18 March 2014 External T.I. 2013-0511191E5 - Taxable Benefits – Weight Management Programs

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 an employer-subsidized weight management program is a taxable employment benefit?

Position: Likely yes.

Reasons: See response.

XXXXXXXXXX 2013-051119
T. Baltkois

March 18, 2014

Dear XXXXXXXXXX:

Re: Taxable benefits – weight management program

We are writing in response to your correspondence dated November 1, 2013, wherein you requested our comments concerning whether a weight management program subsidized by an employer as part of an overall wellness initiative would result in a taxable benefit to participating employees.

In the situation described, the employer has established a wellness program for its employees for the stated purpose of reducing absenteeism, reducing benefit costs, and developing a more productive workforce. One component of the wellness program is a weight management program which would be delivered by XXXXXXXXXX or a like service. The weight management program is available to all employees. The employer is proposing to reimburse a portion of the costs incurred by employees to join the weight management program.

Our Comments

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, paragraph 6(1)(a) of the Act provides that all benefits received or enjoyed by an employee from an office or employment are taxable unless specifically excluded by another provision of the Act.

Where an employer reimburses an employee for the cost of a weight management program, the employee would generally be considered to have received an economic benefit in respect of, in the course of, or by virtue of his or her office or employment. This economic benefit would be taxable under paragraph 6(1)(a) unless it could be clearly demonstrated that the employer was the primary beneficiary of the weight management program or the benefit was excluded by another provision of the Act.

It is our view that the employee, and not the employer, would usually be regarded as the primary beneficiary where an employee becomes physically healthier and generally better able to perform his or her duties (e.g., sick less often, less downtime, remain fit for duty) as a result of participating in a weight management program.

Clause 6(1)(a)(iv)(A) of the Act excludes from income any benefit derived from counselling services in respect of the mental or physical health of the taxpayer or an individual related to the taxpayer. The phrase "counselling services" is not defined in the Act. Where the legislation does not define a phrase, we generally rely on case law and the ordinary meaning of the words (e.g., dictionary definition).

The Concise Canadian Oxford Dictionary defines "counselling" as "the act or process of giving counsel; the process of assisting and guiding clients, esp. by a trained person on a professional basis, to resolve esp. personal, social, or psychological problems and difficulties." It is a question of fact whether a weight management program such as the one described includes counselling services.

Where counselling services are provided as part of a weight management program, it is our view that the value of any benefit derived from such services would be difficult to separate from the value of any other benefits received or enjoyed under the program. Therefore, clause 6(1)(a)(iv)(A) of the Act likely would not apply to exempt any portion of an employer-paid weight management program.

We trust these comments will be of assistance to you.

Yours truly,

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