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: Does the cost of luxury automobiles have to be included in the calculation pursuant to paragraph 6(2.1)(e) for the purposes of calculating a standby charge for an employee employed principally in selling or leasing automobiles?
Position: Yes.
Reasons: The wording in the Act requires all new automobiles acquired in the year to be included in the calculation pursuant to paragraph 6(2.1)(e).
XXXXXXXXXX 2006-017711
Luisa A. Carpino, CA
(613) 832-3488
July 17, 2006
Dear XXXXXXXXXX:
Re: Auto Standby Benefit Calculation
This is in reply to your letter dated March 14, 2006, requesting clarification of the calculation of the reasonable standby charge for an employee's use of an employer-owned vehicle where the employee is employed principally in selling or leasing automobiles. We apologize for the delay in responding.
You indicated that the employees in question are not allowed to use luxury vehicles owned by the employer. Therefore, the employer wishes to exclude the cost of these vehicles for the purpose of calculating standby charges for the employees.
Subsection 6(2) of the Income Tax Act (the "Act") provides the calculation of a reasonable standby charge required to be included in the income of an employee under paragraph 6(1)(e) as a taxable benefit for the use of an employer-owned automobile. In situations where the employer makes more than one automobile available to an employee, the employer would have to calculate a separate standby charge for each automobile based on the cost of each automobile and the number of days each automobile was made available during the year. However, where an employee is employed principally in selling or leasing automobiles, the employer has the option to calculate one standby charge using subsection 6(2.1) of the Act based on the average cost of all new automobiles acquired by the employer in the year, whether or not used by the employees. This means that, should the employer choose the option under subsection 6(2.1) of the Act, the employer would have to also include the cost of luxury vehicles acquired in the year regardless of whether these types of vehicles are used.
We trust this information is helpful.
Yours truly,
Randy Hewlett
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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