18 September 2001 External T.I. 2001-0086715 - MOTOR VEHICLE 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:

Are minimum amounts that are paid to employees, for the use of a motor vehicle in connection with the duties of an office or employment, taxable benefits where the amount is not based solely upon a per-kilometer calculation?

Position:

Not if the amount is a reimbursement of actual expenses incurred.

Reasons:

Paragraph 51, IT-522R.

XXXXXXXXXX 2001-008671

Randy Hewlett, B. Comm.

September 18, 2001

Dear XXXXXXXXXX:

Re: Motor Vehicle Allowances For Employees

We are writing in response to your letter dated May 23, 2001, wherein you requested our opinion on whether an allowance for the use of a motor vehicle in connection with the duties of an office or employment is a taxable benefit to an employee when it is based upon twenty-seven cents per-kilometre, with a minimum of three dollars per round trip.

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 submitted in the manner set out in Information Circular IC 70-6R4, Advanced Income Tax Rulings, dated January 29, 2001. 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.

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. In such a case, there is no income tax consequence for that allowance to the employee.

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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