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: Will a taxable benefit arise for the use of an employer provided motor vehicle to travel between home and work?
Position: Yes
Reasons: Legislation
2007-025147
XXXXXXXXXX Shaun Harkin, CMA
(613) 957-9229
July 3, 2008
Dear XXXXXXXXXX :
Re: Technical Interpretation Request - Taxable Benefits - Vehicle Usage
This is in reply to your facsimile of September 7, 2007 concerning whether employees of the XXXXXXXXXX incur a taxable benefit for the use of an employer vehicle for travelling between home and a regular place of employment. There is no personal use of the vehicle outside of travelling between home and the regular place of employment.
The vehicles in question include: (i) motor vehicles marked with sirens and decals, equipped with radio communication, first aid, gas detectors and oxygen for use as a first response vehicle in case of fire, which would not be considered automobiles, and (ii) motor vehicles and automobiles, equipped with radio communication, fuel, tools, spare parts and highway maintenance and first aid supplies, used to respond to situations that arise that require immediate attention.
You also ask whether a motor vehicle that was originally properly classified as an automobile, can subsequently fit the exception in subparagraph (e)(ii) of the definition of "automobile" in subsection 248(1) of the Income Tax Act (the "Act").
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following general comments.
Our Comments
When an employer makes a motor vehicle available for an employee's personal use, it generally gives rise to a taxable employment benefit. The use of an employer-provided motor vehicle by an employee to travel between his or her home and a regular place of employment is considered personal notwithstanding that the vehicle may be required because the employee is on call for emergency purposes. However, where the employee proceeds directly from home to a point of call other than the employer's place of business to which the employee regularly reports or returns home from such a point, the use of the vehicle is considered employment-related.
The taxable benefit for the personal use and availability of a motor vehicle that is considered an automobile is included in the employee's income under paragraph 6(1)(e) of the Act as a "standby charge". Where the employer pays any of the operating costs of the automobile, an "operating cost benefit" is also included in the employee's income under paragraph 6(1)(k) of the Act. The taxable benefit for the personal use of a motor vehicle that is not an automobile is included in the employee's income under paragraph 6(1)(a) of the Act. The amount of the benefit is based on a reasonable calculation of the value of the benefit derived by the employee from the personal use.
As noted in paragraph 23 of Interpretation Bulletin IT-63R5, Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer - after 1992, "where a motor vehicle other than an automobile is essential to the employer's business operation, and its only personal use is to provide transportation between an employee's residence and the employer's business premises, it may be appropriate to calculate the benefit to the employee on a cents-per-kilometre basis for equivalent automobile transportation." The Canada Revenue Agency ("CRA") generally accepts the rates prescribed in section 7306 of the Income Tax Regulations (the "Regulations") for this purpose. This rate reflects the cost of owning and operating an automobile and is a reasonable approximation of the benefit enjoyed by an employee for the personal use of an employer-provided motor vehicle that is not an automobile. For 2008, in most areas of Canada, the rate is 52 cents per-kilometre for the first 5,000 kilometres driven and 46 cents for each additional kilometre.
However, there may also be situations where the rate prescribed in section 7306 of the Regulations does not reflect the economic benefit enjoyed by the employee for the personal use of the employer's motor vehicle and, therefore, a lower rate is more appropriate. For this purpose, the CRA will accept a benefit for use of a motor vehicle, which is not an automobile, that is calculated using the rate prescribed in section 7305.1 of the Regulations, which is 24 cents-per kilometre for 2008, where all of the following conditions have been met:
1) The employer prohibits any other personal use of the motor vehicle (other than commuting between home and work).
2) The employer has bona fide business reasons for requiring the employee to take the vehicle home at night, such as:
a) there are reasonable security concerns with respect to the employer's tools and equipment being left at the worksite or overnight at employer's premises, or
b) the employee is on-call to respond to public emergencies and the vehicle is provided to improve response to emergencies.
3) The motor vehicle is specifically suited to or designed for the employer's business or trade and is essential in a fundamental way for the performance of the employment duties. For example:
a) the motor vehicle is specially designed or equipped to carry tools or equipment for the business or trade,
b) the motor vehicle is consistently used to carry and store heavy, bulky or numerous tools and equipment necessary for the performance of employment duties. These items would be of a nature that could not easily be loaded and unloaded from the vehicle,
c) the motor vehicle is used on a regular basis to carry material that is noxious and malodorous, such as veterinary samples or fish and game, or
d) where the employee's circumstances are that of being on-call for public emergencies as described in 2(b) above, the vehicle is clearly marked or specially equipped so as to provide for rapid response or for the purposes of carrying specialized equipment to the scene of the emergency.
Regarding the ongoing classification of a motor vehicle as an "automobile", we note the legislation specifically states that the relevant time for purposes of determining whether a motor vehicle fits the exclusion described in subparagraph (e)(ii) of the definition of "automobile" in subsection 248(1) of the Act is the year in which the motor vehicle is acquired or leased.
We trust that these comments will be of assistance.
Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2008
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2008
Email this Content