In order for the corporation to be eligible for the deduction, it must be transparent (corporation must be ready to prove) that the primary beneficiary of the sports and recreation club was the corporation. This in turn, will ensure that there will be no shareholder or employee taxable benefit.
If, there is an inquiry or audit made by the CRA, and the corporation is unable to prove that it was the primary beneficiary of the membership, the tax deduction will be disallowed and this will become a taxable benefit.
Please keep in mind that if this is a golf/country club membership, it is prohibited. For example, let's say that this is a country club or simply a recreational facility with a golf course located on the premises. Even if you do not specifically pay for or partake in golf, the corporation's deduction will be denied.
