31 January 2013 External T.I. 2012-0453001E5 - Taxability of Employer Paid 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: Whether a membership fee paid to an organization to assist the employer with labour relations is a taxable benefit to an employee?

Position: Question of fact. In this case, no.

Reasons: Where the payment for the membership fees is for the employer's advantage, the employee will not be considered to have received a taxable benefit.

XXXXXXXXXX
2012-045300
C. Underhill

January 31, 2013

Dear XXXXXXXXXX:

Re: Taxability of Employer Paid Membership Fees

We are writing in response to your fax of June 22, 2012, concerning the tax consequences of employer paid membership fees. More specifically, you have enquired whether a membership fee paid to an organization to assist the employer with labour relations is a taxable benefit to an employee.

In the situation you described, the employer operates a XXXXXXXXXX in Canada and its employees are unionized. The employer is a member of an organization which provides labour relation consulting services to its members. The organization is funded solely by its membership and the membership fee is levied by way of dues based on the number of hours worked by the member's bargaining unit employees. The employer enters into an agreement with the organization and is responsible for paying the membership fee. The employer is assessing a taxable employment benefit to its employees on the fee it pays to the organization.

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 (IC) 70-6R5, "Advance 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/formspubs/menu-e.html. Your letter describes a factual situation involving a specific taxpayer. As explained in IC 70-6R5, it is not our practice to comment on the tax consequences applicable to a specific taxpayer in particular circumstances except in the form of an advance income tax ruling. We are, however, prepared to provide the following general comments.

In accordance with paragraph 6(1)(a) of the Income Tax Act (Act), employees are generally taxable on the value of all benefits received by virtue of their employment. A benefit is not considered to be received or enjoyed under paragraph 6(1)(a) of the Act when: (a) the employer is the primary beneficiary of the amount paid or reimbursed or (b) no economic advantage is conferred on the employee by virtue of the payment or reimbursement. A determination of who is the primary beneficiary of an amount paid or reimbursed or whether an economic advantage is conferred can only be made on a case-by-case basis.

In your situation, it appears that the membership fee paid by the employer to the organization is incurred principally for the benefit of the employer. Furthermore, it is the employer who is a member of the organization not the employee. Based on the limited facts provided, it is our view that the membership fee paid by the employer to the organization is not a taxable benefit to the employee.

We trust these comments will be of assistance.

Yours truly,

Nerill Thomas-Wilkinson, CPA, CA
Manager
for Director
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch