RECREATIONAL FACILITIES AND CLUB DUES
Recreational facilities and club memberships are often provided by employers as perks or benefits. However, the tax treatment of these benefits can vary significantly depending on their purpose, accessibility, and the conditions under which they are provided. Below, we break down the CRA guidelines for both taxable and non-taxable scenarios, reporting obligations, and employer considerations.
Taxable Benefits
When an employer provides access to recreational facilities or pays for club memberships, it is usually considered a taxable benefit for the employee. This means the value of the benefit must be included in the employee’s income for tax purposes. Some examples of taxable situations include:
- Paying for an employee's membership at a private club, such as a golf club, tennis club, or business/professional club.
- Reimbursing employees for memberships they personally paid for, regardless of the purpose.
- Providing access to exclusive recreational facilities available only to a select group of employees.
- Offering club memberships where the primary beneficiary is the employee rather than the employer.
Non-Taxable Benefits
In certain situations, recreational facilities and memberships may not be considered taxable benefits. The CRA outlines the following exemptions:
- In-House Recreational Facilities: Facilities owned and operated by the employer, such as gyms or swimming pools, are generally non-taxable if they are available to all employees equally.
- Employer-Owned Memberships: If the employer holds the membership and it is used primarily for business purposes (e.g., client meetings), it may not be taxable to employees.
- Health-Related Memberships: When a membership is provided as part of an employee’s health plan (e.g., for physiotherapy or medical reasons), it may not be taxable if it directly benefits the employer by promoting the employee’s ability to work.
Special Considerations for Golf Clubs and Social Clubs
The CRA has specific rules for golf, social, and similar clubs:
- If the membership benefits the employee more than the employer, the full value of the membership is taxable.
- For golf club memberships, even if the membership is used to entertain clients, it is generally taxable unless the employer can prove that the primary beneficiary is the business.
- In cases where the fees are reimbursed but the membership is minimally used, the benefit is still taxable unless it is directly tied to job requirements.
Reporting Obligations
Employers are responsible for determining the taxable value of recreational facilities or club dues provided to employees. This value must be included in the employee’s T4 slip and is subject to deductions for:
- Income Tax: The taxable benefit amount is added to the employee's total income.
- CPP Contributions: The benefit is pensionable, so CPP contributions apply.
- EI Premiums: If the benefit is provided in cash, EI premiums apply. For non-cash benefits, EI does not apply.
GST/HST Implications
Employers may also need to account for GST/HST on taxable benefits related to recreational facilities and club memberships. The CRA treats the employer as having collected GST/HST on the value of the benefit, which must be remitted accordingly.
Examples of CRA Guidelines
- Example 1: A company reimburses an employee for the cost of a personal gym membership. Unless the membership is specifically required for a medically documented condition and approved as part of the employee's work-related health plan, this reimbursement will be considered a taxable benefit and must be included in the employee's income.
- Example 2: An organization builds an in-house fitness center, open to all employees without restrictions or additional costs. Because the facility is equally accessible to all staff and not tied to personal memberships, the benefit is non-taxable under CRA guidelines.
- Example 3: An employer offers a paid membership to a private golf club for an employee. The membership is primarily used for personal enjoyment, with occasional business meetings. In this case, the value of the membership is fully taxable because the primary beneficiary is the employee.
- Example 4: A business provides access to a social club for a select group of executives but not to all employees. The CRA would consider this a taxable benefit since it is not equally available to all staff members and primarily benefits the selected individuals.
