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Car expenses
and benefits
A tax guide
Our road map
guides drivers and
business managers
through the maze of
Canadian tax rules
for car expenses
and benefits.
2011
Cette brochure est également disponible en français.
PricewaterhouseCoopers LLP (PwC) website: www.pwc.com/ca. For PwC contacts, see page 25.
Tax News Network (TNN) provides subscribers with Canadian and international information, insight and analysis to support well-informed tax and
business decisions. Try it today at www.ca.taxnews.com.
This booklet is published with the understanding that PwC is not thereby engaged in rendering accounting, legal or other professional service or advice. The
comments included in this booklet are not intended to constitute professional advice, nor should they be relied upon to replace professional advice.
Rates and information may change as a result of legislation or regulations issued after January 31, 2011.
i Car expenses and benefits – A tax guide
To help, this booklet provides a general outline and analysis of the relevant tax rules as they stood on January 31,
2011. It also addresses the tax consequences that arise when an automobile is supplied to a shareholder or partner or
when a self-employed person uses an automobile for business.
Company automobiles, expense allowances and reimbursements may increase productivity, provide job satisfaction
and improve the benefit package—things that both employees and employers care about.
Tax authorities have something else in mind: ensuring that employees do not receive personal benefits tax-free, when
salary, bonus and other forms of compensation would give rise to income tax. The result is an intricate set of rules
that levy tax on any personal use of an employer-supplied automobile and on some car allowances. The rules also
permit employees to claim certain deductions if they use their own vehicles in performing their employment duties.
Tax law in Canada is complicated and ever-changing, affected by frequent legislative changes, court decisions and
the administrative practices of the tax authorities. This booklet is not a substitute for professional advice, which you
should seek when you are considering important actions. Nevertheless, it will answer many questions and help you
understand the tax implications of employer- and employee-provided automobiles.
Employee log
An employee log (paper and electronic) is available at www.pwc.com/ca/carexpenses to record information that
supports motor vehicle expenses and taxable benefit calculations.
For help
For assistance with this complex subject, contact your PwC adviser or any of the individuals listed on page 25.
Recent Developments
2011 prescribed rates for automobiles
Department of Finance has announced that the 2011 prescribed rates for automobiles will remain at their 2010
levels. The 2011 prescribed rates follow, along with references to the pages that provide more information about
those rates.
2011 Prescribed rates Pages
Maximum monthly interest deduction $300
2,
Owned cars Maximum capital cost on which capital cost
$30,000 17
allowance (CCA) may be claimed
+ GST/HST & PST on $30,000
Lease cost limit
Deduction Thresholds used to 2,
determine the maximum $800
limits Leased cars Monthly lease limit 16,
deduction for lease + GST/HST & PST on $800
payments Manufacturer’s list $35,294 17
price limit + GST/HST & PST on $35,294
Automobile
Per-kilometre allowance Same limits as tax exempt allowances, below
allowances
Kilometres driven in the First 5,000 56¢
Yukon, NWT or Nunavut Each additional 11
Tax-exempt 50¢
allowances Kilometres driven in all First 5,000 52¢
Taxable
other locations Each additional 46¢
benefits
Persons employed principally in selling or
Operating 21¢ 5,
leasing automobiles
cost benefit 18
All other employees 24¢
The Canada Revenue Agency (CRA) is administering both the British Columbia HST and the Ontario HST. The tax base and
basic operational rules for the provincial portion of the HST are substantially the same as for the GST. Appendices F and H
discuss how the HST affects the tax rules for employer-supplied automobiles and automobiles of self-employed individuals.
Appendices F and H discuss how Nova Scotia’s HST and ITC rate factors affect the tax rules for employer-supplied
automobiles and automobiles of self-employed individuals.
Appendices G and H discuss how the QST and ITR rate factors affect Quebec’s tax rules for employer-supplied automobiles
and automobiles of self-employed individuals.
