Principal Issues: Whether automobile or other vehicle benefit should be included in employees’ income (in service 24 hours-a-day and 365 days per year) in a situation where their employer provides them a vehicle that is clearly marked as an emergency vehicle that carries all necessary emergency equipment in order to enable them to quickly get to the scene of an emergency?
Position: In general, yes.
Reasons: Where the vehicle provided to the employee is not an automobile, the amount of the benefit is to be calculated based on the employee’s personal use of the vehicle and included in income under paragraph 6(1)(a) of the Act, and otherwise under paragraphs 6(1)(e) and (k) of the Act.
XXXXXXXXXX N. Deslandes, CPA, CGA, D. Fisc. 2017-068924 March 9, 2017
Dear Sir,
Subject: Taxable benefits for automobiles or other vehicles
This letter is in response to your correspondence which was forwarded to us on January 31, 2017, in which you expressed your concerns regarding the inclusion of automobile or other vehicle benefits in the calculation of the income of fire department chiefs.
You indicated that the employer generally provides fire chiefs who are on call 24 hours a day throughout the year with a clearly identified vehicle equipped with all emergency equipment to enable them to get to an emergency scene quickly.
In this situation, you consider that no automobile or other vehicle benefits should be included in the income of the fire chiefs. Specifically, you refer to the amendments made in 2003 to the definition of "automobile" (footnote 1) in order to exclude, among other things, certain types of pickup trucks as well as a clearly marked emergency-response vehicle that is used in connection with or in the course of an individual’s office or employment with a fire department or the police. In your view, these amendments were intended to eliminate the inclusion in income of any benefit relating to automobiles or other vehicles.
You are asking for clarification on this subject.
Our comments
This technical interpretation provides general comments about the provisions of the Act and related legislation, where referenced. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R7, Advance Income Tax Rulings and Technical Interpretations, dated April 22, 2016. We are, however, prepared to offer the following general comments, which may be of assistance.
Generally, the Act provides that any employee who uses a vehicle provided by his or her employer for personal purposes must include a benefit in his or her income. The method of calculating this benefit varies depending on whether the vehicle in question is an "automobile" within the meaning of subsection 248(1) of the Act.
Thus, it is necessary to determine whether or not the vehicles that the fire chiefs use are automobiles. One of the criteria for an emergency response vehicle to be excluded from the definition of automobile is that it must, in particular, be "clearly identified". Such a vehicle is generally considered to be clearly identified if it is readily identifiable by the general public as a police or fire vehicle because of symbols or lettering on the exterior of the vehicle.
Generally, where an employee benefits from a vehicle provided by his or her employer that is an automobile, the employee must include in his or her income a benefit that includes two components: operating expenses and standby charges. The computation of such a benefit takes into account the fact that the automobile is made available to an employee for personal use, even if it is not used for such purpose.
However, if an employee benefits from a vehicle that does not meet the definition of automobile, there is still a benefit to the employee under paragraph 6(1)(a) where the vehicle is used for personal purposes. The employer must make a reasonable estimate of the fair market value of that benefit for the employee and include it in the employee's income. There is no standby charge for the availability of this vehicle and there are no operating expenses.
In conclusion, the 2003 amendments to the definition of automobile do not eliminate the requirement of the Act to include in income a benefit in respect of a vehicle provided by an employer and used for personal purposes. Rather, the amendments affected the methodology for calculating the benefit. In this regard, the amount to be included in income as a benefit for a vehicle that does not meet the definition of automobile is generally less than the amount that results from the computation of an automobile benefit.
If you would like more information on this subject, please visit the CRA web page entitled Facts about automobile and other vehicle benefits and automobile allowances found at www. cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/tmbl/fcts-eng.html. You can also refer to Chapter 2 of the T4130 - Employers' Guide - Taxable Benefits and Allowances at: http://www.cra-arc.gc.ca/E/pub/tg/t4130/README.html
Best regards,
Danny Gagnon, CPA, CA, M. Fisc.
Interim Manager
Business and Employment Income Division
Income Tax Rulings Directorate
Legislative Policy and
Regulatory Affairs Branch
FOOTNOTES
Due to our system requirements, footnotes contained in the original document are reproduced below:
1 This definition, provided for in subsection 248(1) of the Income Tax Act (the “Act”), was amended following Royal Assent to Bill C-28 on June 19, 2003.