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: 1. What is the appropriate tax treatment of a rebate received under the federal government's ecoAuto Rebate Program in respect of vehicles purchased under the program ? 2. Whether Transport Canada is obligated to provide tax receipts to recipients of the ecoAUTO rebate?
Position: 1. Capital cost of vehicles used to earn income from business, property, office or employment will be reduced by the amount of the rebate received. No tax consequences on vehicles used for personal use. 2. Transport Canada not required to provide tax receipts.
Reasons: Subsection 13(7.1) is applicable with respect to capital cost reduction. No withholding under s.153(1) and no requirement under Regulation 200 for Transport Canada to provide tax receipts to recipients of the rebate.
January 18, 2008
Ms. Sally Wilson Sebastian Bernards
Senior Programs Officer (613) 957-2139
Individual Programs/
Online Services Section
2007-026144
Technical Interpretation - ecoAuto Rebate
This is in response to your e-mail submission of October 19, 2007 and telephone conversation (Wilson/Bernards) on January 7, 2008 in which you requested our comments as to the appropriate tax treatment of rebates received under the ecoAuto Rebate program by purchasers of fuel-efficient vehicles and whether Transport Canada was obliged to provide tax receipts to recipients of the rebate.
Our understanding of the facts is as follows:
1. As part of the Government of Canada's plan to protect the environment, the ecoAUTO Rebate Program encourages Canadians to buy fuel-efficient vehicles by offering rebates from $1000 to $2000, to people who, beginning March 20, 2007, bought or entered into a long-term lease (12 months or more) for a fuel-efficient vehicle.
2. Any person, organization, provincial, territorial or municipal government can apply for the rebate as long as the purchase or lease (long term lease of 12 months or more) is for a new eligible vehicle that has never been registered for use in Canada and meets the program's fuel consumption criteria.
3. Imported vehicles are not eligible for the ecoAUTO Rebate Program. Only vehicles that have been purchased or leased (12 months or more) in Canada on or after March 20th, 2007 are eligible for the rebate.
4. Transport Canada is administering the program and the information currently provided on its website informs applicants that Transport Canada will not be issuing year-end statements to rebate recipients.
As reflected in paragraph 4 of the IT-273R2 entitled 'Government Assistance - General Comments', "when a taxpayer receives or is entitled to receive government assistance in respect of depreciable property, the manner in which the reduction to the capital cost of the depreciable property is applied depends on whether the entitlement arises or the amount is received before the disposition or after the disposition of the property for which the assistance is provided. When a taxpayer is entitled to receive assistance for a depreciable property before the property is disposed of, subsection 13(7.1) applies to reduce the capital cost of the property by the amount of the assistance. When a taxpayer is not entitled to receive and does not receive the assistance until after the depreciable property has been disposed of, it is the undepreciated capital cost (UCC) of the prescribed class of property in which the property was previously included that is reduced by means of variable J of the formula in subsection 13(21) for calculating the UCC of a class at a particular time."
Paragraph 12(1)(x) of the Act generally requires the inclusion in the calculation of a taxpayer's income for the year of amounts received by the taxpayer in the year as assistance in respect of the cost of a property, unless an exception in subparagraph 12(1)(x)(v) to (viii) applies to the amount. The reduction to the capital cost of purchased vehicle pursuant to subsection 13(7.1), as described above, would, in our view, exclude the amount of assistance from the application of paragraph 12(1)(x) of the Act, by virtue of subparagraph (vi) therein.
Clause 8(1)(j)(ii)(A) of the Act provides for the deduction of CCA, in certain circumstances, on motor vehicles that are used by a taxpayer to earn income from an office or employment. The rules that apply for purposes of calculating CCA on a property that is used to earn income from a business or property, which are enumerated in section 13 of the Act and Part XI of the Income Tax Regulations, also apply for purposes of calculating CCA on a property that is used to earn income from an office or employment.
Accordingly, in our view, assuming that vehicles used for the purpose of earning income from business, property, office or employment were not disposed of before the rebates were received, capital cost of such vehicles will be reduced by the amount of the rebate pursuant to subsection 13(7.1) of the Act.
In our view, there will be no tax implications on rebates received on purchases for vehicles used for personal use.
Paragraphs 153(1)(a) to (t) require withholding of tax from certain payments. As the ecoAuto rebate program is not listed as one of the categories in paragraphs 153(1)(a) to (t), there is no requirement on Transport Canada to withhold. Further, in our view, there is no requirement under section 200 of the Income Tax Regulations for Transport Canada to provide receipts to rebate recipients.
R. Albert, CA
For Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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