Do I have to include a taxable benefit in my income for a company provided car?

Question:

My corporation owns a vehicle and its available for me to use. Are there any tax implications?

Answer:

When a corporation owns a vehicle and provides it to an employee’s for usage, the personal KM’s driven are considered a taxable benefit. Therefore, when you file the employee’s T4 slip a standby charge and operating cost benefit should be calculated and reported on the T4 slip. The standby charge formula is as follows:

A/B x [2% x (C x D)]

Where:

A = the lessor of
i) the personally used KM’s with the corporation owned vehicle (e.g. 4,000 km)
ii) the total days the vehicle was available divided by 30 (e.g.. 360 days / 30)

B = 1,667 KM x ( total days available/30) (e.g. 360 days available/30)

C = Original cost of the vehicle which includes HST

D = total days available / 30 (e.g. 360 days available/30)

The value for A is deemed to equal B unless the vehicle is used primarily (more than 50%) for purposes of employment.
The operating cost benefit is calculated as follows:

If the vehicle is not used primarily 50% or more for employment duties, for each personal kilometer driven a $0.26 per/KM inclusion is added. If the vehicle is used for primarily (50% or more) for employment duties you may choose to elect for a 50% operating cost inclusion of the total stand by charge. You must notify your employee within 45 days after the tax year end to utilize this election.

You can use the CRA’s automatic standby charge and operating cost benefit calculator online for a quick and easy calculation:
click here.

ABOUT THE AUTHOR

ALLAN MADAN

CA.CPA.CGA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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