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:
(a) Is an allowance for the use of a motor vehicle in connection with the duties of an office or employment, based on a per-kilometer amount, a taxable benefit when it is adjusted to a minimum amount per round trip?
(b) Is an allowance for the use of a motor vehicle in connection with the duties of an office or employment, based on a per-kilometer amount, a taxable benefit when in the previous month an employee may have received a fixed amount plus a per-kilometer amount allowance?
(c) Is an allowance based on a per-kilometer amount for the use of a motor vehicle in connection with the duties of an office or employment, for travel outside the employment district, a taxable benefit when a fixed amount allowance is received per month for travel inside the employment district?
Position:
(a) Not if the amount is a reimbursement of actual expenses incurred.
(b) Not if the requirements of paragraph 6(1)(b) of the Act are otherwise met.
(c) The per-kilometer amount for travel outside of employment district is not taxable if the requirements of paragraph 6(1)(b) of the Act are otherwise met. The fixed rate amount for travel within the employment district is a taxable benefit by virtue of paragraph 6(1)(b)(x) of the Act.
Reasons:
(a) Paragraph 51, IT-522R.
(b) The amounts are separate allowances; the tax implications would be determined independently.
(c) The amounts are separate allowances; the tax implications would be determined independently.
XXXXXXXXXX 2001-008249
Randy Hewlett, B.Comm.
July 11, 2001
Dear XXXXXXXXXX:
Re: Travel Allowances
We are writing in response to your letter dated April 12, 2001, wherein you requested our opinion on whether certain motor vehicle allowances paid to employees from their employer would be considered a taxable benefit. In your letter you address three issues related to allowances for the use of a motor vehicle received by an employee:
(a) Is an allowance for the use of a motor vehicle in connection with the duties of an office or employment a taxable benefit where the calculation is based upon $0.30 per-kilometer, with a minimum of $3.50 per round trip?
(b) Is an allowance for the use of a motor vehicle in connection with the duties of an office or employment a taxable benefit where the calculation is based upon $0.32 per-kilometer in one month, and in another month, that employee received a fixed amount of $9.00 plus $0.32 per-kilometer?
(c) Is an allowance for the use of a motor vehicle in connection with the duties of an office or employment based upon a calculation of $0.32 per-kilometer, for travel outside the employment district, a taxable benefit when a fixed amount of $500 per month is received for travel inside the employment district?
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 Income Tax Act (the Act) provide that reasonable allowances received by an employee from the employer for the use of a motor vehicle in the performance of the duties of the office or employment are not included in income. Subparagraph 6(1)(b)(x) of the Act deems the allowance not to be reasonable if the measurement of the use of the vehicle 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.
In addition to the requirements of subparagraph 6(1)(b)(x) of the Act, an allowance will be considered unreasonable if after reviewing all of the facts it is determined that the allowance is not based upon actual business-related expenses of the employee. Paragraph 41 of IT-522R, Vehicle, Travel and Sales Expenses of Employees, dated March 29, 1996, describes our position on what may constitute an unreasonable allowance.
We offer the following comments on each of the situations you describe in your letter.
(a) Minimum Allowances
Where a minimum amount is paid for a round trip that is not based solely on kilometers used, it would have to be determined whether this amount (even when it is a nominal amount) is paid to employees to compensate them for the actual expenses incurred in using their motor vehicle in connection with the duties of the office or employment for any given day. If this is the case, there is no income tax consequence to an employee.
(b) Per-Kilometer Allowance Plus a Fixed Amount
A reasonable allowance received for the use of a motor vehicle in connection with the duties of an office or employment that is based solely on a per-kilometer calculation, is not included in income even if the employee received an allowance for a previous trip based upon some other method of calculation. The amount received for each trip is considered separately.
An allowance, which combines a fixed rate allowance with a per-kilometer amount, is not excluded from income because of the requirements of subparagraph 6(1)(b)(x) of the Act.
(c) Per-Kilometer Allowance For Trips Outside The Employment District
Where an employee receives a fixed rate allowance for trips inside the employment district and a per-kilometer allowance for trips outside the employment district, each allowance is considered separately. As a result, if the per-kilometer allowance for travel outside the employment district meets the requirements of subparagraphs 6(1)(b)(v), (vi) and (vii.1) of the Act, it would not be included in income. Further, the fixed rate allowance for travel within the employment district is taxable since it is not based solely on the number of kilometers for which the vehicle is used in connection with or in the course of the office or employment.
If you have any further questions on your particular situation, please contact the Client Services Division of your local Tax Services Office.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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