Contents
1. Should Employees Get Company Cars?.....................................1
2. Employer-Supplied Automobiles...............................................1
Employer Implications.............................................................................. 1
Employee Implications............................................................................. 3
Planning Techniques for Employers.......................................................... 6
Planning Techniques for Employees......................................................... 7
Withholdings............................................................................................ 7
Record Keeping........................................................................................ 7
Important Dates ...................................................................................... 8
3. Employee-Supplied Automobiles..............................................9
Employee Deductions............................................................................... 9
Reimbursements and Allowances............................................................10
Employer Deductions............................................................................. 12
Planning Techniques for Employers........................................................ 13
Planning Techniques for Employees....................................................... 13
Record Keeping.......................................................................................14
4. Shareholders and Partners .....................................................14
5. Self-Employed Individuals .....................................................15
Appendices....................................................................................15
A Motor Vehicle, Automobile and Passenger Vehicle.................................. 15
B Deduction for Lease Costs........................................................................16
C Automobile Deduction Limits..................................................................17
D Taxable Benefit from an Employer-Supplied Automobile.........................17
E Personal Use—What Counts?..................................................................18
F Employer-Supplied Automobiles—GST/HST..........................................19
G Employer-Supplied Automobiles—QST ................................................. 23
H Self-Employed Individuals—GST/HST and QST.................................... 24
PwC Contacts.................................................................................25
Company-owned cars
If a company has purchased the vehicle, it is eligible to claim
capital cost allowance (CCA) and related interest expense or
other borrowing charges, subject to the following special rules
and limitations.
Reimbursements to employer
An employee’s standby charge is reduced by amounts paid in Example
the year to the employer for the use of the automobile. The An employee uses an employer-provided automobile, with the
employee cannot deduct these amounts for tax purposes. following facts for 2011:
Payments for operating costs (see the following commentary) Personal-use kilometres 10,000 km
do not reduce the standby charge.
Total kilometres 30,000 km
Employer-paid operating costs
Operating cost benefit (including GST/HST & PST)
$1,000
Basic calculation Reimbursements to employer Nil
An operating cost benefit is included in the employee’s income
when the employer pays operating costs that relate to personal Results:
use of an employer-provided automobile. The calculation of the The operating cost benefit to the employee is:
operating cost benefit is illustrated below. 10,000 km x 24¢ per km = $2,400.
Table 4 Operating cost benefit: basic calculation Analysis:
The portion of operating costs that relate to the employee’s
Personal kilometres driven in the year1
personal use of the automobile is: 10,000 km/30,000 km x
x Prescribed amount (24¢2 for 2011) $1,000 = $333.
= Operating cost benefit before reimbursements Observations:
– Reimbursements to employer3
The employee could eliminate a $2,400 operating cost benefit
= Operating cost benefit by reimbursing the employer $333 before February 15 of the
1. See Appendix E to determine personal kilometres driven. following year. Therefore, assuming the employee’s marginal
2. 21¢ for persons employed principally in selling or leasing automobiles. tax rate is 46%, the employee can save $771, i.e., $2,400 x
3. The payment must be made before February 15 of the following year. 46% - $333.
Reimbursements to employer
An employee’s operating cost benefit is reduced for payments – Operating expenses
made to the employer, in respect of operating costs, before The tax authorities consider all costs directly associated
February 15 of the following year. with the operation of an automobile to be operating costs, as
opposed to capital costs. Table 1 on page 1 shows examples of
The CRA commented that it will consider payments made operating expenses and capital costs.
by employees to third parties in respect of operating costs to
be reimbursements made to the employer. As a result, these – Parking costs
payments will reduce the employee’s operating cost benefit. Legislation specifies that, for the purposes of the employee
The employee should: benefit rules, automobile operating expenses do not include
• retain receipts for operating costs paid to third parties; and parking costs. Generally, parking costs are an employee benefit
• provide a summary to his or her employer before in addition to the operating cost benefit unless:
February 15 of the following year. • the parking is provided for business purposes; and
• the employee regularly has to use the automobile for
Avoiding a benefit employment purposes.
