Motor vehicle provided by the employer

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• Automobile or motor vehicle benefits – Allowances or reimbursements provided to an employee for the use of their own vehicle
• Automobile provided by the employer

You may provide a motor vehicle to your employee to use in performing their duties of office or employment that is not an automobile. Generally, the benefit from personal driving of the employer provided motor vehicle is a taxable benefit.

On this page

• Steps
• References

Steps

1. Determine if the vehicle is a motor vehicle

   The Income Tax Act defines motor vehicles and automobiles differently for tax purposes.

   Answer a few questions to determine if the vehicle is a motor vehicle or an automobile.

   Launch vehicle validator

   Motor vehicle and automobile definitions

   The difference between an automobile or a motor vehicle depends on:

   • Seating capacity
   • Type of vehicle
   • Primary use of the vehicle

   Automobile

   An automobile is a motor vehicle that is designed or adapted mainly to carry individuals on highways and streets, and has a seating capacity of not more than the driver and eight passengers. A zero-emission passenger vehicle (ZEPV) is also considered an automobile.

   Learn more: ZEPV - What kind of vehicle do you own?.

   Does not include

   An automobile does not include:

   • An ambulance
   • Clearly marked police or fire emergency response vehicles
   • Clearly marked emergency medical response vehicles that you use to carry emergency medical equipment and one or more emergency medical attendants or paramedics
   • A motor vehicle you bought to use primarily (more than 50% of the distance driven) as a taxi, a bus used in a business of transporting passengers, or a hearse in a funeral business
   • A motor vehicle you bought to sell, rent, or lease in a motor vehicle sales, rental, or leasing business, except for benefits arising from personal use of an automobile
   • A motor vehicle (other than a hearse) you bought to use in a funeral business to transport passengers, except for benefits arising from personal use of an automobile

   • A van, pickup truck, or similar vehicle that meets either of the following criteria:

     • Can seat no more than the driver and two passengers, and in the year it is acquired or leased is used (50% or more of the distance driven) to transport goods or equipment in the course of business
     • In the year it is acquired or leased, it is used (90% or more of the distance driven) to transport goods, equipment, or passengers in the course of business

   • Pickup trucks that you bought or leased in the tax year that meet both of the following criteria:

     • Are used (50% or more of the distance driven) to transport goods, equipment, or passengers in the course of earning or producing income
     • Are used at a remote work location or at a special work site that is at least 30 kilometres away from any community having a population of at least 40,000

     If the back part or trunk of a van, pickup truck, or similar vehicle has been permanently altered and can no longer be used as a passenger vehicle, it is no longer considered an automobile as long as it is used primarily for business.

   Motor vehicle

   A motor vehicle is an automotive vehicle designed or adapted for use on highways and streets. It does not include a trolley bus or a vehicle designed or adapted for use only on rails. Although an automobile is a kind of motor vehicle, the CRA treats them differently for income tax purposes.

   Zero-emission vehicles are cars and trucks powered by rechargeable electric batteries or hydrogen fuel cells.

   • If the vehicle is an automobile and is not a motor vehicle based on the above definitions, do not continue to next step.

     Refer to: Automobile provided by the employer.

   • If the vehicle is a motor vehicle and is not an automobile, continue to: Step 2 - Determine if the motor vehicle was used for personal driving.

2. Determine if the motor vehicle was used for personal driving

   Personal driving is any driving of a motor vehicle provided by the employer for purposes not related to their employment. This includes driving between home to a regular place of employment.

   What is a regular place of employment

   The CRA considers a regular place of employment to be any location where your employee regularly:

   • Reports for work
   • Performs their employment duties

   "Regularly" means there is some degree of frequency or repetition in your employee’s reporting to that particular work location in a period (weekly, monthly or yearly). This does not need to be your establishment. An employee can have multiple regular places of employment.

   Generally, any travel by your employee between home and a regular place of employment is considered personal driving.

   Examples of a regular place of employment

   A regular place of employment may include:

   • The office where your employee reports daily
   • Several store locations that a manager visits monthly
   • A client’s premises when your employee reports daily for a 6 month project
   • A client’s premises when your employee attends biweekly meetings

   What are the exceptions for transportation to a regular place of employment in specific situations

   The benefit may not be taxable where you provide your employee with transportation to a regular place of employment in one of the following situations:

   • You need to provide your employee with transportation from pickup points to an employment location where public and private vehicles are neither allowed nor practical at the location because of security or other reasons
   • You need to provide transportation to your employee who works in remote locations
   • You need to provide transportation to your employee who works at special work sites, including prescribed zones

   What if your employee drives to multiple regular place of employment during the same day

   Depending on the situation, your employee may have more than one location where they regularly report for work. The CRA considers that if your employee drives to multiple regular places of employment in a day, the following is considered personal driving:

   • Between your employee’s home and their first work location
   • Between the final work location and your employee’s home

   Any other travel by your employee between regular places of employment is considered business (employment-related) driving.

