The guidance contained in this communique is applicable to taxable benefits arising from the personal use of aircraft for T1 individual taxation years commencing after 2017. Where the taxpayer concurs, and it is considered reasonable in the circumstances, CRA officials may utilize this guidance for taxation years prior to 2018.
Three main scenarios for computing value of benefit from personal aircraft use
In computing the value of the taxable benefit arising from the personal use of a corporation’s or employer’s aircraft by its shareholders and/or employees, there are three main scenarios to consider:
- Where the shareholder or employee takes a flight on the aircraft in circumstances where there is a business purpose for the flight and their presence on the flight, and there is a personal purpose for others taking the flight, the value of the taxable benefit for the personal use would be equal to the highest priced ticket available in the marketplace for an equivalent commercial flight.
- Where the shareholder or employee takes a flight on the aircraft in circumstances where there is no business purpose for the flight, the value of the taxable benefit would be equal to the price of the charter of an equivalent aircraft for an equivalent flight.
- Where the shareholder or employee uses the aircraft primarily for personal purposes relative to the aircraft’s total use during the calendar year (“primary purpose test”), either alone, or in combination with other persons not dealing at arm’s length, the value of the taxable benefit is equal to the personal use portion of the aircraft’s operating costs plus an imputed available-for-use amount.
Re Scenario 1 (inclusion of personal benefit)
Where the shareholder or employee is accompanied by a family member(s) or friend(s) on the flight, the CRA will generally take the position that the purpose of their taking the flight is personal. … The value of these taxable benefits will be included in the income of the shareholder or employee, unless the family member or friend is also a shareholder or employee, in which case [it] will be included in [their] income … .
Re Scenario 2 (sharing of charter price and exceptions)
If there is more than one shareholder and/or employee on the flight, then the charter price will be split amongst those shareholders and/or employees. …
In the case where:
- an employee takes a flight for personal purposes on an aircraft that is owned or leased by the employer
- the taxable benefit was conferred on account of employment and
- an open market charter is not a viable option based on the unique circumstances of the flight, for example there are demonstrable bona fide security concerns for the employee
the taxable benefit will be computed pursuant to scenario 1 for that particular flight.
Re Scenario 3 (computation of operating and available-for-use benefit)
Operating costs would include all variable and fixed costs incurred/accrued in operating the aircraft during the year. …
The available-for-use amount is equal to the original cost of the aircraft multiplied by an imputed monthly interest rate. … [T]he prescribed interest rates contained in [Reg.] 4301(a) … may be used to approximate an imputed equity rate of return for the calculation. To the extent the aircraft is leased and not capitalized for tax purposes, the available-for-use benefit will be based on the monthly leasing costs incurred/accrued (rather than the original cost multiplied by an imputed interest rate).
The operating benefit and the available-for-use amount are then computed by multiplying the respective costs by the personal use portion relative to the total use portion based on the aircraft log book and other relevant records that outline the flights taken, flying hours, and passengers on the flights. Generally, the relative percentage, and the taxable benefit, will be based on the flying hours attributable to the particular shareholder or employee (and those personal use flying hours attributable to persons not dealing at arm’s length that are not shareholders nor employees).