An operating cost benefit will not arise if the employee
reimburses the employer for 100% of the personal-use portion In addition, the CRA Employers’ Guide—Taxable Benefits and
of actual operating costs. Allowances (T4130(E) Rev. 10) states that a benefit may not
arise if:
• a business operates from a shopping centre or industrial
park, where parking is available to both employees and
non-employees; or
• an employer provides “scramble parking” (i.e., there is
a shortage of parking spaces, which are taken on a
first-come, first-served basis).
The CRA has commented that the taxable benefit for an Finance automobile purchases with cash
employer-provided parking space should not be reduced for days Borrowing money to finance a luxury automobile purchase
when an employee is unavailable to use the spot (e.g., because is less attractive than it once was, due to the interest expense
the employee is on vacation or travelling out of town by plane). limitations. Consider financing automobile purchases out of
cash reserves and borrowing to fund working capital or to
Alternative computation purchase other assets for which the interest deduction is
An employee who uses an automobile primarily (i.e., more than not restricted.
50%) for business purposes may elect to calculate the operating
cost benefit as follows: Consider a sale-leaseback arrangement
It may be worthwhile for the employer to sell the automobile
Table 5 Operating cost benefit: alternative computation and lease it back. In the standby charge calculation, this
replaces the original cost by lease payments.
1/2 x Standby charge before reimbursements (from Table 3)
– Reimbursements to the employer1
Provide interest-free loan to employees to
= Operating cost benefit purchase cars
1. The benefit is reduced for payments made to the employer before February 15 of Sometimes it makes sense for employers to lend funds interest-
the following year. free to help employees purchase their own cars. Instead of the
standby charge of 24% (i.e., 2% per month), the employees
When the election is made, an employee is taxed on a will include in employment income a deemed interest benefit
maximum benefit of 36% of original cost (or 100% of the lease based on the prescribed rate of interest on the loan (e.g.,
cost), instead of the total of the standby charge plus 24¢ (21¢ 1% for the first quarter of 2011). In addition, for employees
for a car salesperson) for each personal kilometre driven. who are eligible to deduct automobile expenses, the business
portion of the deemed interest benefit is deductible, up to the
To make the election, the employee must give the employer monthly interest limit (see page 2). However, any forgiveness
written notification before December 31. The employee is of the loan (or increased salary to cover loan repayments) will
required to maintain a record of kilometres to support constitute an additional taxable benefit.
the election.
Reduce monthly lease payments
Planning Techniques for Employers Monthly lease payments will be reduced if the term of the lease
Reduce availability is extended. Consider the long-term tax consequences of this
To reduce the number of days that cars are available, the strategy to both the employer and employee.
employer can require company cars to be left on company
premises during weekends and/or when employees are away Consider purchasing a leased vehicle
on business trips and vacations. Employees must be required If the employee plans to drive the same luxury vehicle for
to return car keys to the employer at these times. The result: a more than three or four years, consider a three- to four-year
reduction in the standby charge. lease with payments at or below the monthly maximum lease
deduction (i.e., $800 plus GST/HST and PST on $800). When
Buy or lease less expensive vehicles the lease buy-out price is near the maximum capital cost on
Choosing less expensive vehicles (e.g., used cars) reduces the which CCA may be claimed (i.e., $30,000 plus GST/HST and
capital cost or the lease cost in the standby charge calculation. PST on $30,000), the employer should purchase the vehicle.
This maximizes both lease deductions and CCA claims on
Consider whether to buy or lease luxury vehicles.
The standby charge is based on original cost (plus capitalized
repairs) or lease payments (excluding insurance). The relative
costs for the entire period of ownership should be compared,
bearing in mind both the cost to the employer and the taxable
benefit to the employee.
