26 February 2004 External T.I. 2004-0063471E5 - Employer-Paid Health Club Membership

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-paid health club membership is a taxable employment benefit.

Position: Yes.

Reasons: Employee is the primary beneficiary notwithstanding that there may be incidental benefits to the employer.

Randy Hewlett, B.Comm.

XXXXXXXXXX 613-957-8973
2004-006347
February 26, 2004

Dear XXXXXXXXXX:

Re: Employer-Paid Health Club Membership

We are writing in response to your letter of February 20, 2004, wherein you requested our opinion on the taxable status of employer-paid gym memberships.

You indicated that under your contract of employment you are reimbursed for the annual cost of a health club membership. In your view, the reimbursement is not a taxable employment benefit because your good health provides benefits to your employer through reduced stress and disability leave.

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 Canada Revenue Agency 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.

We do not consider a situation to be advantageous to the employer where the employee's membership in a health or fitness club is 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 club's facilities. 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 Planning Branch