obligation to make the contributions arose." Furthermore, as per IT 85R2, paragraph 9c) ... "Benefits provided to an employee under a private health services plan are also not subject to tax. Therefore employer contributions to the HWT are considered non-taxable benefits to the employees." The basic rules above will apply to individuals providing services as an employee to an employer whether the employer is a corporation, an individual or a partnership. The level of coverage must be reasonable relative to the services provided. In summary, in the case of an HWT: 1 - Reasonable contributions into the HWT are tax deductible by the corporation 2 - The net amount contributed can be spent by the employees and their dependants for medical expenses on a tax free basis Participation Rules A corporation may provide benefits under an HWT to an individual who is both an employee and a shareholder of the corporation. These benefits may be received for income tax purposes by the individual in his or her capacity as an employee or as a shareholder. The tax consequences will be different from the basic rules described above if corporate employer paid benefits are received by an individual in his or her capacity as the shareholder. A taxable shareholder benefit would arise to that individual. The contributions will not be deductible to the corporation. It is a question of fact as to whether these benefits are received for income tax purposes by the individual in his or her capacity as an employee or as a shareholder. The Canada Revenue Agency (CRA) starts with the presumption that the benefit is received in the individual's capacity as a shareholder. It is required by the corporate employer and the employee/shareholder to demonstrate that the HWT benefits are being provided to the individual in his or her capacity as an employee and that the expenses are reasonable in the circumstances. If non-shareholder employees are excluded from coverage, there is a significant risk that the benefits provided to the employee/shareholder will be regarded as being received by him or her by virtue of his/her shareholdings. If, however, the employee/shareholders are of a different class of employees (e.g. executives) from the rest of the employees, it might be possible to justify excluding the non-shareholder employees or providing a lower level of benefits to them. Only one employee is required. As per Canada Revenue Agency (CRA) guidelines (specifically