2 June 1994 External T.I. 9404075 - STANDY CHARGES - EXCISE TAX ACT

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

whether GST should be charged on pre 1991 car lease and whether actual lease payment amount should be used in calculation of standby charge

Position TAKEN:

Where property (lease auto in this case) is a property to which section 173 of the Excise Tax Act applies, 6(1)(e.1) applies to include 7% benefit in employee's income. As s. 173 of ETA applies, 6(1)(e.1) benefit is calculated. Actual lease payment is used in calculation of standby charge.

Reasons FOR POSITION TAKEN:

Per ITA and IT63R4 as recently amended

		940407
XXXXXXXXXX	Sandra Short

Attention: XXXXXXXXXX

June 2, 1994

Dear Sirs:

Re: Employee Benefits from Employer Provided Automobile

This is in reply to your letter of February 14, 1994 wherein you have requested a ruling relating to the calculation of employee benefits resulting from employer provided (leased) automobiles to employees. Advance Income Tax Rulings are only given in respect of proposed transactions and where the request conforms with the requirements of Information Circular 70-6R2 and the Special Release attached thereto dated September 30, 1992. We have enclosed a copy of each for your information. We can, however, provide you with comments which should answer your general enquiries.

You have asked whether a GST benefit should be assessed when an employee is provided with a leased vehicle and where the lease is a pre 1991 lease and does not have GST charged on it. You have also asked whether, in calculating a user fee to employees, you should use the actual lease cost amount or the $650 monthly maximum amount allowed to the employer as a deduction.

In the comments that follow, unless otherwise stated, all statute references are to the Income Tax Act S.C. 1970-71-72, c.63 as amended, consolidated to June 10, 1993 (the "Act").

Paragraph 6(1)(e.1) of the Act provides for the inclusion in an employee's income of an amount equal to 7% of that portion of the total 6(1)(a) or (e) benefit reported that is in respect of GST taxable supplies, to which section 173 of the Excise Tax Act (ETA) applies. Where the leased automobile is a property to which section 173 of the ETA applies, a benefit under paragraph 6(1)(e.1) should be assessed. Section 173 of the ETA appears applicable to this situation. You may wish to review paragraph 1 of Interpretation Bulletin IT-63R4 dated March 31, 1994, which we have also enclosed.

Employees should be assessed automobile standby charges based upon actual lease payments made by the employer notwithstanding that the amount deductible by the employer may be limited under section 67.3 of the Act to a monthly maximum of $650. This position is reflected in Interpretation Bulletin IT-63R4, paragraph 12.

We trust our comments will be of assistance to you.

Yours truly,

J.A. Szeszycki
for Director
Personal and General Section
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch