| 24(1) | File No. 5-9639 |
| J.D. Jones | |
| (613) 957-2104 | |
| 19(1) | |
| May 28, 1990 |
Dear Sirs:
Re: Paragraph 6(1)(a) of the Income Tax Act (the "Act")
This is in reply to your letter of February 13, 1990, wherein you requested a technical interpretation of paragraph 6(1)(a) of the Act as it relates to the payment by an employer of health club fees for certain employees.
Specifically, you have requested our opinion on the applicability of paragraph 6(1)(a) of the Act where an employer, with the aim of increasing employee productivity and decreasing time lost due to illness, designs a mandatory preventative health care system for senior management employees. Under such a program, designated employees would be required, as a condition of employment, to attend regularly at health club and to undergo regularly scheduled fitness including an exercise gym, track, swimming pool and aerobics exercise area and would have qualified medical personnel available to supervise testing and provide medical examinations. The health club may also provide ancillary dining and sporting facilities.
On the assumption that the employer insures all costs, you have requested our opinion on the deductibility of such costs to the employer and whether the costs of such a program, including the health club membership, would constitute a taxable benefit to the affected employees.
In our opinion, the comments in paragraph 11 of IT-148R2 would be applicable with respect to the deductibility from income of all costs incurred by the employer. That is, subparagraph 18(1)(ii) of the Act prohibits the deduction of any expense incurred by the taxpayer in respect of membership dues (whether initiation fees or otherwise) which entitle the taxpayer, his employees or anyone else to use the facilities or sporting facilities for its members. In our view, in programs of this nature, it is the employees who derive the primary benefit from the use of the fitness facilities, notwithstanding that the employer may also derive a benefit by way improved employee performance and a reduction in absenteeism. Accordingly, the costs of such a program paid by the employer would constitute a taxable benefit to the affected employees pursuant to paragraph 6(1)(a) of the Act.
We trust our comments clarify the Department's views with respect to this matter.
Yours truly,
for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch