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: Is there a taxable benefit to an employee when an employer pays for or reimburses the employee for a medical test?
Position: Question of fact.
Reasons: See response
February 19, 2014
Re: Employer-paid medical testing
We are writing in response to your letter dated October 2, 2013, in which you asked about the tax implications for employer-paid medical testing. In the situation described, an employer requires employees to undergo a particular medical test (either paid for by the employer or reimbursed to the employee) before it reimburses their gym membership fees. It is our understanding that the employer considers the reimbursement of any gym membership fee to be a taxable benefit for the employee.
This technical interpretation provides general comments about the provisions of the Income Tax Act (Act) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings.
Generally, where an employer pays for or reimburses an employee for a personal expense, the amount will be a taxable benefit under paragraph 6(1)(a) of the Act. However, in situations where the expense is incurred in the performance of his or her employment duties, the employer cost or reimbursement will generally not be a taxable benefit.
Technical interpretation 2001-009280 (emailed to you on December 11, 2013) provides general comments about the tax implications of employer-paid medical examinations. This technical interpretation provides that:
Where it is established that the medical examination was necessary to fulfil a condition of employment, it is our view that the employer is the primary beneficiary of any expense incurred. However, where the medical examination is made available only to a select group of employees, unless the employer requires the examination as a condition of employment, the employee is considered the primary beneficiary of any expense incurred by the employer.
In a case where the employee can exercise discretion as to whether to take an annual examination by the employer's physician, clearly it is not a condition of employment. As well, unless a medical exam with negative results impacts employment status in some manner, it cannot be said that the medical exam was a condition of employment.
These general comments continue to reflect CRA's view. That is, any employer-paid medical examination that was not required as a condition of employment will give rise to a taxable benefit.
Under paragraph 118.2(3)(a) of the Act, any amount included in the employee's income that would otherwise qualify as an expense under subsection 118.2(2) of the Act for the medical expense tax credit will be deemed to be a medical expense paid directly by the employee.
We trust these comments will be of assistance to you.
Nerill Thomas-Wilkinson, CPA, CA
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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