Tech Tax: Who Retains Ownership Of Business Devices Affects Their Taxable Status
Every few months a new e-device is released that offers either more features, more capability, faster speeds or bigger memory than its predecessor.
This has meant some businesses often struggle with how to provide their employees with the latest and greatest technology -- whether it's to enhance their productivity or increase their job satisfaction -- while at the same time trying to curb the costs associated with both the purchase and ongoing support of the new products.
Employers should be warned, however, that depending on their approach, unsuspecting employees may end up with a taxable employment benefit and an unplanned tax bill at the end of the year.
The Canada Revenue Agency (CRA) recently released its position on two related technology issues: Bring Your Own Device (BYOD) policies and employee discount technology purchase programs.
In a typical BYOD arrangement, employees choose the most suitable device for their needs and purchase it themselves instead of having the employer buy it for them. The employer then reimburses the employee for the cost of the new laptop, iPad or other device, or, alternatively, provides each employee with a fixed dollar amount in the form of a "technology allowance." The devices are used by employees to carry out their duties of employment.
At the Canadian Tax Foundation's annual conference in Montreal late last year, the CRA stated that a BYOD policy will generally give rise to a taxable employment benefit. The CRA did state, however, that the benefit could be avoided altogether if the ownership of the device, once purchased, was transferred to the employer and any personal use of the device was "incidental."
In a related matter, the CRA was recently asked whether a taxable benefit arises if employees are given the opportunity to purchase computer software at a discount from a technology company as a result of the employer purchasing new software for the office computers.
The CRA responded that a taxable benefit would indeed accrue to the employee since any "economic benefits received by employees in respect of their employment will be considered a taxable benefit even if the benefit is not provided by the employer."
Employers should take heed of the CRA's position.