Business & Corporate Tax Planning

Bonuses

Corporations with year ends after July 6th can declare and deduct a bonus in the 2024 fiscal year but defer paying it until 2025. In this way, the business can deduct the expense in the current fiscal year, but the individual does not include the amount in income until 2025, the year in which the bonus is received.

However, the bonus must be paid within 179 days following the fiscal year end of the corporation and the payroll deductions must be remitted with the regular payroll remittance for that pay period, usually by the 15th of the month following payment.

Gifts and Awards

Employers can give employees two gifts per year, not exceeding $500, on a tax-free basis. In addition, employers can give employees two awards per year, not exceeding $500, on a tax-free basis. Gifts would mark special occasions such as marriage, birthdays, birth of a child, etc.; whereas, awards would honour employment achievements such as years of service, service excellence, safety awareness and other such achievements.

If the cost of the gift or award is over the $500 limit, only the value above $500 would be included in the employee's T4 as a taxable benefit. 

The gifts mentioned above must be non-cash gifts. If you give employees cash bonuses or cash-like bonuses (gift cards, etc.) these must be included on the employees' T4 slips and taxed as regular salary.  CRA recently changed their administrative policy on gift cards and in some cases,  they’re no longer considered a taxable benefit.  In order for this to apply, the following conditions must be met:

  • It comes with money already on it and can only be used to purchase good or services from a single retailer or group of retailers identified on the card; 

  • The terms and conditions of the gift card clearly state that amounts loaded to the card cannot be converted to cash; and

  • The employer must keep a log to record gift card information containing all of the following:

    • Name of employee;

    • Date gift card was provided to the employee;

    • Reason for providing the gift card;

    • Type of gift card;

    • Amount of gift card; and

    • Name of the retailer(s)

You do not need to include small items of a trivial value in these calculations, such as t-shirts, mugs, plaques and trophies.

Remuneration

If you have loaned or advanced amounts to your corporation, consider repaying this amount instead of taking otherwise taxable distributions, such as salaries or dividends. Alternatively, consider charging interest on the loan which, in some provinces, reduces the amount of certain taxes paid, such as payroll levies.

In determining the appropriate mix of salaries, dividends or other payments, contact your Chartered Professional Accountant. Caution should be exercised to ensure sufficient salary is taken to maximize deductions such as for RRSPs.

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