Do you have to pay tax on gift cards in Canada? It depends on who receives the card, what type of card it is and why it was provided.
An employee performance reward may be treated differently from a holiday gift, client thank-you or customer giveaway. For employers, understanding Canada Revenue Agency (CRA) rules can help prevent payroll and reporting surprises.
Note: This article is intended for general information purposes only and does not constitute tax, legal, accounting or payroll advice.
How the CRA Treats Gift Cards
For employee benefits, the CRA distinguishes between cash, near-cash rewards and qualifying non-cash gifts or awards.
This matters because taxable benefits generally need to be included in an employee’s income and processed through payroll.
| Type | General Treatment |
| Cash | Taxable |
| Near-cash rewards | Usually taxable |
| Certain eligible gift cards | May be non-taxable if CRA conditions are met |
There is also a difference between employee-benefit tax and sales tax.
GST/HST generally does not apply when an eligible gift certificate is purchased. Applicable sales tax is usually calculated when the card is used to buy taxable goods or services.
The Government of Canada provides more information about buying and using gift cards. The CRA also explains the GST/HST treatment of eligible gift certificates in its Gift Certificates policy statement.
When Employee Gift Cards May Not Be Taxable
Certain gift cards may qualify as non-cash gifts or awards under the CRA’s administrative policy.
Generally, the card must:
- Have a specific amount loaded onto it
- Be usable at one retailer or an identified group of retailers
- Not be redeemable or convertible into cash
- Be provided as an eligible gift or award
- Be properly documented by the employer
Employers should keep records showing who received the card, when it was provided, its value, the reason it was given and where it can be used.
Eligible non-cash gifts and awards may generally have a combined fair market value of up to $500 per employee annually, including taxes. Amounts above the limit are generally taxable.
Separate rules may apply to eligible long-service awards. Businesses should review the CRA’s complete gifts, awards and long-service awards guidance.
When Gift Cards Are Taxable
A gift card is generally taxable when it functions like cash, is connected directly to job performance or does not meet the CRA’s non-cash conditions.
Examples may include:
- Prepaid Visa, Mastercard or similar payment-network cards
- Cards that can be redeemed for cash
- Sales incentives
- Performance bonuses
- Productivity rewards
- Project-completion incentives
- Employment-related referral bonuses
Broad-use prepaid payment cards are generally considered cash or near-cash because employees can use them much like money.
A retailer gift card may also be taxable if it is provided for reaching a sales target or another performance measure. Calling a reward a gift does not automatically make it non-taxable.
Gift Cards for Employees, Clients and Customers
Employee Rewards
Gift cards can support holiday programs, appreciation, recognition and service milestones.
Cards provided for an eligible occasion may receive non-cash treatment when all CRA requirements are met. Performance-based rewards are generally taxable.
Gift[it] offers employee reward and incentive solutions for Canadian organizations managing recognition programs at scale.
Client Gifts
Businesses may provide gift cards to thank clients, strengthen relationships or show appreciation.
These cards are not employee benefits, but business-expense, deductibility and recordkeeping rules may still apply.
Customer Promotions
Gift cards can also be used for contests, giveaways, loyalty programs and promotional campaigns.
The tax and reporting requirements may depend on the promotion’s structure, value and business purpose. Gift[it] supports customer loyalty programs with flexible card options for Canadian businesses.
How Businesses Can Stay Organized
Before distributing employee gift cards, your organization should:
- Record who received each card
- Track its value and issue date
- Document why it was provided
- Confirm where it can be used
- Determine whether it can be converted into cash
- Monitor annual gift and award totals
- Coordinate with payroll or accounting when required
The CRA’s Employer’s Guide to Taxable Benefits and Allowances provides more information about employer responsibilities.
Choosing the Right Gift Card
The type of card you choose can affect both recipient experience and administrative requirements.
Options may include retailer, restaurant, grocery, gas, entertainment, multi-brand, digital and physical gift cards. Retailer-specific cards may qualify for non-cash treatment when all CRA conditions are satisfied, while broad-use prepaid payment cards are generally treated differently.
Gift[it] helps businesses and organizations order and distribute gift cards for employee rewards, customer incentives and community programs. Explore bulk gift card options to find a fit for your program.
Frequently Asked Questions
Are employee gift cards taxable in Canada?
They are generally taxable unless they meet all CRA conditions for an eligible non-cash gift or award.
Are Visa and Mastercard gift cards taxable?
When provided to employees, broadly accepted prepaid payment cards are generally considered cash or near-cash benefits and are usually taxable.
Can employers give gift cards instead of bonuses?
Yes, but replacing a performance bonus with a gift card generally does not make the reward non-taxable.
How much can employers give before tax applies?
Eligible non-cash gifts and awards may generally total up to $500 per employee annually, including taxes. All other CRA conditions must still be met.
Make Rewards Easier to Manage
Whether tax applies depends on the card, the recipient and the reason it was provided.
Reviewing CRA requirements before launching your program can help you select suitable cards, maintain accurate records and reduce unexpected payroll issues.
Connect with the Gift[it] team to discuss flexible gift card solutions for your organization.