15 October 2009 External T.I. 2009-0329531E5 - Employer reimbursed recreational dues

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.

Principal Issues: Whether an employer's reimbursement of certain employees' membership dues at a recreational facility is a taxable benefit to the employees.

Position: Question of fact. In this situation, yes.

Reasons: Based on the information provided, the recreational facilities fees are not provided to all employees (whether or not in-house) and do not appear to be principally for the benefit of the employer.

									2009-032953
XXXXXXXXXX 								Brenda White
									519-645-5454
October 15, 2009

Dear XXXXXXXXXX :

Re: Recreational Facility Dues

This is in response to your letter of July 29, 2009 inquiring about the taxability of employer reimbursed recreational facility dues for certain employees.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

The CRA's position with respect to the taxable benefit implications of employer-provided membership dues for clubs providing dining, recreational, or sporting facilities, is outlined in Interpretation Bulletins IT-148R3, "Recreational Properties and Club Dues", ("IT-148R3"), IT-470R (Consolidated), "Employees' Fringe Benefits" and the Employer's Guide T4130 "Taxable Benefits and Allowances", which are available on our website.

Generally, the payment or reimbursement of club dues or membership fees by an employer results in a taxable benefit to the employee under paragraph 6(1)(a) of the Income Tax Act (the "Act") unless provided by the employer to all employees (whether or not in-house) or done principally for the employer's advantage. Whether the economic benefit from employer reimbursed recreational facility dues is principally for the benefit of the employer or the employee is a question of fact determined on a case-by-case basis. As noted in paragraph 12 of IT-148R3, the onus is on both the employer and the employee to establish whether such memberships or dues are primarily to the employer's advantage.

We generally would not consider that the employer is the primary beneficiary where the employee's membership in a fitness club provides an indirect benefit to the employer. This would be the case where the employee becomes physically healthier as a result of utilizing the club's facilities and consequently becomes generally better able to perform his or her duties (e.g. is sick less often, reduce downtime, remain fit for duty). In such situations, the employee is regarded as being the primary beneficiary and would be in receipt of a taxable benefit described in paragraph 6(1)(a) of the Act.

In the situation you have described, it appears that the reimbursements of recreational fees are not available to all employees and these memberships are principally for the benefit of the employees. In such situations, reimbursed recreational fees represent a taxable benefit that must be included in employment income under paragraph 6(1)(a) of the Act.

We trust these comments will be of assistance.

Yours truly,

Rob Ferrari
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch