When you travel on business for your company, you may earn frequent flyer miles or other promotional benefits, such as through rental car or hotel bookings. These promotional benefits can generally be exchanged for free or discounted travel, upgraded seating, travel related services, etc. Even though the business trips are paid for by your employer, you may be allowed to use the frequent flyer miles and other benefits for personal travel.
You’ll be happy to know that under most circumstances, these benefits won’t result in any additional tax to you. The Canada Revenue Agency’s (CRA’s) policy is to not collect tax from individuals who make personal use of frequent flyer miles earned through employer-paid business travel. Thus, you won’t be taxed on the frequent flyer miles or other benefits, either when you receive them or when you use them. Likewise, your employer won’t withhold income tax and payroll taxes on the value of the benefits.
More specifically, the CRA’s policy is to not assess a taxable benefit in respect of frequent flyer points earned when an employee’s personal credit card is used for business travel and the expenses are reimbursed by the employer, unless any of the following applies:
the points are converted to cash;
the plan or arrangement between you and the employee seems to be a form of indirect remuneration; or
the plan or arrangement is a form of tax avoidance.
If any of the conditions above are met, the employer must withhold taxes in respect of the value of the benefit and the employee must declare the fair market value of the benefit received on their annual tax return.
You may use your frequent flyer points to cover the cost of employment related travel. In this case, the CRA has stated a reimbursement of travel reward points used by an employee for business travel purposes would be deductible by the employer and non-taxable to the employee where it is clearly established that the employee used his/her personal frequent flyer points to pay for the employment-related travel and the reimbursement does not exceed the fair market value of the tickets.
For more information, please contact firstname.lastname@example.org or 1 844-GYTD-CPA