In addition, if personal kilometres are less than 50% of total Withholdings are required in respect of income tax and
kilometres driven, the employee’s operating cost benefit can be Canada Pension Plan (CPP). However, the CPP withholding
determined using the alternative computation (see page 6). requirement will not result in additional withholdings if the
employee’s earnings, before the standby charge, exceed the
Employees can minimize personal driving by making simple CPP maximum pensionable earnings ($48,300 in 2011).
adjustments to their car use. For example:
• make business visits on the way to or from work to convert According to the CRA Employers’ Guide—Taxable Benefits
personal kilometres to business kilometres; and and Allowances (T4130(E) Rev. 10), the standby charge and
• in two-car families, use the employee-owned car exclusively the operating cost benefits are not subject to Employment
for personal purposes to maximize the percentage of Insurance (EI) premiums.
business use of the employer-provided vehicle.
Record Keeping
Consider acquiring an older automobile from Employer’s Records
the employer Employers should maintain records that substantiate
By purchasing an older automobile from the employer, an deductions related to vehicles, and keep track of the following:
employee will:
• eliminate the standby charge; and Original cost and
• cease to have a benefit based upon the original cost. lease cost in
This information is necessary to compute each employee’s
respect of each
standby charge.
Using this approach, a benefit will arise in respect of vehicle provided
employer-paid operating costs attributable to the personal to employees
use of the employee-provided car (see page 12, Payment Availability of
Records regarding the number of days each employee had an
for personal expenses). However, the benefit will not be automobile
automobile available are required to determine the standby
based on the prescribed amount times the number of personal charge.
kilometres driven. Furthermore, the employee may be able to Reimbursements received from the employee for use and/or
deduct expenses related to business use of the automobile (see Payments from
operating costs must be recorded to compute the employee’s
employees
page 9, Motor vehicle expenses). standby charge and operating cost benefit, respectively.
Consider a salary increase instead of an It is important for employers to maintain records of operating
expenses borne in respect of each employee. This information is
employer-provided vehicle required to determine the amount of such costs attributable to
If an employee’s bonuses, incentive compensation and/or Operating personal use when employee reimbursements are a factor.
contributions to retirement plans are based on his or her base expenses
salary, excluding taxable benefits, the employee may prefer a The employer should also maintain records supporting
reductions to each employee’s operating cost benefit in respect
salary increase instead of an employer-provided vehicle. of operating costs paid by the employee to third parties.
3. Employee-Supplied Automobiles hours for business purposes, but the distance driven is small,
capital costs may be apportioned based on a combination of
Employee Deductions distance and time used to earn employment income. A log for
If the conditions summarized in the table below are met: recording business and personal driving expenses is provided
• employees may deduct reasonable travel expenses, in a separate attachment.
including motor vehicle expenses; and
• employees who are salespersons or contract negotiators Deductible motor vehicle expenses include automobile
may deduct a wider variety of expenses. operating expenses and capital costs shown in Table 7. These
are pro-rated as discussed above.
Table 6 Employee deductions
Table 7 Operating expenses vs. capital costs
Salespersons and
Employees in general Operating expenses Capital costs2
contract negotiators
At least partially • Gas 1
• Capital cost allowance (CCA)
Did not claim any remunerated by • Oil • Interest
deductions as a commissions or similar • Maintenance • Leasing costs
salesperson amounts based on sales • Minor repairs (net of
volume insurance recoveries)
Ordinarily required to carry on the duties of • Licence and registration fees
employment away from: • Insurance
the employer’s place 1. Only the portion not refunded as a gasoline tax rebate may be deducted.
the employer’s place
Conditions of business, or in 2. Subject to the same restrictions discussed previously (page 1) with respect to
of business
(all must be met to deduct different places employers who own passenger vehicles.
the expenses noted below) Did not receive a tax-free allowance with respect to
the expenses (see comments under Deductible travel expenses are reported on Form T777, along
Allowances, page 11) with other deductible employment expenses. The Quebec
Not reimbursed for expenses equivalent is Form TP-59-V.
