If you are thinking of corporate gift-giving this holiday season, you can be generous, promote your business, and leverage some tax benefits for your pharmacy business. Strategic gifting can be an effective promotional tool for pharmacists and pharmacy owners, while creating opportunities for reduced taxes. Don’t forget to get something for yourself, too!
Gifting Under Tax Rules
A gift is a unique case under Canadian tax regulations. The Canada Revenue Agency (CRA) does not tax the recipients of gifts, as long as it is a gift and not part of a transaction where something is expected in return. If the gift is a valuable non-cash property, and the value of the gifted property surpasses what the giver originally paid for it, there may be tax implications for the giver.
Strategic Gifting for Pharmacists and Pharmacy Owners
Be sure to keep impeccable records of any gifts given from your business, as you need to provide full documentation if the CRA requests it. Keep a log of which employees, clients, or others received a gift, along with receipts and details about the gift.
As an employer, you can deduct the total cost of employee gifts for the pharmacists, assistants, and others working in your pharmacy, providing you with a tax advantage while rewarding your employees.
The CRA generally treats all gifts to employees as taxable benefits, with certain exceptions, such as non-cash gifts (including certain gift cards) up to $500 per year, promotional items like mugs, clothing, and similar items.
Gifts to Clients
When gifting to clients, carefully choose items that qualify for full tax deduction. While items like chocolates or certain gift baskets are fully deductible, meals and entertainment gift cards, such as spa packages and restaurant cards, are only 50% deductible. Opting for non-food gift cards, like those from Amazon, ensures the gift is 100% deductible.
Gifts to Yourself
Obviously, a traditional gift from your business to yourself wouldn’t be allowed, but you could give yourself an upgrade to your education or attend a conference, as a legitimate business expense that is eligible for a tax benefit.
Maximizing Deductibility: Give Generously and Benefit Your Business
Giving promotional items or gift baskets that are 100% deductible means you can give, promote your business, reward employees, and enjoy a tax advantage. Gift cards are always appreciated; they are a great way to ensure recipients get presents they enjoy. Gift cards make for easier giving, especially since you may not know the employee or client well enough to choose a personal gift. However, remember that not all gift cards are alike when it comes to tax purposes. Non-food gift cards, such as those from Amazon, offer a 100% deductible option, unlike food-related options which are subject to a 50% deduction limit.
Whatever you decide on for your gifts in the end, when your pharmacy business is planning gift-giving, align the gift choices with tax regulations for a financial advantage.
Pharmacists and pharmacy owners seeking to give business gifts should choose items that ensure maximum tax benefits, but understanding the nuances of gifting in Canada is essential so you can be generous and optimize tax benefits. Strategic gifting to employees, clients, and family members can yield substantial advantages. By choosing non-food gift cards, such as Amazon gift cards, and ensuring compliance with other Canadian tax regulations for corporate gift giving, your pharmacy can ensure full deductibility.
Pharma Tax can help you optimize your gift-giving tax strategy, as well as develop a comprehensive tax plan so you can pay less each year in taxes. Don’t pay more than you have to; gain the benefit of our pharmacy industry-specific accounting and tax planning expertise.