26 June 2012 External T.I. 2011-0427381E5 - Fitness Membership

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 an employer provided fitness membership a taxable benefit to an employee?

Position: In this case no.

Reasons: IT-148R3 and CRA Guide T4130 provide that a fitness membership will generally not be a taxable benefit to an employee where the employer makes an arrangement with a facility to pay a fee for the use of the facility, the fitness contract is between the fitness provider and the employer and the fitness membership is made available to all employees.

XXXXXXXXXX
									2011-042738
									P. Waugh

June 26, 2012

Dear XXXXXXXXXX:

Re: Fitness Memberships

We are writing in response to your letter dated November 8, 2011, in which you requested our comments concerning the taxation of fitness memberships provided to employees.

In the situation you described, an employer with numerous locations across Canada enters into an agreement with a national and independent fitness provider to provide fitness club memberships which are available to all employees. The fitness contracts are between the employer and the fitness providers and the employer has control of the memberships including renewal, termination, leave of absence, etc. The employer pays the fitness providers directly for the full cost. The employee pays a portion of the membership cost via payroll deduction throughout the year. All employees pay the same portion.

Our comments

Generally, the payment or reimbursement of fitness membership fees by an employer results in a taxable benefit to the employee under paragraph 6(1)(a) of the Income Tax Act (the “Act”) unless the employer can demonstrate that the membership is principally for the employer’s advantage. As noted in paragraph 12 of Interpretation Bulletin IT-148R3, Recreational Properties and Club Dues, and Guide T4130, Employers’ Guide - Taxable Benefits and Allowances, no taxable benefit will generally arise to employees if the employer pays a related or unrelated organization to provide such fitness facilities; the membership is between the fitness provider and the employer; and the fitness membership is available to all employees. A fitness membership will be considered made available to all employees as long as each employee has the opportunity to use the membership, regardless of whether they take advantage of the membership or not.

Based on the information you have provided, it is our view that your situation meets the conditions provided in IT-148R3 and Guide T4130, and thus, the fitness memberships provided by the employer to the employees would not be considered a taxable benefit to those employees.

We trust these comments will be of assistance.

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