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JCL · #2 04-02-2008, 11:42 PM

Not an accountant here, but I have had company cars for years, and I am a Canuck (not a Canook, lol).

Assume for the following that your car is not used extensively for business transactions (ie doing deliveries) but rather is used primarily to drive back and forth to work, plus some client visits.

First, you need to insure the vehicle for business purposes. Varies from province to province, but it costs more than insurance for pleasure use only, or for driving to/from work only.

Next, if the company provides you a vehicle, or an allowance for a vehicle, or pays any expenses for the vehicle then it is income. Not at 25% as in your example, but the actual value of the benefit you receive. In my case that starts with the allowance, the cost of the insurance, the cost of the fuel, etc.

How much of that income is taxable? Say I drive 10,000 km per year, and 1,000 km are for business purposes. Then, 90% of the allowance/insurance/fuel/etc noted above is taxed as income. Business km do not include driving to and from work, even if you make a sales call, those are personal km. All of this must be supported with a log book. You don't have to produce the log book unless requested by CRA.

Plan on a marginal tax rate of 42%, as it varies by province. That is a SWAG, not a calculated average, but it works where I live.

There are some additional details around interest expense. No particular benefit to leasing, it doesn't create a tax advantage so it is more about wanting to get a new car every few years and not having to sell your old car, if you want to lease.

Company cars have largely disappeared, as there is no tax advantage. Car allowances, with vehicles owned by the individual, are more common in my experience.

The good news is that vehicles are cheaper, as is fuel, compared to Europe.

All of the above is from a non-accountant, but is based on my experience. YMMV.

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