Required under the employment contract to pay the
expenses
Capital cost allowance
A prescribed form (Form T2200) certified by the
employer, reporting the conditions of employment,
An employee who is entitled to claim CCA in computing travel
is completed1 expenses may calculate the deductible amount as follows:
Expenses that may be All expenses incurred to Add to CCA class CCA deductible
Travel
deducted earn employment income Based on the
Interest and The full cost of the vehicle, up to proportion of
Not limited by income Varies
Maximum CCA on auto Expected % the prescribed amount (page 2) business use1 of
deduction Other Commision income of business the vehicle3
expenses for the year use from The full cost of the vehicle, up to
1. Quebec employees must file Form TP-64.3-V with their Quebec tax returns, in year to year the prescribed amount (page 2)
addition to completing Form T2200. Constant Full CCA
multiplied by the percentage of
business use1 of the vehicle.2
Motor vehicle expenses 1. If the vehicle is used frequently during work hours for business purposes, but the
If an automobile is used for both employment and personal distance driven is small, base on a combination of distance and time used to earn
employment income.
purposes, to determine the deductible amount, most motor 2. An adjustment is required to reflect any change in regular use.
vehicle expenses are pro-rated, based on the proportion that 3. In computing undepreciated capital cost (UCC), the full CCA must be deducted.
the distance driven in the course of employment is of the total
distance. When a vehicle is used frequently during working
In the latter case, total deductions (before interest and CCA Reimbursements
on an automobile) are limited to the salesperson’s or contract Reimbursements are simpler than allowances, for tax
negotiator’s commission income for the year. Because of this purposes. Employers can deduct reimbursements of business-
restriction, a salesperson or contract negotiator may prefer to related automobile operating expenses. Employees are:
claim travel expenses in accordance with the provisions for • not required to report reimbursements on their income tax
other employees. returns; and
• not entitled to deduct automobile expenses that were
reimbursed.
Allowances Example
The general rule on allowances for travel and/or motor
vehicle expenses is simple: to be tax-free to the employee, the An employer pays an employee both:
allowances must be reasonable. • a reasonable per-kilometre amount for employment-related
travel outside the employment district; and
• a flat-rate allowance per month for travel inside the
If an allowance for travel expenses is tax-free, the employee employment district.
may not deduct travel expenses. Similarly, if an allowance
for motor vehicle expenses is tax-free, the employee may not Results:
deduct expenses in respect of the motor vehicle. The flat-rate allowance does not compensate the employee
for any of the “same use” of the vehicle as the per-kilometre
A motor vehicle allowance will be considered reasonable only allowance. Therefore, the per-kilometre allowance is not
if it is: included in income, but the flat-rate allowance is taxable.
• based solely on the number of kilometres driven in the
course of employment; and Technically, if the per-kilometre allowance is excluded from
• computed using a reasonable per-kilometre rate. income, the employee cannot deduct automobile expenses.
However, the CRA will permit a deduction for automobile
Consequently, a flat monthly automobile allowance is not expenses if the employee can show that the expenses exceed
both allowances and the employee includes both allowances in
considered reasonable for tax purposes, and must be included income.
in income. Furthermore, even an allowance that meets the
above criteria for reasonableness will be taxable in its entirety
if the employee is reimbursed for some of the automobile
expenses. However, reimbursements for supplementary As a general rule, for allowances paid in 2011, the CRA will
business insurance, parking, or toll or ferry charges will accept as reasonable an allowance calculated in accordance
not cause the allowance to be taxable, if the allowance was with the following prescribed rates:
determined without reference to these reimbursed expenses.
Table 9 Prescribed rates for tax-exempt allowances
According to the CRA Employers’ Guide—Taxable Benefits Reasonable allowance for 2011
and Allowances (T4130(E) Rev. 10), if an employee receives
Distance First 5,000 km 52¢ + 4¢ for each kilometre driven in the
a combination of flat-rate and reasonable per-kilometre driven Yukon, N.W.T. or Nunavut
Each additional km 46¢
allowances, or any other personal reimbursement such as a
fuel card, that cover the same use for the vehicle, the total
combined allowance is taxable. Every December, the Department of Finance normally
announces the maximum automobile allowance rates that
employers may deduct in the next year. The CRA uses the
Example same rates to assess whether motor vehicle allowances will be
An employer pays an employee both: tax-exempt to employees. The rates are intended to reflect the
• a flat per diem rate to offset the employee’s fixed expenses; and key components of owning and operating an automobile, such
• a reasonable per-kilometre rate for each kilometre driven. as depreciation, financing and operating expenses (i.e., gas,
maintenance, insurance and licence fees). Rates for 2011 are in
Result: Table 9, above.
