2 June 2009 External T.I. 2009-0312311E5 - Employer Paid Health Club Dues

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 taxability of an employer's reimbursement of a gym membership to an employee who is working temporarily in another city?

Position: While the determination of whether certain amounts paid or reimbursed by an employer are primarily for the benefit of the employer or employee is a question of fact, in this case the amount would be taxable.

Reasons: These types of expenses appear to be primarily personal.

XXXXXXXXXX 							2009-031231
								Michael Cooke
June 2, 2009

Dear XXXXXXXXXX :

Re: Temporary Gym Membership Reimbursement

We are writing in response to your email of March 3, 2009 wherein you requested our comments on the taxability of a reimbursement for a gym membership to an employee who is working on temporary assignment in another city.

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 a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website.

Notwithstanding the above, we are prepared to provide the following comments.

The payment or reimbursement of fitness club membership fees or dues by an employer would ordinarily result in a taxable benefit to the employee under paragraph 6(1)(a) of the Income Tax Act (the "Act"). However, if an employee's membership in such a club is principally (i.e. generally meant to be more than 50%) considered to be to the employer's advantage or benefit, the employee will not be considered to have received a taxable benefit.

Generally, we would not consider that the employer is the primary beneficiary where the employee's membership in a fitness club provides an indirect benefit to the employer. This would be the case where the employee becomes physically healthier as a result of utilizing the club's facilities and consequently becomes generally better able to perform his or her duties (e.g. is sick less often). In such situations, the employee is regarded as being the primary beneficiary and would be in receipt of a taxable benefit described in paragraph 6(1)(a) of the Act. Please refer to paragraph 12 of Interpretation Bulletin IT-148R3, "Recreational Properties and Club Dues", which also states that the onus is on both the employer and the employee to establish whether such memberships are primarily to the employer's advantage.

In your situation, it appears that the employee may be working at a "special work site", as that term is defined in subsection 6(6) of the Act. Subsection 6(6) of the Act may apply, inter alia, to exclude from income of an employee the value of certain benefits (i.e. relating to meals lodging and transportation) that would otherwise be taxable as personal or living expenses where such amounts are related to duties of employment performed by the employee at the special work site. However, this particular provision does not apply to exclude the value of any reimbursement relating to a gym membership.

Therefore, in your situation, it is our view the employer's reimbursement of the employee' temporary gym membership would be taxable under paragraph 6(1)(a) of the Act.

We trust these comments will be of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch