Wednesday, June 17, 2009

CRA No Longer Taxing Loyalty Programs

Until recently, if you accumulated points in some sort of loyalty program (like frequent flier points) while on business you were supposed to declare the value of these points as income. I doubt that many people actually declared this “income”.

This was one of those rules that make a criminal out of many people who just didn’t bother to do the accounting (assuming they were aware of the rule in the first place). For most business travelers, the value of such points is fairly low and there was very little point in figuring it all out.

Fortunately, the Canada Revenue Agency has changed the rule on loyalty program points. As long as you meet the following test, you no longer have to declare these points as income:

- the points are not converted to cash,
- the plan or arrangement is not indicative of an alternate form of remuneration, and
- the plan or arrangement is not for tax avoidance purposes.

I’m not 100% sure how these new rules would be interpreted, but it seems that the majority of people who collect points on business travel will no longer be required to declare the income.

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