Calculate payroll deductions and contributions
Recreational facilities and club dues
Content has been updated for clarity, completeness and plain language. No changes were made to the current Canada Revenue Agency (CRA) administrative policy.
On this page
- Determine if the benefit is taxable
- Calculate the value of the benefit
- Withhold payroll deductions and remit GST/HST
- Report the benefit on a slip
- References
Determine if the benefit is taxable
Generally, the use of a recreational facility or club is a taxable benefit for employees. Depending on your situation, the benefit may not be taxable under the CRA's administrative policy .
Examples of recreational facilities
Examples of recreational facilities include:
- exercise rooms
- swimming pools
- gymnasiums
- tennis, squash or racquetball courts
- golf courses
- shuffleboard facilities
Examples of clubs
Examples of clubs include:
- social or activities clubs
- sports or athletics clubs
- fitness clubs
Situations
Situation: You provide an in-house recreational facility to your employee
Non-taxable situation
Under the CRA's administrative policy, if you provide an in-house recreational facility, the benefit is not taxable if the facility is available to all your employees, whether provided free of charge or for a minimal fee.
Example
You want to promote good health for your employees and you convert a space in your building into a fully equipped gym. Although not all employees use the gym, it is available to all employees. Since the gym is an in-house recreational facility that is available to all employees, the CRA administrative policy applies. Employees are not considered to receive a taxable benefit for the use of the gym.
Taxable situation
If you provide recreational facilities to a select group or category of employees for free or for a minimal fee, while other employees have to pay the full fee, there is a taxable benefit for employees who do not have to pay the full fee.
Continue to Calculate the value of the benefit.
Situation: You pay for an employer-owned membership to a recreational facility
Non-taxable situation
Under the CRA's administrative policy, if you made an arrangement with a facility to pay a fee for the use of the facility, the benefit is not taxable if all of the following apply:
- Membership agreement is with the employer and not the employee
- Facility or membership is available to all employees
Example
You arrange with a nearby fitness club to purchase memberships at a considerable discount for use by your employees. To ensure the club is not crowded for full paying members, the club puts a limit on the number of employees that can use the club at any time. The membership is held with you who issues passes daily on a first-come, first-served basis. Employees are free to purchase their own memberships at full price if they prefer to have unlimited access. However, the free passes are available to all employees who want them.
Since the memberships are with the employer (not the employees) and are available to all employees, the CRA administrative policy applies and the benefit is not taxable.
Taxable situation
If the payment for an employer-owned membership at a recreational facility does not meet both of the conditions above, the benefit is taxable.
Example
You arrange with a nearby fitness club to purchase memberships for a select group of employees.
Since the memberships are not available to all employees, the CRA administrative policy does not apply and the benefit is taxable.
Continue to Calculate the value of the benefit.
Situation: You pay, reimburse, or subsidize the cost of club dues or membership fees
Taxable situation
If you pay, reimburse, or subsidize the cost of club dues or membership fees for an employee’s use, the benefit is taxable.
Continue to Calculate the value of the benefit.
Non-taxable situation
If you provide your employee with a membership in a social or athletic club, the benefit is not taxable if you can clearly demonstrate you are the primary beneficiary of the membership.
What is a primary beneficiary
You are not considered to be the primary beneficiary if the membership in or use of the club’s facilities provides only an indirect benefit to you. This would be the case where the employee becomes physically healthier as a result of using the club’s facilities and becomes generally better able to perform their duties (for example: fewer sick days, less downtime, remain fit for duty). In these situations, the employee is considered the primary beneficiary and the benefit is taxable.
Example
You are a clothing manufacturer that provides a gym membership to its president. The benefit is taxable because the primary beneficiary is the president.
Situation: You pay, reimburse, or subsidize the cost of food and beverages at a recreational facility or club
Taxable situation
If you pay, reimburse, or subsidize the employee for expenses incurred for food and beverages at a restaurant, dining room lounge, banquet hall, or conference room of a recreational facility or club, the benefit is taxable.
Continue to Calculate the value of the benefit.
Calculate the value of the benefit
If the benefit is taxable, the value of the benefit is equal to:
- Fair market value of the benefit received or enjoyed
- minus Any amounts your employee reimbursed you
- equals Value of the benefit to be included on the T4 slip
Example 1 – Calculations
An employer subsidizes its employees’ purchase of memberships at a fitness club. The memberships ordinarily cost $400 per year and the employer pays $200.
The taxable benefit is calculated as follows:
- $200 is the part of the fitness membership fee paid by the employer
- minus $0 because the employee does not reimburse the employer
- equals $200 is the value of the benefit to be included on the T4 slip
The amounts must be included in the pay period they were received or enjoyed.
Withhold payroll deductions and remit GST/HST
If the benefit is taxable, you must withhold the following deductions. The amounts must be included in the pay period they were received or enjoyed.
The withholding and remitting requirement depends on the type of remuneration: cash , non-cash , or near-cash .
Non-cash and near-cash: Option 1
Withhold:
- Income tax
- CPP
- EI (do not withhold)
Remit:
- GST/HST in certain situations
Cash: Option 2
Withhold:
- Income tax
- CPP
- EI
Do not remit:
- GST/HST
Learn how to calculate deductions and the GST/HST to remit on benefits: How to calculate – Calculate payroll deductions and contributions.
Report the benefit on a slip
If the benefit is taxable, you must report the following amounts on the T4 slip.
Non-cash and near-cash: Option 1
Report on:
- Box 14 – Employment Income
- Box 26 – CPP/QPP pensionable earnings
- Code 40 – Other Information
Cash: Option 2
Report on:
- Box 14 – Employment Income
- Box 24 – EI insurable earnings
- Box 26 – CPP/QPP pensionable earnings
- Code 40 – Other Information
Learn how to report the benefit on a slip: Fill out the slips and summaries – File information returns (slips and summaries).
References
Legislation
- ITA: 6
- Amounts to be included as income from office or employment
- ITA: 6(1)(a)
- Value of benefits
- ITA: 6(1)(b)
- Personal or living expenses (allowances)
- CPP: 12(1)
- Amount of contributory salary and wages
- ETA: 173
- Taxable benefit is considered a supply for GST/HST purposes
- IECPR: 2(1)
- Amount of insurable earnings
- IECPR: 2(3)
- Earnings from insurable employment
- IECPR: 2(3)(a.1)
- Earnings from insurable employment – amount excluded as income under 6(1)(a) or (b), 6(6) or (16) of the ITA
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