22 May 1990 Ruling 59683 F - Leasing of Passenger Vehicles

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.

May 22, 1990

Dear Sirs:

This is in reply to your letter of February 19, 1990 concerning the leasing of passenger vehicles.  We apologize for the delay in replying.

You have asked us to comment on the following situations:

1)     A company leases a vehicle for an employee.  The vehicle has a manufacturer's list price (MLP) which when added to the provincial sales tax (PST) exceeds the prescribed amount in "C" of paragraph 67.3(d).  Consequently, this paragraph would normally reduce the amount of lease payments that may be deducted by the company.  However, the employee pays a non refundable amount to the leasing agency to reduce the monthly lease payments to the prescribed amount.

     Would the lease cost limitation still apply to reduce the deductible amount based on paragraph 67.3(d)?

2)     A company requires that the MLP of leased vehicles be within the limits set by section 67.3.  However, employees are allowed to add options to the leased vehicles at their cost. 

     Would the lease limitations be calculated using the employer's MLP plus the value of the options added to the car by the leasing agent at the request of the employee? (We assume that these options are the property of the leasing company.)

3)     A company leases a vehicle that is three years old and has a value substantially lower than its MLP.

     Would the calculation in paragraph 67.3(d) be based on the original MLP?

The answer to all three questions is yes.

Paragraph 67.3(d) refers to "manufacturer's list price" not to the cost or fair market value.  The MLP is established on the basis of a new car and takes into consideration the cost of the optional features added to the car assuming they are owned by the leasing agency.  The Act does not provide any discounting of MLP based on the age of the car at the time it is leased.  In other words the MLP is not reduces by employee deposits or the age of the vehicle and options owned by the leasing agency are included in the MLP even when paid for by the employee.

We hope these comments are of assistance.

Yours sincerely,

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch