Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Request to increase the maximum per-kilometre rate at which employers can pay employees a non-taxable motor vehicle allowance to reflect the current cost of gasoline.
Position: A request to increase the rate for the motor vehicle allowance would have to be considered by Finance, whose officials are aware of the views expressed on this matter by the correspondent.
Reasons: The CRA is responsible for administering the legislation as enacted by Parliament. Changes to the Act and Regulations are a matter of tax policy, which is the responsibility of Finance.
ITA REFERENCE: 6(1)(b)
HAA: 4903-1
SECURITY: For distribution
June 30, 2004
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Stan Keyes, Minister of National Revenue, has asked me to reply to your letter of June 4, 2004, requesting that the Canada Revenue Agency (CRA) increase the maximum per-kilometre rate at which employers can pay employees a non-taxable motor vehicle allowance to reflect the current cost of gasoline.
A motor vehicle allowance that is based solely on the number of kilometres a vehicle is driven will generally not result in a taxable benefit for an employee under the Income Tax Act if the allowance is designed to cover the employee's out-of-pocket cost in using the vehicle when performing his or her duties. For this purpose, the CRA will accept the same rate prescribed in section 7306 of the Income Tax Regulations.
The prescribed rate takes into consideration the costs of owning and operating a motor vehicle, such as depreciation, financing, insurance, maintenance and fuel costs. The rate is reviewed annually by the Department of Finance. On December 23, 2003, the Honourable Ralph E. Goodale, Minister of Finance, announced that for 2004 the rate for most areas in Canada would remain at 42 cents per kilometre for the first 5,000 kilometres driven.
The CRA is responsible for administering the legislation as enacted by Parliament. Changes to the Act and Regulations are a matter of tax policy, which is the responsibility of the Department of Finance. Therefore, your request to increase the rate for the motor vehicle allowance would have to be considered by that department. I assure you that Finance officials are aware of the views expressed on this matter.
Thank you for having taken the time to write and bring your concerns to the CRA's attention.
Yours sincerely,
Stephen Rigby
Assistant Commissioner
Policy and Planning Branch
Randy Hewlett
(613) 957-8973
2004-008092
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