Historically, the administrative position of the Canada Revenue Agency (“CRA”) in respect of employee discounts was as follows: Generally, if the employer sold its goods to its employees at a discount, but at a price that was at least equal to the employer’s cost, there was no taxable benefit for the employees.
In an apparent about-face, a recent Income Tax Folio published by the CRA indicated that employee discounts would be taxable, unless the discount was available to the general public. Not surprisingly, this position caused an outcry and made front page news.
Soon afterward, Minister of National Revenue Diane Lebouthillier stated that the change in the Income Tax Folio was made without her consent, and she ordered the CRA to take it off its website. The Minister stated that the CRA was planning an internal review on wording changes to the Folio, which would be followed by a consultation on the issue with industry groups. Of course, this was not complete comfort, as the Minister did not specifically rule out the possibility that all discounts may become taxable.
However, on October 14, 2017, Prime Minister Trudeau got involved and tweeted: “Let me be blunt: we are not going to tax anyone's employee discounts. Minister @DiLebouthillier has asked the CRA to fix this”.
We hope that this is true, and hopefully this will be the end of the story. We expect the CRA to fix the Folio accordingly in due course.