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Emma G
April 8, 2020
Question

Honorarium or not - how would you pay this?

  • April 8, 2020
  • 1 reply
  • 0 views

We have had a University researcher provide a huge amount of assistance to our company without charging us directly - they are not on our payroll, nor do they bill us as a contractor. We would like to give them a "bonus" to thank them for their assistance, so I am wondering if this would best be paid as a honorarium? 

 

If this is correct, I am assuming I would:

 

  1. deduct: CPP, EI and tax (as per CRA "Special payments")
  2. ensure the honorarium falls within the HR guidelines for their university
  3.  and I could process this payment without needing an invoice, but could keep email confirmation from the company CEO for audit trail
  4. Send them a T4A (or......?) at end of tax year

 

Thanks in advance, Emma

1 reply

R
Rochelley
April 8, 2020

Hi @Emma G ,

 

Even though CRA does support the notion of small payments that are not subject to the usual tax rules, these payments must follow some criteria which include:

  • They are nominal - $500 or less in a calendar year
  • They are made to an individual for voluntary services for which fees are not legally or traditionally required
  • They are not reflective of the value of the work done
  • They are made on a one-time or non-routine basis to an individual as a "thank you"

I think you've covered it all.  I would add a couple of comments; If the amount is less than $500 in the calendar year, then you do not have to issue the T4A.  Normally, you wouldn't withhold taxes on an honorarium.  Rather, the recipient will be taxed appropriately when they file their personal income tax return and record the T4A income.

 

An excerpt that I borrowed from someone else:

 

Honorarium payments to non-employees:

  • Residents of Canada:  An honorarium paid to a resident of Canada who is not an employee, is not subject to tax deductions; however this does not mean that the recipient does not have to pay taxes on the amount received.  The individual may be issued a T4A for the payment, and when they file their tax return for the year, any taxes owing on the amount paid will be assessed by CRA.  Recipients will not be issued a T4A as long as the payment is $500 or less in a calendar year.
  • Non-residents of Canada:  Where the service was performed in Canada, honorariums paid to non-residents of Canada are subject to a flat rate income tax deduction of 15% and are reported on a T4A-NR.  If their service was performed outside of Canada, there is no tax deduction or reporting requirements.

Good luck!

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