The total combined allowance is taxable because the flat-rate
amount compensates the employee for some of the “same use” as
the per-kilometre allowance.
To be considered reasonable, allowances that exceed the Similarly, if an employer reimburses an employee for the full
prescribed rates must be supported by actual automobile cost of leasing a vehicle, a taxable benefit will arise, equal to
operating expenses. However, the facts of the particular case the personal portion.
will determine the reasonableness of an allowance.
The calculation of the benefit is based on the extent to which
In a nutshell, only “reasonable allowances” (i.e., neither too the car was used for personal purposes. This is illustrated in
high nor too low) will be tax-free. If an allowance is considered the following example.
unreasonable, and therefore is included in the employee’s
income, the employee may deduct automobile expenses if the Example
requirements outlined in Table 6 (page 9) are met. Employee provides own leased vehicle with the following facts
for 2011:
Technically, an allowance that is unreasonably low is to be
included in the employee’s income. Nevertheless, the CRA Personal-use kilometres 10,000 km
normally permits such an allowance to be treated as tax-free. Total kilometres 30,000 km
The employee, however, has the option of including the Employer-paid operating costs (including GST/HST & PST) $2,000
allowance in income and deducting the applicable automobile
expenses. An employee who considers an allowance to Employee-paid lease costs reimbursed by employer $7,000
be unreasonably low should be prepared to support that Results:
position. However, an allowance for travel expenses will not be The taxable benefit equals the portion of employer-paid costs
considered unreasonably low simply because the employee’s related to the employee’s personal use of the automobile, i.e.,
total expenses for business travel exceed the allowance. ($2,000 + $7,000) x 10,000 km/30,000 km = $3,000.
Deductible up
Fully Minimize personal automobile use, maximize
Allowances deductible if business automobile use
Not Taxable to prescribed
> prescribed rates taxable to the
taxable if if not rates
employee Individuals can minimize the after-tax cost of a car by making
reasonable reasonable simple adjustments to car use. For example:
Allowance • make business visits on the way to or from work to
< prescribed rates1
convert personal kilometres to business kilometres; and
Allowance
= prescribed rates
Not taxable Fully deductible • in two-car families, use one car for personal purposes
Allowance not based so that the percentage of business use of the other
Taxable vehicle is maximized.
on business km
1. Although technically an allowance that is unreasonably low is taxable, the CRA will
normally allow it to be treated as tax-free. Get an interest-free or low-interest loan from
your employer
The prescribed rates are applied employee-by-employee, so In some cases, employers may agree to make interest-free or
the employment kilometres of several employees cannot be low-interest loans to employees, to help them purchase their
averaged. own cars. The employee includes in employment income a
deemed interest benefit equal to:
Planning Techniques for Employers • the prescribed rate of interest on the loan (e.g., 1% for the
Employers that pay all or a portion of their employees’ first quarter of 2011); less
automobile expenses should consider the following strategies • any interest paid by the employee to the employer on
so that a deduction can be claimed for the amount paid. or before January 30 of the following year.
Motor vehicle
A motor vehicle is designed or adapted for use on highways
and streets.
Excluded from the definition are a trolley bus and any vehicle
operated exclusively on rails.
Automobile
An automobile is a motor vehicle that:
• is designed or adapted to carry passengers; and
• seats not more than nine people, including the driver.
