15 January 2001 External T.I. 2000-0061125 - COMBINED PER DIEM&KM MV ALLOWANCE

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:

Taxation of motor vehicle allowance based partly on kilometers, and partly on a daily rate

Position:

Included in income

Reasons:

Consistent with earlier opinions

XXXXXXXXXX 	2000-006112
		Wayne Antle, CGA
January 15, 2001

Dear XXXXXXXXXX:

Re: Taxation of Automobile Allowances

This is in response to your letter dated December 8, 2000 concerning whether a motor vehicle allowance paid to you by your employer, that is calculated partially on a per kilometre basis, and partially on a per diem basis, can be included in your income.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments.

Subparagraphs 6(1)(b)(v), (vi) and (vii.1) of the Act provide that reasonable allowances for the use of a motor vehicle received by an employee from the employer for travelling in the performance of the duties of the office or employment are not taxable. However, subparagraph 6(1)(b)(x) of the Act provides that, for purposes of these subparagraphs, an allowance received in a taxation year by a taxpayer for the use of a motor vehicle in connection with or in the course of the taxpayer's office or employment is deemed not to be a reasonable allowance if the measurement of the use of the vehicle for the purpose of the allowance is not based solely on the number of kilometres for which the vehicle is used in connection with or in the course of the office or employment.

It is our view that, since the allowance you received for the use of your private vehicle is composed of a daily rate and a cents per kilometre rate, the allowance would not be considered reasonable by virtue of subparagraph 6(1)(b)(x) of the Act, because it is not based solely on the number of kilometres driven. Accordingly, in our opinion, the total combined allowance would be taxable. You may be entitled to deduct reasonable motor vehicle expenses incurred in the performance of your employment duties if you meet certain requirements. Please refer to chapters 6 and 7 of the 1999 Employment Expenses Guide for details of the expenses that may be claimed, and the conditions that must be met. This guide is available at your local tax services office, or on our website at www.ccra-adrc.gc.ca.

Please note that a Notice to Employers was recently issued which modified the position previously stated in the Employer's Guide for Taxable Benefits to bring the procedures in line with our position outlined above. We have enclosed a copy of this notice for your reference.

If you need assistance in how to report the allowance, or prepare your tax return, please call the Winnipeg Tax Services Office at 1-800-959-8281, or visit the office at 325 Broadway.

We trust that our comments will be of assistance.

Yours truly

John Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch