April 15, 2026

Is There Tax On Gift Cards In Canada?

gift cards are taxed in Canada

Giving gifts is such a personal thing, and one of the most popular gift items in Canada is a gift card. Whether it is for birthdays, as corporate rewards, anniversaries, or holidays, gift cards are personalized, super convenient, and easy to use. However, the one common question that a lot of people tend to overlook is: Is there tax on gift cards?

There is no single answer to this, as the taxes apply differently when purchasing a gift card versus when using it. Understanding gift card taxation will help both consumers and businesses to avoid common mistakes and ensure compliance with Canadian tax rules.

Follow this easy guide by Taxccount Canada to help you stay on top of tax obligations when it comes to gift cards.

Are Gift Cards Taxed When You Buy Them?

In most cases, gift cards in Canada are not taxed when you purchase them. Gift cards are considered a prepaid payment method, similar to cash. So, when you are buying a $100 gift card, you are exchanging the money for a stored value that can be used later. Since no goods or services are being purchased, GST or HST is not charged on the purchase of gift cards.

For example –

  • You buy a $50 café gift card
  • You pay exactly $50, with no GST/HST added

The tax is usually applied later when you/ the other person redeems the gift card for the purchase of products or services.

Understand Gift Card Taxes

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When Do You Pay Tax on Gift Cards?

Taxes are applied to gift cards when they are redeemed to purchase any goods or services.

For example –

  • You receive a $50 retail gift card
  • You visit the store and buy items worth $50

If the items you bought are taxable, GST/HST will be applied at the time of checkout.

So, if the total purchase is –

  • Item price – $50
  • HST (13% in Ontario) – $6.50

The total comes out to be $56.50, which means that you need to pay $6.50 if the gift card only covers $50.

Simply put –

Gift cards themselves are not taxed – the items/services purchased with them may be taxed.

Are There Any Exceptions?

There are certain exceptions depending on the situation.

Promotional Gift Cards

Sometimes businesses offer promotional gift cards, like –

  • Buy a $100 gift card, and get a $20 bonus card
  • Loyalty reward gift cards
  • Store credits

The tax treatment in these cases varies depending on how the promotion offer is structured. Businesses must properly record these promotions in their accounting records to ensure accurate GST/HST reporting.

Gift Cards for Specific Goods or Services

Certain gift cards are issued for specific products or services, like spa treatments, digital subscriptions, or entertainment packages.

In these cases, the taxation is sometimes done at the time of purchase. It depends on how the gift voucher is structured under the Canadian tax rules. Businesses need to understand this distinction, especially related to the particular service.

Business Gift Cards for Employees

Employers give gift cards to employees as rewards or bonuses. In most cases, the Canada Revenue Agency (CRA) considered these gift cards to be a taxable employee benefit.

So, if the gift card functions like cash and can be used almost anywhere, it may be considered as part of an employee’s income and needs to be reported on the T4 slip.

However, the CRA does allow non-cash gift cards or awards up to a certain annual limit to go without taxation if they meet specific conditions.

These rules can be overwhelming to understand; that’s why it is recommended to consult a professional tax expert. Get in touch with the team at Taxccount Canada, and our tax experts will guide you.

Do Businesses Pay Tax When Selling Gift Cards?

From buying gift cards, we now move on to selling gift cards. Businesses that sell gift cards generally don’t charge GST/HST at the time of sale. Instead, they must –

  • Record gift card sales as a liability in their accounting system
  • Recognize the revenue only when the gift card is redeemed
  • Collect and report GST/HST when the customer uses the gift card to buy taxable goods or services

Proper bookkeeping is integral because incorrect reporting may result in errors at the time of tax filing or even CRA audits.

What Happens If a Gift Card Is Never Used?

Although the chances are less, sometimes the person may not use the gift card. It may be lost, forgotten, or never redeemed.

For tax perspective –

  • Businesses usually recognize the value as broken revenue after a certain period
  • The tax implications basically depend on when the revenue is recognized and how the accounting system is handled

Canadian businesses must follow proper accounting standards when dealing with unredeemed gift cards.

Why Does Understanding Gift Card Tax Rules Matter?

Gift cards may seem simple, but they can create tax and accounting complications for both businesses and individuals. Common uses include –

  • Incorrect GST/HST reporting
  • Taxable employee benefits
  • Misclassification of gift card revenue
  • Accounting errors related to unredeemed cards

If you don’t handle these correctly, it may lead to penalties or compliance issues with the CRA.

How Does Taxccount Canada Help?

Understanding Canadian tax rules can be challenging, especially when it comes to situations like gift cards, employee benefits, and GST/HST reporting. That’s why you should rely only on an expert.

At Taxccount Canada, our team of professionals helps you with –

  • GST/HST compliance and proper reporting
  • Accurate bookkeeping and financial records
  • CRA audit support and tax planning
  • Employee benefit tax guidance
  • Business tax preparation

Whether you are a business that sells gift cards or just want to ensure that your tax filings are correct, our team is there to guide you at every step.

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This is general information only and not professional advice. Consult a professional before acting.