January 18, 2022
CRA Updates Taxable Benefit Guidelines For Company Provided Smartphones For The 4th Time On January 4th 2022
Yesterday during a live customer presentation, they were incredulous that a company provided Smartphone is viewed as a taxable benefit by the CRA.
We showed them we were featured by Forbes for IRS and CRA tax compliancy (https://www.linkedin.com/feed/update/urn:li:activity:6848254822538461185/) and we clicked on the taxable benefits section in the article which takes you here : https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/provided/cellular-phone-internet-services.html
We scrolled to the bottom and to show them the date that CRA changed their policy (expecting it to be in 2020) only to discover that the policy was changed for the 4th time on January the 4th 2022.
Upon further investigation it looks like the CRA is going to be actively going after taxable benefits given that the new language is as follows :
“If part of the use of the cell phone … is personal, you have to include the value of the personal use in your employee's income as a taxable benefit. The value of the benefit is based on the FMV of the service, minus any amounts your employee reimburses you. You can only use your cost to calculate the value of the benefit if it reflects the FMV.”
FMV = Fair Market Value (Retail Sales Price) For The Equivalent Plan
FMV is not what your company is paying to their Telco; as your company will get a volume discount.
If your company has a 50% discount and is getting a $50 / month rate plan then the personal usage is calculated at the $100 FMV/Retail sales price and then taxed appropriately.
We’ve never done a trial or have a commercial customer deployed where personal usage and cost (at a company wide level) is less than 70% personal; and the CRA looks like they are agreeing with our data points.
The CRA appears to be acting in concert with multiple OECD countries in their taxation activities as it pertains to “personal usage” vs. “business usage” of any expense (company paid or reimbursed) and the associated taxable benefits that accrue.
We also met with a Tier 1 Accounting Firm in Canada a few years ago, they insisted we were wrong on our interpretation … only to be called back a few weeks later saying that we were right and it was the reason this firm went BYOD (to avoid the taxable benefit issue).
We are the global experts on Smartphones and the associated tax and labour law implications pre-pandemic and now with the pandemic, and how this is impacting organizations.
Link To CRA Website On Update To Change In Taxation Policy (January 4th 2022) : https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/provided/cellular-phone-internet-services.html
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