   What is a point of call

   The CRA considers a point of call any location other than a regular place of employment where your employee goes to perform their employment duties.

   Generally, any travel by your employee between home and a point of call is considered business (employment-related) driving, if you need or allow your employee to travel directly from home to a point of call, or return home from that point. In order for the travel to be considered business (employment-related) driving, it must be reasonable that your employee’s travel to the point to call be made at that time and on the way to or from work.

   If the travel is not reasonable, it is considered personal driving.

   • Personal driving examples

     • Vacation trips
     • Driving to conduct personal activities
     • Travel between home and a regular place of employment other than a point of call
     • Travel between home and a regular place of employment even if you insist your employee drives the vehicle home, such as when your employee is on call

   • Business (employment-related) driving examples

     • Travel between your employee’s regular place of employment and a client’s workplace (a point of call)
     • Travel for business purpose errands
     • Travel between home and a point of call, such as:
       • Salesperson visiting customers
       • Going to a client’s premises for a meeting
       • Making a repair call

   • If there is no personal driving, the use of the employer-provided motor vehicle is not a taxable benefit.

     Do not continue to next step.

   • If there is personal driving, the use of the employer-provided motor vehicle is a taxable benefit.

     Continue to: Step 3 - Determine if the motor vehicle benefit is taxable.

3. Determine if the motor vehicle benefit is taxable

   Non-taxable situation

   If you provide a motor vehicle to your employee, the benefit is not taxable if your employee does not use the motor vehicle for any personal driving.

   Taxable situation

   If you provide a motor vehicle to your employee and they use the motor vehicle for personal driving, the benefit from the personal driving is taxable.

   You need to calculate the value of the benefit from your employee’s personal driving of the motor vehicle.

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   • If the benefit is not taxable, you do not need to do any calculations.

     Do not continue to next step.

   • If the benefit is taxable, continue to: Step 4 - Review the records (logbook) to determine the number of personal and business (employment-related) kilometers driven.

4. Review the records (logbook) to determine the number of personal and business (employment-related) kilometers driven

   If you provide a motor vehicle to your employee, they must keep a logbook or daily record of the trips made with the motor vehicle.

   The logbook or daily record will support your calculation of the vehicle benefit and any expenses your employee will claim. They must give you a copy.

   Logbook - Detailed records

   Your employee should record the details of the use of the vehicle, such as the following information in a logbook or daily record:

   • Total number of days that the vehicle was made available to them during the year
   • Total number of kilometres travelled for business (employment-related) and personal driving (on a daily, weekly or monthly basis) during the number of days that the vehicle was made available

   Learn more on what to include in a logbook: Motor vehicle records

   If no record was kept or is no longer available, you must be able to reasonably account for the number of personal and business (employment-related) kilometers driven to use the fixed rate calculation.

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   • If no record is kept or is no longer available, you cannot calculate using the fixed rate calculation.

     Continue to: Step 6 - Calculate the value of the motor vehicle benefit to be included on the T4 slip, using other calculation methods.

   • If your employee kept the detailed records and you received a copy, you may be able to calculate using the fixed rate calculation.

     Continue to: Step 5 - Determine if the motor vehicle home at night policy applies.

5. Determine if the motor vehicle home at night policy applies

   Under the CRA's administrative policy, you can use the prescribed rate per kilometre of personal driving to calculate the value of the motor vehicle benefit using the fixed rate calculation if all of the following conditions of the motor vehicle home at night policy apply:

   • The vehicle is not an automobile.
   • You tell your employee in writing that they cannot make any personal driving of the vehicle, other than travelling between work and home. Your employee kept records of the vehicle’s use as proof that there was no other personal driving.
   • You have valid business reasons for making the employee take the vehicle home at night. For example:
     • It would not be safe to leave tools and equipment at your premises or at a worksite overnight.
     • Your employee is on call to respond to emergencies (the CRA generally considers an emergency to relate to either health and safety of the general population or to a significant disruption to the employer's operations), and you provide the vehicle so the employee can respond more effectively to emergencies.
   • The motor vehicle is specifically designed or suited for your business or trade and is essential for the performance of your employee's duties. For example:
     • The vehicle is designed, or significantly modified, to carry tools, equipment, or merchandise. Your employee has to have the vehicle to do their job.
     • The vehicle, such as a pickup truck or a van, is suitable for and is consistently used to carry and store heavy, bulky, or numerous tools and equipment. It would be difficult to load and unload the contents. The vehicle is essential to your employee in performing their job.
     • The vehicle is regularly used to carry harmful or foul-smelling material, such as veterinary samples or fish and game. The vehicle is essential to your employee in performing their job.
     • Your employee is on call for emergencies, and has to use a vehicle which is:
       • A clearly marked emergency response vehicle.
       • Specially equipped to respond rapidly.
       • Designed to carry specialized equipment to the scene of an emergency.

