13 February 2001 External T.I. 2000-0053735 - CAPITAL COST ALLOWANCE-VEHICLES

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Inclusion of federal and provincial sales taxes in the cost of passenger vehicles for capital cost allowances. In the case of the PST where the province levies the tax on a graduated basis from 7% on vehicles costing under $32,000 to 10% on vehicle costing more than $34,000, would such tax be calculated at 7% or 10% if the passenger vehicle was acquired for $50,000.

Position:

PST component of the cost for CCA purposes would be based on 7% of $27,000.

Reasons:

Limitation prescribed by paragraph 7307(1)(b) of the Regulations.

XXXXXXXXXX 	F.B. Fontaine, FCCA
		2000-005373
February 13, 2001

Dear XXXXXXXXXX:

Re: Cost of Passenger Vehicles

This is in reply to your letter dated October 13, 2000 in respect of the above-noted subject.

You indicate that the province of British Columbia levies provincial sales tax ("PST") on a graduated basis starting at 7% on vehicles costing less than $32,000 and up to 10% on vehicles costing more than $34,000.

You wish to know whether the PST to be added, for capital cost allowance purposes ("CCA"), pursuant to paragraph 7307(1)(b) of the Income Tax Regulations (the "Regulations") would be calculated at 7% or 10%, if the actual cost of a passenger vehicle acquired by a taxpayer was $50,000.

We agree with your interpretation that:

"paragraph 7307(1)(b) of the Regulations restricts the cost on which CCA may be claimed on passenger vehicles to the prescribed amount of ($27,000 in 2000), plus the federal and provincial sales tax that would have been payable......on the acquisition of the automobile if it had been acquired at a cost equal to ($27,000) before the application of the federal and provincial sales taxes."

Based on paragraph 7307(1)(b) of the Regulations, it is our opinion that in the particular scenario described, the applicable PST to be added in determining the cost for CCA purposes would be $1890.00, i.e. 7% of $27,000.

We trust this will be helpful to you. As stated in paragraph 22 of Information Circular 70-6R4, written opinions are not advance income tax rulings and, accordingly, are not binding on the Canada Customs and Revenue Agency.

Yours truly,

for Director
Business and Partnership Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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