Paying your dues

Many professionals and business people belong to recreational or dining clubs (e.g., golf or tennis clubs). However, you should be aware that annual dues payable to such facilities are not deductible expenses, even if there’s an argument that the expense has been incurred for business purposes. There are also rules that specifically deny the employer a deduction for the use of such facilities. The CRA’s position with respect to expenses incurred at a lodge, golf course or similar facility is as follows: If such property is used for business purposes, and those purposes do not include the entertainment or recreation of clients, suppliers, shareholders or employees, it will allow a deduction for the related expenses. For instance, if you hold a business meeting at a golf club and it doesn’t involve playing golf or use of the other recreational facilities, any reasonable expenses related to that meeting will be deductible.

As for meals and beverages consumed at such facilities, deductibility restrictions are the same as for those consumed at other establishments (see topic 11). You must ensure that the costs are clearly itemized and, of course, incurred for the purpose of earning income. If your records show an all-inclusive charge that doesn’t itemize specific costs, the deduction won’t be allowed.

If you pay annual membership dues for an employee, the dues will not be regarded as a taxable benefit to the employee if it can be demonstrated that it’s to your advantage for your employee to belong to the club. Similarly, amounts you pay for your employees’ use of the facilities for promotional purposes would not be regarded as a taxable benefit.

Tax tip: Based on the facts, it should be considered whether a club membership is principally for the benefit of the employee or the employer. Regardless of whether the employee has to report a taxable benefit, the employer is not able to claim a deduction for the amount paid.