10 May 2005 External T.I. 2005-0125211E5 - Taxation of automobile benefit of status Indian

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.

Principal Issues: With respect to a status Indian employee whose employment income is tax-exempt, how should a benefit be taxed with respect to an employer-owned vehicle used for personal use by the employee, both on and off-reserve.

Position: To the extent that such a benefit would otherwise be included in income under paragraph 6(1)(e) and 6(1)(k), the amount is taxed in the same manner as the individual's employment income.

Reasons: Consistent with the Indian Act Exemption for Employment Income Guidelines

2005-012521
XXXXXXXXXX Kimberly Duval
(613) 957-2747
May 10, 2005

Dear XXXXXXXXXX:

Re: Taxation of Automobile Benefit of a Status Indian Employee

This is in response to your letter of April 10, 2005 inquiring as to whether a taxable benefit relating to the personal use of an employer-owned automobile would be subject to tax when paid to status Indian employees. You also ask if the fact that the automobile would be used for both on and off-reserve commuting would impact on whether the benefit would be subject to tax.

The situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. It is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advanced income tax ruling. For more information about how to obtain a ruling, please refer to Information Circular 70-6R5, "Advanced Income Tax Rulings, dated May 17, 2002. This Information Circular and other CRA publications can be accessed on the internet at http://www.cra-arc.gc.ca. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. A list of TSOs is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.

The CRA's general views regarding the taxation of employee benefits for the personal use of an employer provided motor vehicle is described in Interpretation Bulletin IT-63R5, "Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer - after 1992". Generally speaking, the value of the benefit derived by an employee from the personal use and availability of a motor vehicle supplied by an employer is required to be included in calculating an employee's income from employment pursuant to paragraphs 6(1)(e) and 6(1)(k) of the Income Tax Act (the "Act").

In the case of status Indian employees, employment income may be tax-exempt if it falls within one of the Indian Act Exemption for Employment Income Guidelines (the "Guidelines"). As noted in the Guidelines, for tax purposes, employment-related income is generally treated the same as the employment income to which it relates. As such, the benefit derived from the personal use of the employer-owned motor vehicle which would otherwise be brought into income pursuant to paragraph 6(1)(e) and 6(1)(k) of the Act would be treated in the same manner as the status Indian's employment income received during that period. For example, where a status Indian employee earns employment income which is considered tax-exempt under the Guidelines, an employment benefit relating to the personal use of the employer-owned automobile in that same period would also be tax-exempt. This would be true, regardless of whether the personal-use of the motor vehicle was performed on or off-reserve.

We trust that these comments will be of assistance.

Yours truly,

Roxane Brazeau-LeBlond, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Planning Branch