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: How to calculate a taxable benefit where the employer pays an annual lump sum to a fitness facility and employees who wish to participate in a fitness program pay an annual membership to the facility. Not all employees participate in the program and the amount they pay is less than the fair market value of a fitness membership at the facility that is available to members of the general public.
Position: The amount of the benefit for each employee who participates in the program is equal the amount paid by the employer divided by the number of employees who participate.
Reasons: Pursuant to paragraph 6(1)(a) of the Act each employee who participates in the fitness program has received a taxable benefit. Generally, the amount of a taxable benefit is based on fair market value. However, in a situation such as this it is sufficient to allocate the employer's cost equally among employees who participate and benefit.
XXXXXXXXXX 2006-018929
November 8, 2006
Dear XXXXXXXXXX:
Re: Fitness Subsidy - Taxable Benefit
We are writing in response to your letter of May 24, 2006, wherein you requested our opinion on how to calculate a taxable benefit in respect of the employer-paid portion of a fitness membership.
You indicated that the employer pays an annual lump sum to the facility and certain employees who wish to participate in the fitness program pay an annual membership to the facility. Not all employees participate in the program. You inquired as to the proper method to calculate a taxable benefit for the employees given that the amount they pay is less than the fair market value of a fitness membership at the facility that is available to members of the general public.
In our view, each employee who participates in the fitness program has received a taxable benefit. Generally, the amount of a taxable benefit is based on fair market value. In this situation, however, it would be sufficient for the employer to allocate to each employee who participates in the program a taxable benefit equal to the amount paid by the employer divided by the number of employees who participate.
We trust our comments will be of assistance to you.
Yours truly,
Randy Hewlett,
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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