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Employee Taxable Benefits - Is coffee and a bun called breakfast?

Employee Taxable Benefits - Is coffee and a bun called breakfast?



Employee Taxable Benefits - Is coffee and a bun called breakfast?
23 Nov 2017
Written by: Steve Reed

CRA Taxation of Employee Benefits in Canada Under Fire

Recently, Canada Revenue Agency (CRA) was under fire with regard to their policy regarding taxable employee discounts. It resulted in Liberal MP’s blaming CRA for the “change” in how staff discounts are taxed primarily in the retail industry, and statements from the Minister of National Revenue indicating a further review was required.

The former policy stated that, “If you sell merchandise to your employee at a discount, the benefit . . . is not usually considered a taxable benefit.”

The new policy subtly changed the wording to state that, “No amount is included in the employee’s income if the discount is also available to the general public . . . “

Finally, after much consternation, the offending policy guide, Folio S2-F3-C2, was removed from the CRA website. All very much a tempest in a teacup, but our revenue authority is not alone in the wide world of tax gaffes.

Germany’s Ruling on Taxable Employee Benefits

A court in Germany has ruled that employer-provided morning coffee and snacks do not constitute a taxable benefit because it cannot be defined as a breakfast.

The employer company provided free coffee and bread rolls to its employees daily. The German Federal Central Tax Office, or Bundeszentralamt für Steuern, considered the coffee and rolls a free meal and sought to tax the employees accordingly. The BZSt demanded taxes of U.S.$1.76 per employee per day for a three-year period!

The German company appealed and the court found that the employer’s offer of coffee and bread rolls could not be considered a “full breakfast” and was therefore non-taxable. The court further elaborated on this definition and opined that in order to be a taxable meal, the company would have had to provide jams, cold meats, cheese, and perhaps a sausage or two (i.e. a typical European breakfast).

In the end, another win for the famished employee over the gluttonous tax authority.

Hopefully, the ministerial powers can focus their attention on much more substantive issues of taxation and leave a few crumbs (or threads) for the hard working employee!


Please contact Steve Reed, CPA, CA of the Manning Elliott Tax team at 604-714-3600 for more information on the taxation of employee benefits in Canada.

The above content is believed to be accurate as of the date of posting. Canadian Tax laws are complex and are subject to frequent changes. Professional tax advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.

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