Your approach is primarily punitive and that is not useful. Of course you want to set a limit on the behavior by telling him that such behavior is not permissible. A time out of 10-15 minutes is sufficient as discipline. Survey his situation to explore for any changes or strains he might be under because such behavior can be a manifestation of stress. But it can also be a playful thing and not due at all to stress. If the latter, simple limit setting should take care of the problem.
The reason for peeing on toys may have many reason. One of the most common reason is stress in the child; both physical (involving the bladder) and psychological, where the peeing may be a tool getting attention and/or a 'scream' for help. It may also be part of him experiencing the world; finding out what the toilet really is for and why all kind of human do that where many animals do not, thought this is a very uncommon reason.
In any case it is a underlying reason, and taking away toys (or rewarding when not peeing on the toys) may not help at all and can even make it worse. So you have to find the reason for his peeing, and work toward that reason rather than the consequences of the reason. Since kids may have difficulties with communicating properly, a talk with a professional may help in the quest for the reason behind the behaviour.