Principal Issues: Whether a CUV is considered similar to a pick-up truck or van for the purposes of paragraph (e) in the definition of "automobile" in subsection 248(1) of the Act.
Position: Question of fact.
Reasons: To the extent that a CUV has the same utility and function as an SUV, it will be considered a similar vehicle to a pick-up truck or van for the purposes of paragraph (e) in the definition of "automobile" in subsection 248(1) of the Act.
June 29, 2011
Melissa Drapeau HEADQUARTERS GST/HST Audit & Examination Directorate Income Tax Rulings Compliance Programs Branch Directorate 112 Kent Street, Tower B T. Posadovsky Ottawa ON K1A 0L5
2011-040817
Crossover Utility Vehicles and the Definition of Automobile
We are writing in reply to your correspondence dated May 31, 2011, in which you ask whether a crossover utility vehicle ("CUV") is considered similar to a pick-up truck or van for the purposes of paragraph (e) in the definition of "automobile" in subsection 248(1) of the Income Tax Act (the "Act").
An "automobile", for the purposes of the Act, is defined as a motor vehicle that is designed or adapted primarily to carry individuals on highways and streets and that has a seating capacity for not more than the driver and 8 passengers. However, vehicles such as ambulances and clearly marked emergency-response fire or police vehicles are excluded from the definition. Paragraph (e) of the definition also excludes a vehicle:
(i) of a type commonly called a van or pick-up truck, or a similar vehicle, that has a seating capacity for not more than the driver and two passengers and that, in the taxation year in which it is acquired or leased, is used primarily for the transportation of goods or equipment in the course of gaining or producing income; and
(ii) of a type commonly called a van or pick-up truck, or a similar vehicle, the use of which, in the taxation year in which it is acquired or leased, is all or substantially all for the transportation of goods, equipment or passengers in the course of gaining or producing income.
Whether or not a vehicle is considered an "automobile" is relevant to the limitation on the depreciable cost of a passenger vehicle, the equivalent restrictions on deductible lease payments in respect of leased passenger vehicles, the limitation on the deductibility of interest expenses with respect to passenger vehicles, and for the purpose of calculating employment-related benefits such as the automobile operating expense benefit and the reasonable standby charge. The definition is also relevant for the purposes of the Excise Tax Act.
A sport utility vehicle ("SUV") is a generic term describing a vehicle that has an increased passenger or cargo-carrying space similar to that of a van, but also enhanced performance features similar to a pick-up truck. SUVs are typically built on a light-duty truck chassis for sturdiness and strength, often equipped with four-wheel drive for on- or off-road use and may also have the ability to tow heavy loads. "CUV" is a marketing term that may include some SUVs, but generally includes vehicles built on lighter platforms with performance and fuel-efficiency more similar to a car than to a truck. CUVs typically have an increased cargo-carrying capacity but may not necessarily have the same towing or off-road capabilities of an SUV.
As you indicated in your correspondence, the Canada Revenue Agency considers an SUV to be similar to a pick-up truck or van for the purposes of paragraph (e) in the definition of "automobile" in subsection 248(1) of the Act. It is our understanding that the CUV classification includes vehicles previously marketed as SUVs but also vehicles similar to a station wagon, which you are aware is not excluded from the definition. Consequently, we are not in a position to categorically state that CUVs are similar to a pick-up truck or van. In our view, a particular CUV will be considered a "similar vehicle" to a pick-up truck or van for the purposes of paragraph (e) in the definition of "automobile" in subsection 248(1) of the Act only to the extent that it has the same utility and function as an SUV.
We trust our comments will be of assistance to you.
Yours truly,
Randy Hewlett
Manager
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch