Happy holidays from the Oasis LLP family to yours! 2021 has been another interesting year for most businesses across the country. If you are looking to let loose (within the restrictions, of course!) with your employees, planning a holiday party is a great way to celebrate what you achieved and look forward to 2022. If this is your first time hosting a business holiday party, you may not be aware of the tax benefits that you may be able to claim. This blog will briefly go through the rules, but if you would like more information, please call us at 416-318-5771.
Employee Holiday Party
Depending on the culture of your office, your holiday party could be a quaint dinner at a local restaurant or it could be something exciting like go-karting or karaoke. No matter what you and your staff decide to do, you could deduct up to 100% as a business expense. The rules for the deductions are quite simple. If the party is limited to a select number of people in your business (example, a managers only party), you can only deduct 50% of the food and entertainment costs.
However, if you open the invite to everybody in your office, you can deduct 100% of the cost for food and entertainment, as long as the total price per person is less than $100.
Giving Out Gifts
If you decide to give out gifts to your employees as a bonus for their hard work, there are a few things to keep in mind. Gifting cash is fairly easy and provides your employees with extra funds to spend on themselves or their families. When you gift money, the recipients will fill out the exact amount on their T4 slips (box 14), and your accounting department will need to take out the correct amount of CPP and EI premiums, as well as the income tax. Please keep in mind that In the eyes of the CRA, gift cards are treated as cash.
The rules for a physical gift are a bit different. As long as the gift is valued at or below $500, it will have zero tax implications. However, if the value is over $500, the difference must be added to the person’s T4 in box 40 and will be taxed on income tax and CPP premiums. As an example, if the gift is worth $850, $350 will have to be taxed.
No matter how you decide to celebrate with your team, we hope you all have a safe and healthy party! If you need further assistance on how to handle the taxes on your holiday party and gifts, reach out to Oasis LLP today!
