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: Does the employer's reimbursement of membership fees in a recreational facility used for physical fitness give rise to a taxable benefit to the employee receiving the reimbursement?

Position: Yes.

Reasons: The primary beneficiary of the membership is the employee, notwithstanding that the employer may receive incidental benefits from overall employee fitness and well being.

2002-015095
XXXXXXXXXX A. Seidel
(613) 957-2058
September 12, 2002

Dear XXXXXXXXXX:

Re: Active Living Subsidy

We are writing in response to your letter dated July 4, 2002, concerning active living subsidies paid by an employer to an employee.

Background

An employer has provided employees with an active living subsidy program. Under the program, an employer agrees to reimburse fifty percent (50%) of the cost of a fitness club membership, up to a maximum of $150 per non-executive employee. The employer will reimburse executive employees up to one hundred percent (100%) of the cost of a fitness club membership as part of a flexible benefits program.

The particular circumstances in your letter, on which you have asked for our views, appear to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate tax services office for their views. However, we are prepared to offer the following general comments which may be of assistance.

As indicated in paragraph 2 of Interpretation Bulletin IT-470R, "Employees' Fringe Benefits (Consolidated)", unless there is a specific exemption in the Income Tax Act (the "Act") taxpayers are generally taxed on the value of all benefits they receive by virtue of their employment. Where an employer pays the fees or reimburses an employee for membership in a fitness club, the employee is in receipt of a taxable benefit. As a result, where an employer pays or reimburses an employee for such a membership, the amount must be included in the employee's income pursuant to paragraph 6(1)(a) of the Act.

For more information on the Canada Customs and Revenue Agency's views on the matter, please see Interpretation Bulletin IT-470R Employees' Fringe Benefits and Interpretation Bulletin IT-148R3 Recreational Properties and Club Dues. These publications can be found on out Internet website at www.ccra-adrc.gc.ca.

Yours truly,

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

- 2 -