Non-Taxable Benefits for Canadian Companies: A Complete Guide

Non-taxable benefits offer opportunities for Canadian corporations to stay compliant with the Canada Revenue Agency (CRA) while enhancing employee satisfaction. Companies are always looking to maximize tax-saving opportunities and improve employee retention. Non-taxable employee benefits improve employee morale and optimize compensation packages without tax burdens. 

This guide details the non-taxable benefits Canadian companies can offer employees in compliance with the CRA requirements. 

Common Non-Taxable Benefits for Canadian Employers

Non-taxable benefits are perks that Canadian corporations can give employees without them having to pay taxes on the monetary value of the benefits. It is important to note that companies must apply these non-taxable benefits according to the Canada Revenue Agency guidelines. 

What are non-taxable benefits?

Non-taxable benefits in Canada are perks employers can provide to employees without including their value in the employee’s taxable income (so not affected by payroll source deductions). These must primarily benefit the employer or meet specific CRA criteria, such as being work-related or available to all employees.

Common non-taxable benefits may include cell phone and internet services, education and training costs, professional fees, wellness programs, mileage reimbursements, moving expenses, disability insurance, counselling services, gifts and awards. 

Top 12 Non-Taxable Benefits in Canada

1. Cell Phone and Internet Services

Employees’ cell phone and internet expenses are considered non-taxable if they are incurred for work activities. For example, a sales professional working with a corporation can receive non-taxable cell phone and internet perks for services primarily for work. To comply with CRA guidelines, reimbursable cell phone bills must be work-related and have a reasonable fixed price to qualify as non-taxable.

2. Education and Training Costs

Employee education expenses directly related to an employee’s role that can enhance the skills required for their job are generally non-taxable. For example, if an employer pays for an employee’s certification needed to carry out their daily job requirements, the benefit is non-taxable to the employee. 

Other types of training costs that are non-taxable perks to employees include safety training, job-specific training, and continuing education programs.

3. Reimbursed Professional Fees

Corporations can reimburse their employees for professional dues or membership fees essential to their jobs. For example, Chartered Professional Accountants (CPAs) or lawyers may get non-taxable fee reimbursements for job-related professional membership fees.

4. Employee Wellness Programs

Subsidizing wellness programs is non-taxable if the benefit is available to all employees and complies with the CRA guidelines. Examples of non-taxable wellness programs include therapy sessions.

5. Mileage Reimbursement

The CRA allows employers to provide a non-taxable allowance or a reimbursement to employees for using their automobile or motor vehicle for business-related or employment duties. Mileage reimbursement is a non-taxable benefit only if the expenses meet specific requirements. 

For example, the allowance must meet the per-kilometre guidelines.

For 2026, the prescribed rate increased to 73¢/km for the first 5,000 km and 67¢/km thereafter. See the full list of 2026 tax changes affecting Canadian small businesses including updated CCA vehicle limits and other deduction changes.

Additionally, mileage reimbursements or allowances must be adequately documented with receipts and vouchers for the benefit to remain non-taxable.

6. Moving Expenses

Transferring an employee from one business location to another for work purposes can result in reimbursable moving expenses that are non-taxable to the employee. This non-taxable benefit covers expenses incurred for moving the employee, family members, and personal items. Eligible moving expenses that may qualify as non-taxable benefits include travel costs to house hunt for new accommodation, temporary accommodations, cancelled leases, transportation, storage, and fees to disconnect or reconnect utilities.

7. Recreational Facilities

As an employer, if you provide an in-house recreational facility, such as a gym, free of charge or for a subsidized fee and in compliance with the CRA’s administrative policy, the benefit is not taxable in the hands of the employee if the facility is available to all employees.

8. Awards & Gifts

Specific non-cash awards and gifts to employees are non-taxable. For example, employees do not pay taxes on non-cash gifts and awards up to a $500 yearly threshold. Employers can reward long-term employees with five or more years of service with non-cash rewards not subject to tax, provided the benefit meets the required conditions.

9. Disability Insurance

Employer-paid insurance and income maintenance plans may be non-taxable to employees depending on whether the coverage is a group or non-group plan. Premiums or contributions for short- and long-term disability insurance may be non-taxable to employees in a group plan.

10. Club and Membership Fees:

As a Canadian company, you can offer employees membership in a social or athletic club as a non-taxable benefit, provided you can demonstrate that your company is the primary beneficiary of the membership.

11. Event Tickets

As a business owner, you may provide your employees with event tickets for entertainment and sporting purposes as tax-free benefits if the event is for business purposes, benefiting your company. Also, adequate supporting records must be kept to support event expenses. Documents to keep include the name of the employee, details of the personal or business use, the number of tickets provided to the employee, and the value of each ticket.

