27 September 1991 Ministerial Letter 911738 F - Company Leased Vehicles and Taxable Benefits

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.

Dear Madam:

Re: Company Leased Vehicles and Taxable Benefits

This is in reply to your letter of May 21, 1991 in which you requested a ruling concerning the determination of vehicle benefits to employees.  We apologize for the delay in replying.  We also wish to acknowledge our telephone conversation on September 9, 1991 (Eisner 19(1) in which we clarified the circumstances of your case, as set out below.

24(1)

In the latter case, the employees are not considered entitled to claim "office in home" expenses as referred to in paragraphs 2 and 3 of the enclosed Interpretation Bulletin IT-352R "Employees Expenses Incurred in Performing Duties of Office or Employment" as, the employer considers that in view of the limited use of the residence required in connection with a technician's  employment duties, the technician is not required to maintain an office in the home

24(1)

Accordingly, you have asked us to clarify the Department's position on the following points setting out the relevant provisions of the Income Tax Act

1.        If the employee lives and works in an area where the company does not have a business establishment, but does drive to and from locations where he services customers, does he receive a taxable benefit?

2.        If the employee lives and works in an area where the employer does not have a business establishment, is the distance driven between the employee's residence and the location of the first customer and the distance driven from the location of the last customer back to his residence considered to be personal use?

3.        Where an employee drives a company vehicle to and from work and the vehicle has the company logo on it, does the employee receive a taxable benefit?

4.        Whether or not a vehicle is used for personal use, is it illegal to require an employee to reimburse the company an amount of money each month for the privilege of the use of a company vehicle?.

Where an employer provides an employee with a vehicle, the employee is considered to be in receipt of a taxable benefit to the extent that the vehicle is used for, in the case of an automobile, is available for use for personal travel.  The first step in determining the amount of a taxable benefit received by the employee is to determine whether the vehicle being provided is an "automobile" as defined in subsection 248(1) of the Income Tax Act (the "Act").  For comments on this definition, you may refer to paragraphs 2 and 3 of the enclosed Interpretation Bulletin IT-63R3, a publication which discusses the various benefits derived from the use of a company vehicle.

If the vehicle is not considered an "automobile", you may refer to the comments in paragraph 13 of IT-63R3 for information on the method of determining the taxable benefit.

Where the vehicle in question is an automobile, there are two types of benefits described in the Act concerning this type of vehicle.  The first of these benefits, included in employees' incomes under paragraph 6(1)(a) of the Act, requires the inclusion of the personal portion of the vehicle operating costs (e.g., gas, oil, maintenance) that are paid by the employer.  The other type of benefit is the standby charge which relates to the availability of a company provided vehicle for personal use by employees.  This type of benefit is subject to tax under paragraph 6(1)(e) of the Act.  The Department's general position on these two types of benefits is set out in detail in IT-63R3.  Please note that the bulletin also includes in its discussions references to the various provisions of the Act that are relevant in computing vehicle benefits.

It is the Department's longstanding position that travel between an employee's settled place of work and the employee's residence is personal in nature. Where the employer does not provide a business establishment with respect to an employee and the employee is entitled to claim expenses in respect of an office in the employee's home as discussed in paragraphs 2, 3, and 10 of IT-352R, it is our view that the settled place of work is the home. Accordingly, travel between the residence and the first customer's business location and travel between the last customer's business location and the residence would not be considered personal.  On the other hand, if the employee is not entitled to claim expenses in respect of an office in the home, the residence would not be considered his settled place of work.  In that case, travel between the residence and the business location of the first customer and travel between the business location of the last customer and the residence would be considered personal travel, in our view.  However, in both of these situations, travel between business locations of customers is not considered to be travel of a personal nature.

It is also our view that travel in a company car between an employee's residence and place of work and vice versa is personal in nature even though the vehicle displays the company logo. It is the purpose of a trip which determines whether or not it is of a personal nature.

We are not in a position to comment on whether it is improper from a legal standpoint for a company to charge an employee an amount for the personal use of a company vehicle without apparent regard to use of the auto for personal trips. Where a taxable benefit is determined in respect of the personal use of the vehicle, payments or reimbursements made to the employer on that account would partially offset the amount of the benefit required to be included in income.

If you require further assistance, you may contact Mr. Thirza Gonzales (Tel. 566-6130) who is the Chief of the Source Deductions Section at the Mississauga District Taxation Office.

We hope that the foregoing comments and the attached interpretation bulletins will be of assistance to you.

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch