There are two potential issues with club dues paid by a corporate entity for an employee. First, club dues are not deductible for tax purposes. Having a corporation rather than an individual pay for those dues however results in a lower after tax cost of those same dues due to the lower rate of tax inside a corporation. The second issue is whether or not a benefit should be taxed in the hands of the individual. If it is determined that the corporation benefits from having an employee as a club member with client entertaining resulting in increased sales, there will be no benefit to the employee. If it is determined that the club membership is simply a perk, the value of the membership will be a taxable benefit. Canada Revenue Agency produces an Interpretation bulletin on this subject.
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