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:
What is the amount of provincial sales tax that can be included in the capital cost of a passenger vehicle, where a trade-in is involved and the cost of the vehicle before taxes exceeds $24,000?
Position TAKEN:
The provincial sales tax that would have been payable on $24,000 minus the value of the trade-in.
Reasons FOR POSITION TAKEN:
Regulation 7307(1) only provides a deemed cost for the calculation of the provincial sales tax.
5-941340
XXXXXXXXXX L. Roy
Attention: XXXXXXXXXX
July 22, 1994
Dear Sir:
Subject: Regulation 7307
This is in reply to your letter of May 24, 1994 wherein you requested that we clarify the amount of provincial sales tax that can be included in the capital cost of an automobile where a trade-in is involved and the cost of the automobile before taxes exceeds $24,000.
Section 7307 of the Income Tax Regulations sets out limits for automobiles acquired after 1990. More specifically, subparagraph 7307(1)(b)(ii) provides that in addition to the $24,000 limit, the applicable goods and services tax and the provincial sales tax that would have been paid if the automobile had been acquired at a pre-tax cost of $24,000 is included in the capital cost of the automobile.
Where a provincial sales tax act provides that the sales tax is calculated on the difference between the value of the property sold and the credit allowed for the property accepted as trade-in, it is our view that the provincial sales tax that can be included in the capital cost under subparagraph 7307(1)(b)(ii) of the Regulation is the tax that would have been payable under the circumstances (that is with the trade-in) pursuant to the dispositions of the provincial act if the acquisition cost (before taxes) of the automobile had been $24,000. Therefore, the capital cost in your example would be $26,800 (24,000 + ((24,000 - 10,000) x 8%) + 1,680) since no goods and services tax input tax credit is available.
We trust the above comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch
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