       The CRA generally considers an emergency to relate either to the health and safety of the general population or to a significant disruption to the employer’s operations.

       Simply transporting your employee to a work location does not meet the condition of being "essential in the performance of your employee's duties".

   Examples

   Example - Does not meet all conditions

   ABC Restaurant Inc. uses a van that has been specially modified so it can be used more efficiently to transport and deliver food orders. The employer has asked the manager, Leslie, to take the van home at night in case she needs to respond to an emergency at the restaurant, such as an after hour alarm or to fill in on busy nights. Leslie is not allowed to use the van for any other personal use. Since she is the manager, her employment duties do not include delivering food orders, even on a busy night.

   ABC Restaurant cannot use the fixed rate (33 cents per kilometre) when calculating Leslie's taxable benefit. These circumstances do not meet all of the conditions of the administrative policy. Although the vehicle has been modified for business needs, Leslie does not need the van to perform her employment duties, so she does not have to bring it home for valid business reasons.

   Example - Meets all conditions

   Mary works for a gas utility company and has to be on-call two weekends out of every month. On these weekends, she has to be able to respond to emergencies directly from her home. The van, which the employer provides Mary for these weekends, displays the company's name, has a light on the roof and has been permanently modified to carry specialized equipment to the scene of the emergencies. The company has a written policy prohibiting any other personal use of these vehicles, other than driving between the worksite and home. Mary has not used the vehicle for any other personal driving other than driving from home to work and back.

   Since this situation meets all of the conditions of the administrative policy, Mary's employer may calculate the personal use of the vehicle using the fixed rate of 33 cents per kilometre.

   Prescribed rates (section 7305.1 of the ITR) per kilometre

   Prescribed rates (section 7305.1 of the Income Tax Regulations) per kilometre

   Year	Employee does not sell or leases automobiles	Employee’s source of employment is selling or leasing automobiles
   2024	$0.33	$0.30
   2023	$0.33	$0.30
   2022	$0.29	$0.29
   2021	$0.27	$0.24
   2020	$0.28	$0.25
   2019	$0.28	$0.25
   2018	$0.26	$0.23
   2017	$0.25	$0.22
   2016	$0.26	$0.23
   2015	$0.27	$0.24

   • If your employee does not meet all conditions of the motor vehicle home at night policy, do not use the fixed rate calculation.

     Continue to: Step 6 - Calculate the value of the motor vehicle benefit to be included on the T4 slip, using other calculation methods.

   • If your employee meets all conditions of the motor vehicle home at night policy, you can calculate using the fixed rate calculation.

6. Calculate the value of the motor vehicle benefit to be included on the T4 slip

   You must calculate a reasonable estimate of the fair market value (FMV) of the benefit received by your employee from their personal driving of the motor vehicle you provided, including the GST/HST and PST.

   What is considered a reasonable estimate

   A reasonable estimate is considered to be the amount an employee would have had to pay in an arm's length transaction for the use of comparable transportation. It includes items such as the cost of leasing a comparable vehicle and any other related operating costs.

   In some cases, the benefit to the employee is not the fair market value of the particular vehicle the employee has the use of, but in the fact that by using an employer-provided motor vehicle, the employee does not have to invest in and operate their own vehicle. Depending on the situation, where the only personal use is driving between the employee’s home and place of work, the value of the benefit may be measured as the personal kilometres driven multiplied by the prescribed rates in Income Tax Regulation 7306 (reasonable rate).

   Generally, the CRA accepts the following methods:

   • Reasonable allowances rate calculation (prescribed rates per kilometre from section 7306 of the ITR)
   • Fixed rate calculation, if all conditions in step 5 are met (prescribed rates per kilometre from section 7305.1 of the ITR)

   It is also acceptable to use other methods to reasonably estimate the motor vehicle taxable benefit.

   Methods to calculate

   Calculate the motor vehicle benefit using the reasonable allowances rate calculation

   Use the prescribed rate (section 7306 of the ITR) per kilometre of personal driving to calculate the motor vehicle taxable benefit:

   • Total number of kilometres travelled for personal driving
   • multiply by Reasonable allowance rate - First 5,000 kilometres
      
   • multiply by Reasonable allowance rate - Additional kilometres
      
   • equals This is the amount for the motor vehicle benefit
   • minus Any amounts your employee reimbursed you in the year for the motor vehicle benefit
      
   • equals This is the total value of the motor vehicle benefit to be included on the T4 slip in code 34

   Calculation example

   In 2022, Matthew was required to use a motor vehicle provided and owned by his employer in connection with his employment in Ontario. In reviewing his travel logbook, his employer found that he drove 10,000 km for personal driving. Matthew reimbursed the employer $300 for the personal driving of the motor vehicle. His personal driving of the motor vehicle was not limited to driving between home and work. His employer chose to calculate using the reasonable allowances rates method to determine the taxable benefit for the personal driving of the motor vehicle.

