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: Various questions concerning employment benefits which may arise in connection with an employer-provided electric vehicle.
Position: See responses.
Reasons: See responses.
2017 CPA Alberta Roundtable
Question 17 - Electric Vehicles
The automobile benefit provisions have been unchanged for many years, but technology continues to evolve. Consider an employee who has been provided with an electric car by an employer for use in performing his or her employment duties. A charging station for this car is installed in the employee’s residence. How would the cost of the charging station be addressed in the context of taxable automobile benefits?
(a) Would the cost of the charging station be considered part of the cost of the vehicle (ie a capital component) or part of the operating costs of the electric vehicle (and thus subsumed in the operating expense benefit)? We note that charging stations are separate assets, in a different class, for CCA purposes.
(b) Would the CRA consider the installation of the charging station a benefit outside the automobile benefit provisions?
(c) Would the CRAs response change if the employee does not act at arm’s length to the corporation (for example, is a significant shareholder) beyond the general issue of determining whether a benefit is received in the capacity of employee or shareholder?
(d) As the charging station draws on the employee’s electricity, it appears the employee is reimbursing the employer for a portion of the operating costs, which should reduce the taxable benefit, be a deductible operating expense or be possible for the employer to reimburse. Technical Interpretation 2016-0652861C6 (French) indicated CRA had not formed a specific policy at October 7, 2016. Has the CRA reviewed the appropriate manner for calculating this expense, or do they intend to do so?
a) As noted, an electric charging station is a separate capital asset and would not form part of the cost of the electric vehicle. The 2016 federal budget proposed to include electric vehicle charging stations that supply a specified amount of continuous power in class 43.1 or 43.2. Absent the enactment of these proposed amendments, an electric vehicle charging station (including its purchase and installation cost) would be included in class 8 for CCA purposes.
b) The installation of an electric vehicle charging station at an employee’s residence may result in a benefit that is included in income under paragraph 6(1)(a) of the Income Tax Act (Act). Generally, the value of benefits of any kind received or enjoyed by a taxpayer in respect of employment are included in a taxpayer’s income from employment under paragraph 6(1)(a) of the Act, unless:
- the benefit is specifically excluded under the Act;
- the benefit does not confer an economic advantage on the employee;
- the benefit is not measureable in monetary terms; or
- the employer is determined to be the primary beneficiary of the benefit.
¶2.24 of Income Tax Folio S2-F3-C2, Benefits and Allowances Received from Employment, discusses the concept of primary beneficiary, and states that
“although no single factor may be conclusive, a positive answer to one or more of the following questions may suggest that the employer is the primary beneficiary of a benefit:
- Does the employer have a business purpose for providing the benefit?
- Is the benefit required for the employee to perform the employment duties more effectively?
- Is the benefit required to fulfill a condition of employment?
- Does the employer have a moral or contractual obligation to provide the benefit to ensure that employees are not unduly subject to harm from performing the employment duties?”
Where an employer provides an employee with an electric vehicle for use in performing employment duties and installs a charging station at the home of that employee, it is our view that in many cases the employer would likely be the primary beneficiary, provided that ownership of the charging station is not transferred to the employee, and that its cost (including installation) is reasonable in the circumstances.
However, this would not be the case if the charging station is owned by the employee. As discussed in ¶2.15 of Income Tax Folio S2-F3-C2, an employee receives an economic advantage when an employer pays for or reimburses the cost of an employee-owned asset, even if that asset is used for employment purposes. The value of the benefit included in the employee’s income under paragraph 6(1)(a) of the Act would be the fair market value of the asset (including any installation costs), less any amount paid by the employee.
c) The Canada Revenue Agency’s position concerning benefits received or enjoyed by employee-shareholders is discussed in ¶2.2 to 2.4 of Income Tax Folio, S2-F3-C2, Benefits and Allowances Received from Employment. In our view, there are no specific factors beyond those described in Income Tax Folio S2-F3-C2 that would be considered in situations involving electric vehicles.
Generally, if the employer installs a charging station at the home of an employee-shareholder, who received the benefit derived from the installation of the charging station in his or her capacity as a shareholder, the value of the benefit would be included in income under subsection 15(1) of the Act, regardless of whether the employer or shareholder owns the charging station.
d) Under the Canada Revenue Agency’s administrative policy regarding third-party reimbursements, the electricity costs that are paid by an employee to a third party and attributable to the personal use of an employer-provided electric automobile (i.e., charging) will reduce the operating expense benefit determined under paragraph 6(1)(k) of the Act where such costs can be established. Further, if an employer reimburses an employee for reasonable employment-related electricity costs paid by the employee, the reimbursement will not generally give rise to a taxable benefit.
Where an employer does not reimburse an employee for employment-related electricity costs paid by the employee and the employment-related electricity costs can be established, the costs may be deducted by the employee as motor vehicle travel expenses if all of the conditions in paragraph 8(1)(h.1) of the Act are met. These conditions are that the employee:
- was normally required to carry out his or her employment duties away from the employer’s place of business (or in different places);
- was required by the contract of employment to pay such expenses; and
- did not receive a non-taxable allowance or reimbursement in respect of the motor vehicle expenses.
Where the employee meets the conditions of paragraph 8(1)(h.1) of the Act, subsection 8(10) of the Act requires the employee to obtain a completed and signed Form T2200, Declaration of Conditions of Employment, from their employer.
September 14, 2017
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