19 February 2007 External T.I. 2006-0187401E5 - Taxable Benefits

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: What is the taxable status of free parking and fitness club memberships?

Position: Question of fact.

Reasons: For parking it depends on whether the space is regularly used for business purposes. For a fitness club membership it depends on whether the provision of the membership can be considered primarily for the employer's advantage.

							2006-018740
XXXXXXXXXX 						Joy Bertram,
	   						CGA, CPA(vt)
February 19, 2007  

Dear XXXXXXXXXX:

Re: Taxable Status of Free Parking and Fitness Club Memberships

We are writing in response to your fax of May 19, 2006, wherein you requested our opinion on the taxable status of a flexible benefits program that provides employees with free parking and fitness club memberships. We apologize for the delay in responding.

The various benefit components offered under a flexible benefit plan may be subject to taxation in accordance with specific provisions of the Income Tax Act (the "Act") in the same manner as if they were offered on their own outside of the program. The taxable status of employer provided parking and fitness club memberships are as follows:

(a) Employer-Provided Parking

The general position of the Canada Revenue Agency (the "Agency") on employer-provided parking is outlined in Guide T4130, Employee Benefits and Interpretation Bulletin IT-470R Employees' Fringe Benefits. As noted therein, employer-provided parking generally constitutes a taxable benefit to the employee under paragraph 6(1)(a) of the Act. The amount of the benefit is based on the fair market value of the parking minus any payment the employee makes to use the space. There is no taxable benefit, however, when the employee uses the space for business purposes on a regular basis. As a guideline, if an employee is required to use his or her vehicle 3 or more days on a weekly basis for employment-related travel and requires the parking space for this purpose, the parking space would be considered to be used regularly for employment-related reasons and therefore, the employee would not be in receipt of a taxable benefit.

(b) Fitness Club Memberships

The Agency's general position on employer-provided 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 under paragraph 6(1)(a) of the Act. 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 Act.

The above-noted publications are available on our website at http://www.cra-arc.gc.ca.

We trust the above will be of assistance to you.

Yours truly,

Randy Hewlett
Manager
Business and Personal Section
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch