Facts about automobile and other vehicle benefits and automobile allowances
You often provide your employees with tangible goods that they can use for their personal benefit outside the work environment. In these situations, we say that the employees are in receipt of a benefit. Unless the benefit is specifically exempted in the Income Tax Act or by the Canada Revenue Agency's (CRA) administrative policy, you must include the value of the benefit or the amount of the allowance in the employee's income.
When you provide an employee with a vehicle or give an allowance to an employee who then uses their own vehicle, the employee may be in receipt of a taxable benefit. However, there are many difficulties and complexities associated with the benefit or allowance. Refer to the following questions for clarification:
- What is and what is not an automobile
- When does a benefit arise (the personal use)
- How to calculate the benefit for employer provided automobiles and other vehicles
- How to calculate the allowance you give to your employee for using their own automobile or other vehicle
If the employee does not use the vehicle for personal driving, there is no taxable benefit even if the vehicle was available to the employee for the entire year. This applies as long as you require the employee to use the vehicle in the course of their employment.
A shareholder of a corporation may use a vehicle supplied by the corporation for purposes other than the corporation's business. The shareholder's personal use of a vehicle that is either owned or leased by the corporation is a taxable benefit to the shareholder if the shareholder is also an employee and has access to the vehicle in their capacity as an employee.
If the vehicle is made available to a shareholder who is not also an employee, the value of the benefit is included in the shareholder's income as a "benefit conferred on a shareholder". Generally, all driving by a shareholder who is not an employee of the company is considered personal unless it can be substantiated as being for business purposes.
Although the shareholder's benefit is calculated in the same manner as the benefit for a shareholder who is also an employee, it is reported differently:
- the taxable benefit for an employee/shareholder is reported on a T4 slip
- the shareholder benefit is reported on a T4A slip
Self-employed or member of a partnership
If you are a self-employed individual or an individual who is a member of a partnership who personally owns or leases a vehicle to earn income from the business, this information does not apply to you. For more information, see Archived Interpretation Bulletin IT-521R, Motor Vehicle Expenses Claimed by Self-Employed Individuals and Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.
Forms and publications
- Guide T4130, Employers' Guide – Taxable Benefits and Allowances
- Archived 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
- Archived Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations
- Income Tax Folio S2-F3-C2, Benefits and Allowances Received from Employment
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