21 March 2002 External T.I. 2002-0127165 - EMPLOYEE BENEFITS RE FITNESS POLICY

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Whether a taxable employee benefit is considered to be received when an employer reimburses an employee for gym memberships, sporting lessons, or gym equipment.

Position: Yes.

Reasons: Taxpayers are generally taxed on the value of all benefits they receive by virtue of their employment except where the Income Tax Act provides otherwise.

XXXXXXXXXX 		J. Gibbons, CGA
		2002-012716
Attention: XXXXXXXXXX 

March 21, 2002

Dear XXXXXXXXXX:

We are replying to your letter dated March 5, 2002, in which you requested our views concerning the income tax implications of a fitness policy that your company wishes to implement. The policy "would provide all permanent employees with the opportunity to work out and participate in health-related exercises to promote wellness and work/life balance in the workplace." Your company does not have any on-site fitness facilities.

As requested, we have considered your enquiry and have provided our views. However, our comments are of a general nature only since we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R4.

Under the proposed fitness policy, your company would reimburse employees for 4 different types of exercise-related costs, up to a maximum of $XXXXXXXXXX, provided that the employees submitted receipts. The 4 different types of costs are:

1. A gym membership at a fitness club in the employee's area or near the employee's work.

2. Home gym equipment, e.g., a stationary bike.

3. Lessons for kick-boxing, golf, etc.

4. Golf clubs (for golf lessons), running shoes (for a half-marathon running course), etc.

Our comments

As indicated in paragraph 2 of IT-470R, "Employees' Fringe Benefits (Consolidated)," taxpayers are generally taxed on the value of all benefits they receive by virtue of their employment except where the Income Tax Act provides otherwise. However, because we recognize the administrative burden for employers when dealing with certain employee benefits, we strive to take reasonable positions without compromising the overall purpose of the taxing provisions. With this in mind, we realize that there are situations where the fair market of the employee benefit is difficult to determine. For example, paragraph 33 of IT-470R states that, where employees are generally permitted to use the employer's recreational facilities free of charge or for a nominal fee, the value of the benefit received by an employee through such use is not normally taxable.

If an employer reimburses an employee for gym memberships, sporting lessons, or gym equipment, it is our view that the amount of the reimbursement is a taxable benefit to the employee that must be included in income pursuant to paragraph 6(1)(a) of the Income Tax Act.

We trust that these comments will be of assistance.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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