Patrick Marley, Alain Fournier, Ilana Ludwin, Maude Lussier-Bourque
April 23, 2020
Last updated: October 30, 2020
For further information on the changes below or other tax matters, please contact one of the authors above or any member of our National Tax Group.
During a webinar with the Association de planification fiscale et financière (APFF) on April 14, 2020, the Canada Revenue Agency (CRA) was asked whether amounts paid by an employer to an employee for the purpose of acquiring equipment to work from home will be treated as a taxable benefit for the employee. The CRA was then asked if its answer would be different if the amount paid by the employer is conditional on the employee providing the employer with a proof of purchase.
The CRA provided its position on these questions on April 22, 2020.
The CRA answered that employees are usually required to include in their income the amount of an allowance they received from their employer and for which they are not required to justify the use. This requirement will not change because of the COVID-19 pandemic.
Where the employer requires the employee to provide a proof of purchase before reimbursing the expense, the answer could be different. The CRA stated that, in theory, an employee receives a taxable benefit when their employer reimburses a personal expense of the employee to acquire equipment to work from home. However, the CRA acknowledged that the COVID-19 pandemic resulted in a significant number of employees, who did not have the necessary computer equipment, being required to work from home. In the particular COVID-19 context, the CRA stated that it is willing to accept that reimbursement of up to $500 of the cost incurred by employees to purchase personal computer equipment that allows them to immediately and properly execute their work, conditional on providing proof of purchase, primarily benefits the employer. As a result of the equipment being considered by the CRA to be primarily for the benefit of the employer, the reimbursement of up to $500 of the cost of the personal computer equipment should not result in a taxable benefit for the employee during the COVID-19 pandemic.
Revenu Québec confirmed during the webinar that the same administrative policy will be applicable for Québec income tax purposes. Revenu Québec’s website provides that this administrative relief applies not only to reimbursement of computer equipment purchased by an employee, but also to office equipment that an employee purchased for teleworking.
During a roundtable at the Annual Canadian Tax Foundation (CTF) Conference on October 27, 2020, the CRA announced that the $500 amount would not be increased, but that the CRA’s position will be extended to include home office furniture (e.g. desks and chairs).
For information about CRA’s guidance related to residency, permanent establishment and other international issues arising during the COVID-19 pandemic, please see our related update.