12. In-house Social Activities

Employers can organize in-house social activities with meals and entertainment as non-taxable employee benefits. Companies must ensure the expenses are reasonable and job-related.

Less Common Benefits to Include

1. Childcare Services
   
   Child care payments or reimbursements for employees’ house-hunting due to a work-related relocation are usually non-taxable benefits. Also, if your company provides in-house childcare services available to only all of your employees (no public use), and you directly manage the services at your business location, this benefit is considered tax-free.

2. Parking & Transit
   
   Some types of parking benefits are non-taxable, for example, if they are provided for business purposes and meet the specifications of the Canada Revenue Agency. Additionally, parking benefits for employees with disabilities are tax-free. 

3. Counselling Services
   
   Counselling services for physical and mental health support through Employee Assistance Programs (EAPs) help promote employee well-being and are usually tax-free.

How to Determine Taxable vs. Non-Taxable Benefits

Employers in Canada can provide benefits to their employees, some of which are taxable, and others are tax-free.  You need a clear understanding of the Canada Revenue requirements to determine whether a benefit is taxable. 

Here are key factors to consider when assessing employee benefits:

Key Factors for Taxable vs. Non-Taxable

• Employer vs. Personal Use
  
  Non-taxable benefits must primarily benefit the employer and result from business use or direct employment purposes. For example, a company vehicle used for personal purposes may result in a taxable benefit. 

• Reasonableness
  
  When providing non-taxable benefits to employees, the CRA requires the benefits to be reasonable in scope and value. Some benefits have a value threshold to guide the reasonableness requirement, such as the $500 limit for awards and gifts.  

• Documentation
  
  Proper documentation is essential to claim tax-free employee benefits. Employers and employees must keep clear records of all benefits, including receipts, vouchers, company policies and reimbursement forms. Some benefits may not qualify as non-taxable if supporting documentation is not provided. You can submit and track payroll-related documents through CRA My Business Account, which provides secure access to your payroll accounts and filing history.”

Best Practices for Offering Non-Taxable Benefits

Corporations should plan adequately when offering non-taxable benefits to employees to ensure adherence to CRA regulations. Here are actionable strategies to consider:

Compliance Strategies

• CRA-Approved Methods
  
  Ensure all tax-free benefits are available to all eligible employees. For example, childcare services must be available to all employees to qualify as non-taxable benefits. 

• Policy Creation
  
  Developing clear and accessible organizational policies that outline non-taxable benefits, eligibility, scope, and documentation requirements can be beneficial for employees to comply with the documentation requirements.

Non-Taxable Benefits – Did You Know?

When providing non-taxable benefits to employees, here’s a quick checklist to help comply with the CRA. 

• Cell Phone Reimbursement– If you properly structure your employees’ cell phone benefits to reimburse only work-related expenses, they can qualify as non-taxable benefits.  

• Education & Training– For education and training costs to be tax-free, they have to benefit the business and be work-related. 

• Wellness Programs– If you offer a gym membership subsidy, it has to be available to all employees. For example, a $300/year gym membership subsidy is only tax-free if available to all employees.

• Awards & Gifts– Non-cash awards such as a $500 gift card as a long-service award to an employee who has worked up to five years with your company are non-taxable, provided they fall within CRA’s guidelines.

• Counselling Services– You can offer tax-free Employee Assistance Programs (EAPs) for mental health support and stress management, fostering a healthier workplace environment.

Avoiding Common Pitfalls

Corporations face risks of misclassifying benefits, which can lead to CRA penalties and employee dissatisfaction. As a business owner or human resources professional, here are common benefits mistakes to avoid:

Taxable Mistakes to Avoid

Personal Use of Company Assets: Company policies may not be concise, leading to employees using company assets, such as vehicles or laptops, for personal purposes. Such situations can result in taxable benefits. 

Overvalued Gifts/Awards: Not all awards qualify for non-taxable benefits. Awards must be on a non-cash basis and within the $500 annual threshold. Failure to adhere to CRA requirements can result in taxable income for employees.

Improper Reimbursements: Inadequate documentation and unreasonable allowances or reimbursements for perks such as meals and travel can lead to non-compliance with CRA guidelines.

Conclusion

Non-taxable benefits, such as child-care benefits, parking, travel allowances, insurance premiums, club and membership fees, and wellness programs, enhance employee satisfaction and provide tax deduction opportunities for employers. 

Canadian corporations must understand the Canada Revenue Agency’s guidelines for tax-free benefits to implement best practices, avoid pitfalls, and improve employee morale. 

For more information on non-taxable benefits and guidelines to avoid common implementation mistakes, visit the CRA website to determine if a benefit is taxable or non-taxable. 

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