Per-kilometre allowance rates that CRA does not consider reasonable
If you pay your employee an allowance based on a per-kilometre rate that we do not consider reasonable because it is either too high or too low, it is a taxable benefit and has to be included in the employee’s income.
Flat-rate allowance
If you pay your employee an allowance based on a flat rate that is not related to the number of kilometres driven, it is a taxable benefit and has to be included in the employee’s income.
Combination of flat-rate and reasonable per-kilometre allowances
If you pay your employee an allowance that is a combination of flat-rate and reasonable per-kilometre allowances that cover the same use for the vehicle, the total combined allowance is a taxable benefit and has to be included in the employee’s income.
Some tax planning strategies are available to minimize taxes due to this benefit, see your financial advisor or contact us.