Appendix C Appendix D
Automobile Deduction Limits 1
Taxable Benefit from an
Employer-Supplied Automobile
Passenger vehicles
Acquired Leased
For more help, refer to the CRA’s Automobile Benefits Online
Manu-
Monthly Max. Lease
Monthly facturer’s
Calculator at www.cra.gc.ca/autobenefits-calculator.
interest capital cost
lease limit list price
limit2 cost limit
limit
1991 to
1996
$300 $24,0003 $6503 $28,2353 Sample Worksheets
3 3 3
When 1997 $25,000 $550 $29,412
acquired or 1998/99 $250 $26,0003 $6503 $30,5883 Standby charge calculation
leased 2000 $27,0003 $7003 $31,7653 Employer-
2001 to Cost of
$300 $30,0003 $8003 $35,2943 owned $ x 2%1 $ A
20114 automobile
automobile
1. The Department of Finance normally announces the limits each December for the Employer-
Monthly
following year. leased $ x 2/3 $ B
lease cost
2. Technically, for each 30-day period during which the interest was paid or payable. automobile
3. Plus GST/HST and PST.
4. The limits for passenger vehicles purchased or leased in 2011 are: Number of days in year auto is available to employee
Max. capital cost & Monthly lease Manufacturer’s list ÷ 30
lease cost limit limit price limit =
Alberta $31,500 $840 $37,059 Round result (with 0.5 rounded down) to the nearest whole
= C
British Columbia number if this fraction exceeds 1.0
$33,600 $896 $39,529
Manitoba (A x C) or (B x C) $ D
New Brunswick
Newfoundland $33,900 $904 $39,882 Reduction for low personal use2
and Labrador Personal kilometres
Northwest ÷ (1,667 x number of months auto was available)
$31,500 $840 $37,059
Territories = Reduction for low personal use E
Nova Scotia $34,500 $920 $40,588
Nunavut $31,500 $840 $37,059 Standby charge before reimbursements
= $
Ontario $33,900 $904 $39,882 =DxE
Prince Edward – Reimbursements to employer during the year $
$34,650 $924 $40,765 = Standby charge $
Island
Quebec $34,178 $911 $40,209 1. Special rules apply if the employee is employed principally in selling or leasing
Saskatchewan $33,000 $880 $38,823 automobiles.
Yukon $31,500 $840 $37,059 2. The reduction for low personal use is available only if:
– the employer requires the employee to use the car to carry out employment
duties;
– business use is more than 50%; and
– personal kilometres average less than 1,667 per month.
The CRA’s comments were in Income Tax Technical News No. 40 (June 11, 2009),
but were previously made in its opinion letters issued in 2008.
On July 1, 2010:
• British Columbia and Ontario each replaced their provincial
sales tax (PST) with an HST. The tax base and basic
operational rules for the provincial portion of the HST is
substantially the same as for the GST.
• Nova Scotia increased its HST rate from 13% to 15% (i.e.,
the provincial portion of the HST increased from 8%
to 10%).
Operating cost benefit Consequently, a full (i.e., 100%) ITC for the GST/HST paid
The calculation of the GST/HST to be remitted by the employer in respect of a reimbursement made to an employee is
relating to the operating cost benefit is illustrated below. available only if the employer reimburses 100% of the expense
(and the employer is engaged exclusively in commercial
GST/HST to be remitted by activities). When the reimbursement is less than 100% of the
employer1 (operating cost benefit) expense, the ITC is pro-rated based on the percentage of the
Alberta cost that was reimbursed.
Manitoba
Northwest Territories Employers may claim ITCs equal to:
Nunavut i. the tax deemed to have been paid (as determined above); or
GST 3% x
Prince Edward Island ii. the reimbursement (subject to the 50% limit applicable to
Quebec Operating cost
benefit before meal and entertainment expenses) multiplied by the
Saskatchewan following factors:
reimbursements1
Yukon (see Table 4 on • for GST, 4/104; or
2
British Columbia 5% x page 5) • for HST:
New Brunswick – 11/111 for British Columbia after June 30, 2010;
Newfoundland 9% x – 12/112 for New Brunswick, Newfoundland and
HST
and Labrador Labrador, and, after June 30, 2010, for Ontario; and
3
Nova Scotia 11% x – 14/114 for Nova Scotia (12/112 before July 1, 2010).
