26 July 2012 External T.I. 2011-0431681E5 - Taxable Benefits – Recreational Facilities

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: 1. Whether a taxable benefit would arise to employees where an employer provides an in-house fitness facility.

Position: 1. Question of fact, but likely yes.

Reasons: 1. A taxable benefit will generally arise where the use of an in-house recreational facility is not made available to all employees.

XXXXXXXXXX
2011-043168
T. Baltkois

July 26, 2012

Dear XXXXXXXXXX:

Re: Taxable Benefits – Recreational Facilities

We are writing in response to your fax dated December 8, 2011, in which you requested our comments as to whether an employee’s use of an employer provided in-house fitness centre would result in a taxable benefit.

In the situation described, the employer constructed a fitness centre for employees working within a specific department for the stated purpose of reducing employee absence rates associated with sickness and injury resulting from the nature of the work performed by those employees. While all employees working within this department may use the fitness centre on the same basis (i.e. at no charge), employees working in other departments do not have any access.

Subsection 6(1) of the Income Tax Act (the “Act”) provides that all benefits and allowances received or enjoyed by an employee from an office or employment are taxable unless specifically excluded by another provision of the Act. The general position of the Canada Revenue Agency (“CRA”) with respect to employer provided fitness facilities is discussed in Guide T4130, Employers’ Guide - Taxable Benefits and Allowances, which notes that a taxable benefit would not generally arise in situations where an employer provides an in-house recreational facility and the facility or membership is available to all employees. This exemption applies whether the employer provides the facilities free of charge or for a minimal fee and the facility or membership is principally for the advantage of the employer.

In the situation described, the use of the fitness centre is not available to all employees. Therefore employees using the fitness centre would be in receipt of a taxable benefit as described in paragraph 6(1)(a) of the Act unless it could be clearly demonstrated that the employer was the primary beneficiary.

You should note that the CRA does not consider an employer to be the primary beneficiary in situations where an employee's membership in or use of a fitness facility provides only an indirect benefit. Where an employee becomes physically healthier as a result of utilizing fitness facilities and consequently becomes generally better able to perform his or her duties (e.g. sick less often, less downtime, remain fit for duty), the employee is generally regarded as being the primary beneficiary. However, there may be situations in which the nature of the particular employment and/or the terms of an employment contract require that an employee meet stringent fitness standards. Where it can be demonstrated that a particular fitness training course or fitness membership fulfills this specific employment requirement, the employer may be considered the primary beneficiary.

We trust these comments will be of assistance to you.

Yours truly,

Nerill Thomas-Wilkinson
Manager
for Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch