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Incorporated question - Can I use funds to pay for a gym membership?

Posted: Jan 22nd, 2013 11:07 am
by mastereh
I'm considering joining a gym and I'd love to be able to have my corporation pay for it, has anyone done this before?

If so what was the best way to pay the gym? Ie Debit, cheque? Did you go month to month or did you just pay for the year?

Re: Incorporated question - Can I use funds to pay for a gym membership?

Posted: Jan 22nd, 2013 11:57 am
by CanuckGreg
I'm not an accountant but I do have my own corporation (I'm an independent IT and management consultant). My first inclination was to say "the corporation can claim the expense, but the empoyee (you) has to claim the membership as a taxable benefit". However, - from CRA's website:
The use of a recreational facility or club is a taxable benefit for an employee in any of the following situations:

•You pay, reimburse, or subsidize the cost of a membership at a recreational facility, such as an exercise room, swimming pool, or gymnasium.
•You pay, reimburse, or subsidize the cost of memberships to a business or professional club (that operates fitness, recreational, sports, or dining facilities for the use of their members but their main purpose is something other than recreation).
•You pay, reimburse, or subsidize the cost of membership dues in a recreational facility of the employee's choice, up to a set maximum. In this case it is the employee who has paid for the membership, owns it, and has signed some kind of contract with the company providing the facility.
•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.
•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.

However, the use of a recreational facility or club does not result in a taxable benefit for an employee in any of the following situations:

•You provide an in‑house recreational facility or pay an organization to provide recreational facilities and the facility or membership is available to all your employees. This applies whether you provide the facilities free of charge or for a minimal fee and the membership is principally for your advantage.
•You make an arrangement with a facility to pay a fee for the use of the facility, the membership is with you and not your employee and the facility or membership is available to all your employees. Membership will be considered to be made available to all employees as long as each employee can use the membership even if an employee chooses not to.
Taking a simplistic interpretation - if the membership is in the name of the corporation and all employees can use it (one employee counts as "all"), then the cost is an expense for the corporation but not a taxable benefit for the employee.

Re: Incorporated question - Can I use funds to pay for a gym membership?

Posted: Jan 22nd, 2013 3:57 pm
by flafson
Would it still count? Most references of corporations mean a company with more than 1 employee, being a contractor is a loop hole for the most part.

Re: Incorporated question - Can I use funds to pay for a gym membership?

Posted: Jan 22nd, 2013 5:20 pm
by Player95
Can't do that really, tax auditors hate that, so it's the nice way to put yourself out as a bad guy. Better pay more salary, and pay to gym on your own. This way your other expenses will be questioned a bit less. There is a section in the Income Tax Act, saying that since 1972 no sporting facility or golf club membership expenses are deductible, unless it is principal business activity.

Re: Incorporated question - Can I use funds to pay for a gym membership?

Posted: Jan 22nd, 2013 5:21 pm
by mastereh
So I did a bunch of reading and it seems that I can't put it through as an expense. I emailed my accountants office and he also confirmed that it can only be a personal expense. Ah well

Re: Incorporated question - Can I use funds to pay for a gym membership?

Posted: Jan 22nd, 2013 5:28 pm
by victorious_s
Hi mastereh,

The gym membership fees will be non-deductible to the corporation and will be a taxable benefit to the employee (unless offered to all employees as mentioned above) or a shareholder benefit to the shareholder. This is a personal expense.

Cheers,

Re: Incorporated question - Can I use funds to pay for a gym membership?

Posted: Jan 22nd, 2013 5:55 pm
by flashy_shortstop
If you are an employee of your corporation, why not give the membership to yourself and count it as a gift expense.

Employees may receive up to $500 of non-cash gifts in a year.

http://sbinfocanada.about.com/cs/taxinf ... egifts.htm

Re: Incorporated question - Can I use funds to pay for a gym membership?

Posted: Jan 23rd, 2013 9:07 am
by mastereh
flashy_shortstop wrote:
Jan 22nd, 2013 5:55 pm
If you are an employee of your corporation, why not give the membership to yourself and count it as a gift expense.

Employees may receive up to $500 of non-cash gifts in a year.

http://sbinfocanada.about.com/cs/taxinf ... egifts.htm
Thanks for that! That works perfectly.

Re: Incorporated question - Can I use funds to pay for a gym membership?

Posted: Jan 23rd, 2013 11:44 am
by Homerhomer
mastereh wrote:
Jan 23rd, 2013 9:07 am
Thanks for that! That works perfectly.
No, it doesn't ;-)

"The gifts and awards policy also does not apply to gifts or awards given to non-arm's length employees, such as your relatives, shareholders, or people related to them."

Click on the rules for gifts in the link above ;-)

When audited, the expenses that are most looked at are golf/gym memberships, meals and auto.
Is $75 tax savings worth it?