17 October 2003 External T.I. 2003-0035455 - EMPLOYER PAID GYM MEMBERSHIPS

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: Taxable status of employer-paid subsidy for gym memberships.

Position: Taxable.

Reasons: Employee is the primary beneficiary of the payment.

							Randy Hewlett, B.Comm.
XXXXXXXXXX 						613-957-8973
							2003-003545
October 17, 2003

Dear XXXXXXXXXX:

Re: Employer-Paid Gym Memberships

We are writing in response to your letter of August 8, 2003, wherein you requested our opinion on the taxable status of employer-paid gym memberships.

In your letter, you indicated that your company is offering a "gym membership subsidy" to all of its employees as part of an employee-wellness program. In your view, the payments do not result in taxable employment benefits under the Income Tax Act (the "Act") because:

• The program is offered to all employees and does not vary amongst job levels;
• The company does not claim a deduction for income tax purposes;
• The program is meant to increase job performance through the promotion of employee wellness; and
• The program will indirectly reduce health insurance costs.

Our Comments

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 an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments.

The position of the CCRA with respect to the taxable benefit implications of employer-paid membership dues for clubs providing dining, recreational, or sporting facilities, is outlined in Interpretation Bulletins IT-148R3, Recreational Properties and Club Dues and IT-470R (Consolidated), Employees' Fringe Benefits. Generally, the payment or reimbursement of club dues or membership fees by an employer results in a taxable benefit to the employee. However, if it is clearly to the employer's advantage for an employee to be a member of a club, the employee will not be considered to have received a taxable benefit.

In general terms, we do not consider a situation to be advantageous to the employer where the employee's membership in a fitness facility is part of an employee-wellness program designed to provide indirect benefits to the employer, such as the employee being healthier and better able to perform his or her duties as a result of utilizing the facility. In such situations, the employee is regarded as the primary beneficiary of the membership and therefore, in receipt of a taxable benefit that must be included in employment income under paragraph 6(1)(a) of the Income Tax Act.

We trust our comments will be of assistance to you.

Yours truly,

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