   • 10,000 km is the total number of kilometres Matthew travelled for personal driving
   • multiply by $0.61 is the reasonable allowance rate for 2022 on the first 5,000 kilometres
      
   • multiply by $0.55 is the reasonable allowance rate for 2022 on the additional kilometres
      
   • equals $5,800 ($3,050 + $2,750) is the amount for the motor vehicle benefit
   • minus $300 is the amount Matthew reimbursed for the motor vehicle benefit
      
   • equals $5,500 is the total value of the motor vehicle benefit to be included on the T4 slip in code 34
   Calculate the motor vehicle benefit using the fixed rate calculation

   Use the prescribed rate (section 7305.1 of the ITR) per kilometre of personal driving to calculate the motor vehicle benefit if all conditions in step 5 are met:

   • Total number of kilometres travelled for personal driving
   • multiply by Fixed rate
      
   • equals This is the amount for the motor vehicle benefit
   • minus Any amounts your employee reimbursed you in the year for the motor vehicle benefit
      
   • equals This is the total value of the motor vehicle benefit to be included on the T4 slip in code 34

   Calculation example

   In 2022, Matthew was required to use a motor vehicle provided by his employer in connection with his employment in Ontario. In reviewing his travel logbook, his employer found that he drove 10,000 km for personal driving. This personal driving was exclusively between home and work. The benefit met all other conditions of the motor vehicle home at night administrative policy. Matthew reimbursed his employer $300 for the personal driving of the motor vehicle.

   • 10,000 km is the total number of kilometres Matthew travelled for personal driving
   • multiply by $0.29 is the fixed rate for 2022
      
   • equals $2,900 is the amount for the motor vehicle benefit
   • minus $300 is the amount Matthew reimbursed for the motor vehicle benefit
      
   • equals $2,600 is the total value of the motor vehicle benefit to be included on the T4 slip in code 34
   Calculate the motor vehicle benefit using other acceptable methods to reasonably estimate the the taxable benefit

   You need to reasonably estimate the taxable benefit from your employee’s personal use of your motor vehicle, including the GST/HST and PST.

   What is fair market value (FMV) of the motor vehicle benefit

   The value of the taxable benefit is generally its FMV. This is generally the amount an employee would have had to pay for the same benefit, in the same circumstances, if there was no employer-employee relationship. The cost to you for the particular property, good, or service may be used if it reflects the FMV of the item or service.

   You must be able to justify your position regarding the amount of the motor vehicle benefit being reasonable.

   What is considered a reasonable estimate

   A reasonable estimate is considered to be the amount an employee would have had to pay in an arm’s length transaction for the use of comparable transportation. It includes items such as:

   • Cost of leasing a comparable vehicle
   • Any related operating costs (excluding the GST)

   What may not be considered a reasonable estimate

   If you calculate the benefit by prorating the operating costs and capital cost allowance, this does not necessarily represent the value of the benefit to your employee.

   To be a reasonable estimate, the value must correspond to the amount an employee would have had to pay for the use of the motor vehicle when used for the purpose it was designed for.

   Value of the motor vehicle benefit

   • FMV of the motor vehicle benefit
   • minus Any amounts your employee reimbursed you in the year for the motor vehicle benefit
      
   • equals This is the total value of the motor vehicle benefit to be included on the T4 slip in code 34

7. Withhold payroll deductions and calculate the GST/HST to remit

   The benefit for personal driving of a motor vehicle is a non-cash benefit.

   If the benefit is taxable, you must withhold the following deductions:

   • Withhold: Option 1

     • Income tax
     • CPP
     • EI (do not withhold)

   • Remit: Option 2

     • GST/HST in certain situations

   The amounts must be included in the pay period they were received or enjoyed.

   
   

   Learn how to calculate deductions and the GST/HST to remit on benefits: How to calculate - Calculate payroll deductions and contributions

8. Report the benefit on a slip

   If the benefit is taxable, you must report the following on a T4 or T4A slip.

   • T4 - Employee: Option 1

     Report on:

     • Box 14 - Employment Income
     • Box 24 - EI insurable earnings (for cash benefit only)
     • Box 26 - CPP/QPP pensionable earnings
     • Code 34 - Personal use of employer’s automobile or motor vehicle

   • T4A - Person or partnership that was a shareholder: Option 2

     Report on:

     • Code 028 - Other income

   Learn how to report the benefit on a slip: Fill out the slips and summaries - File information returns (slips and summaries)

References

Related

• Government Announces the 2024 Automobile Deduction Limits and Expense Benefit Rates for Businesses
• IT63R5 ARCHIVED - Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer - After 1992

Legislation