22 January 2007 Ministerial Correspondence 2006-0218181M4 - Deductibility of membership fees

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: The Organization's executive director has written to an MP with several questions about its membership fees. The main reply was written by GST Rulings, but an insert was provided by IT Rulings with respect to the deductibility of membership fees.

Position: A deduction from employment income is not available. A member who is self-employed or a company that pays the membership fees for its employees may be entitled to a deduction from employment income if the expense can be shown to have been incurred for the purpose of earning business income.

Reasons: A deduction from employment income is not available because membership in the particular organization is not required in order to maintain a professional status recognized by statute.

Signed on January 22, 2007

XXXXXXXXXX

Dear XXXXXXXXXX:

I am writing in reply to your letter addressed to XXXXXXXXXX, Member of Parliament for XXXXXXXXXX, regarding the membership fees of the XXXXXXXXXX. I received a copy of your letter from XXXXXXXXXX's office on December 7, 2006.

You have asked whether XXXXXXXXXX members can deduct their membership fees from their personal taxes. In his letter of October 27, 2006, to XXXXXXXXXX, Mr. Randy Hewlett, a Canada Revenue Agency (CRA) official with the Income Tax Rulings Directorate, explained that the Income Tax Act provides a deduction from employment income for professional membership dues only when paying such dues is necessary to maintain a professional status recognized by statute. It does not appear that membership in XXXXXXXXXX satisfies this requirement. Therefore, no deduction from employment income is available. However, if the taxpayer paying the XXXXXXXXXX membership fee is a self-employed individual earning business income rather than employment income, or an employer that pays XXXXXXXXXX membership fees for its employees, deducting the membership fees from business income would be allowable provided it can be demonstrated that the membership dues were an expense related to the earning of business income.

With respect to your question about the application of the Goods and Services Tax (GST) to XXXXXXXXXX's membership fees, our records indicate that Ms. Katherine Lairson of the CRA's GST/HST Rulings Centre in Ottawa wrote to XXXXXXXXXX, on July 4, 2006, to provide an interpretation on the application of the GST to membership fees. The information in XXXXXXXXXX's letter of May 2, 2006, was not sufficient to allow Ms. Lairson to provide a definite ruling on XXXXXXXXXX's membership fees. I have therefore asked officials of the Excise and GST/HST Rulings Directorate to contact you to obtain additional information so they can undertake a detailed review of XXXXXXXXXX's membership fees and the related benefits accorded to its members.

If you require additional information regarding the application of the GST to membership fees, I invite you to contact Mrs. Danielle Laflèche, Director, Public Service Bodies and Governments Division, Excise and GST/HST Rulings Directorate, by calling 613-954-7656, or by writing to 14th Floor, Tower A, Place de Ville, 320 Queen Street, Ottawa ON K1A 0L5. Mrs. Laflèche is aware of our correspondence and will be pleased to provide assistance.

I assure you that your concerns will be given careful consideration.

Sincerely,

The Honourable Carol Skelton, P.C., M.P.

c.c.: Mrs. Danielle Laflèche

Director
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
14th Floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5

Renée Shields
613-948-5273
2006-021818