4
Ontario 9% or 6% x
1. As with the standby charge benefit, the employer is required to remit GST/HST on Employers in British Columbia and Ontario can continue to
the amount of the operating costs reimbursed by an employee. However, no GST/
HST is required to be remitted by a GST/HST registrant that is: claim ITCs equal to the tax deemed to have been paid (subject
• an individual or a partnership if the vehicle is used less than 90% in to the ITC recapture rules for large businesses discussed on
commercial activities; or page 22).
• not an individual or partnership if the vehicle is not used primarily in
commercial activities.
2. For British Columbia, the rate was 4% for 2010. The method used to claim ITCs (i.e., i or ii) must be used
3. For Nova Scotia, the rate was 10% for 2010. consistently within each expense category. Both methods are
4. In Ontario, the rate is: illustrated in the following example for GST purposes.
• 9% (6% for 2010) for employers that are not large businesses and therefore are
not required to recapture ITCs; and
• 6% (4.5% for 2010) for employers that are large businesses and therefore are Example
required to recapture ITCs.
Expenses incurred by employee
$350 + $17.50 GST + $24.50 PST (7%) $392
Example Percentage which the expense was acquired for use in
80%
relation to the employer’s activities
An employee in Manitoba drives an employer-provided automobile
12,000 personal-use kilometres in 2011. Employer reimburses employee $300
See Appendix C for the limits that apply for vehicles purchased
or leased before 2011.
QST
Self-employed individuals who qualify as a small or medium-
sized business for QST purposes are entitled to claim input tax
refunds (ITRs) on the purchase or lease of a vehicle to be used
in commercial activities. The maximum amount on which ITRs
may be claimed appears to be the same as the maximum on
which ITCs may be claimed (see above).
PwC Contacts
For more information on how these rules affect you or your company,
please contact your PwC adviser or any of the following individuals.
Alberta
403 441 6313
Calgary Cliff Taylor cliff.taylor@ca.pwc.com
780 441 6810
Edmonton Daniel Woodruff daniel.a.woodruff@ca.pwc.com
British Columbia
604 806 7419
Vancouver Brad McDougall brad.j.mcdougall@ca.pwc.com
Manitoba
204 926 2428
Winnipeg David Loewen dave.loewen@ca.pwc.com
Maritimes
902 491 7437
Halifax Dean Landry dean.landry@ca.pwc.com
506 653 9417
Saint John Scott Greer scott.a.greer@ca.pwc.com
Newfoundland and Labrador
709 724 3771
St. John’s Allison Saunders
allison.j.saunders@ca.pwc.com
Quebec
514 205 5073
Montreal Daniel Fortin daniel.fortin@ca.pwc.com
418 691 2436
Quebec City Jean-Francois Drouin jean-francois.drouin@ca.pwc.com
Ontario
519 640 7916
London Tom Mitchell tom.r.mitchell@ca.pwc.com
Mississauga/ 905 972 4118
Jason Safar
Hamilton jason.safar@ca.pwc.com
416 218 1403
North York Bruce Harris1 bruce.harris@ca.pwc.com
613 755 4345
Ottawa Lois McCarron-McGuire lois.a.mccarron-mcguire@ca.pwc.com
416 869 8719
Toronto Israel Mida israel.h.mida@ca.pwc.com
519 570 5755
Waterloo Mark Walters mark.g.walters@ca.pwc.com
519 985 8913
Windsor Loris Macor loris.macor@ca.pwc.com
905 326 5325
York Region Susan Farina susan.farina@ca.pwc.com
Saskatchewan
306 668 5910
Saskatoon Frank Baldry frank.m.baldry@ca.pwc.com
1. Member of PwC’s Canadian National Tax Services (CNTS), a group of tax
specialists from a variety of professional backgrounds, including government, with
the mandate to enhance the overall value and scope of tax services PwC provides
to its clients.
© 2011 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability
partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.