowances)

An Ontario employer provided a motor vehicle to an employee who drove it for personal and business use. The employer is not a large business on December 31, 2016. The taxable benefit for the personal use is $5,100.
As Ontario is a participating province the HST considered to have been collected is calculated as follows: HST considered to have been collected on the motor vehicle benefit = $5,100 × 12/112 = $546.43
The employer is considered to have collected the HST in the amount of $546.43 at the end of February 2017. This amount should be included on the GST/HST return for the reporting period that includes the last day of February 2017.

As always, business owners are reminded that it is best to engage an accountant or tax professional to get guidance on how to calculate taxable benefits and the reporting requirements. It is a very extensive subject, and errors or failure to recognize these situations can result in adverse tax consequences. Please contact us if you would like to have one of our CPAs assist you on this subject.