9 March 2020 External T.I. 2019-0812581E5 - Car share expenses

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: Whether car share expenses are deductible by a salaried employee in computing income from employment under section 8 of the Income Tax Act?

Position: Likely yes.

Reasons: See response.

XXXXXXXXXX					2019-081258
T. Baltkois
March 9, 2020

Dear XXXXXXXXXX:

Re: Car share expenses

We are writing in response to your correspondence of June 6, 2019, in which you requested clarification as to whether car share expenses are deductible by a salaried employee in computing income from employment under section 8 of the Income Tax Act (“Act”).

In the situation you have described, an individual who obtains membership with a car sharing company (“Member”) has the ability to arrange for the use of a motor vehicle in the company’s fleet. A Member may be charged a per-minute, hourly, or daily amount for the use of a motor vehicle (and a per-kilometre amount where usage of the motor vehicle exceeds a certain distance), along with a driver protection fee for a specified number of the Member’s trips during a calendar year. It is our understanding that the Member does not pay for gas, maintenance, repairs, insurance or registration of the motor vehicle.

Our comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R9, Advance Income Tax Rulings and Technical Interpretations.

Generally, when an employee incurs expenses in the course of performing the duties of an office or employment, a deduction is available for certain expenses, provided that the particular expense is specifically identified in section 8 of the Act, and all conditions in that section have otherwise been met. Paragraph 8(1)(h.1) of the Act provides a deduction for amounts expended in the year in respect of motor vehicle expenses incurred in the performance of employment duties where an employee:

• is ordinarily required to carry on the duties of employment away from the employer’s place of business or in different places;
• is required by contract of employment to pay for motor vehicle expenses; and
• is not in receipt of a non-taxable allowance for motor vehicle expenses or has not claimed a deduction for the year under paragraph 8(1)(f) of the Act.

Where all of the above conditions in paragraph 8(1)(h.1) of the Act have been met, subsection 8(10) of the Act further provides that an amount otherwise deductible under these provisions shall not be deducted unless a prescribed form (i.e., Form T2200, Declaration of Conditions of Employment) is signed by the taxpayer’s employer certifying that the conditions set out in paragraph 8(1)(h.1) of the Act were met in the year.

While paragraph 8(1)(h.1) of the Act does not outline the specific motor vehicle expenses that may be deducted thereunder, Guide T4044, Employment Expenses 2018, describes the types of expenses that may generally be deducted by an employee earning a salary, and clarifies that motor vehicle expenses include fuel, maintenance and repairs, insurance, licence and registration fees, and eligible leasing costs.

Notwithstanding that a Member does not incur the cost of specific motor vehicle expenses (i.e., fuel, maintenance and repairs, insurance, etc.), it is our view that the fixed amount (per-minute, per-hour, per-kilometre or daily) paid by a Member is an amount expended in respect of motor vehicle expenses.

Therefore, where all of the conditions in paragraph 8(1)(h.1) of the Act are met and a Member has obtained a signed Form T2200 from his or her employer, the Member would be permitted to deduct the fixed amount paid to a car sharing company under paragraph 8(1)(h.1) of the Act, provided that the amount paid:

• does not provide a Member with other benefits or advantages that are unrelated to the use or operation of the shared automobile;
• is reasonable in the circumstances; and
• is supported by receipts.

We trust these comments will be helpful.

Yours truly,

Sandro D’Angelo, CPA, CMA
Acting Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch