Vol. 149, No. 12 — June 17, 2015
SOR/2015-122 May 29, 2015
INCOME TAX ACT
Regulations Amending the Income Tax Regulations (Motor Vehicle Expenses and Benefits 2015)
P.C. 2015-634 May 28, 2015
His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 221 (see footnote a) of the Income Tax Act (see footnote b), makes the annexed Regulations Amending the Income Tax Regulations (Motor Vehicle Expenses and Benefits 2015).
REGULATIONS AMENDING THE INCOME TAX REGULATIONS (MOTOR VEHICLE EXPENSES AND BENEFITS 2015)
1. Paragraph 7306(a) of the Regulations is replaced by the following:
- (a) the product of 49 cents multiplied by the number of those kilometres;
2. Section 1 applies to kilometres driven after 2014.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
As the costs of acquiring, financing and operating a motor vehicle change, the rates, limits and ceiling (described below) are adjusted through amendments to the Income Tax Regulations (ITR) to reflect changes in the underlying costs.
The Income Tax Act (the Act) contains several rules related to the treatment of automobile expenses and benefits for businesses and employees. These rules, described in detail below, use various rates and limits to reflect the costs of automobile usage. These are assessed each year to determine if they need to be adjusted to reflect changes in the costs of acquiring, financing and operating an automobile.
There are five prescribed limits and rates that help define the level of automobile expense deductions and taxable benefits under the Act.
- — The capital cost ceiling restricts the cost of an automobile on which capital cost allowance may be claimed. The ceiling is set under subsection 7307(1) of the ITR.
- — The interest expense limit restricts the deductibility of interest related to financing the purchase of an automobile that costs more than the capital cost ceiling. The limit is set under subsection 7307(2) of the ITR.
- — The leasing limit restricts the deductibility of automobile leasing costs. The limit is set under subsection 7307(3) of the ITR.
- — The tax-exempt per-kilometre allowance limit is a simplifying provision allowing employers to deduct, at a rate no higher than the prescribed limit, the cost of reimbursing employees who use their personal vehicle for business use. The limit is set under section 7306 of the ITR.
- — The operating expense benefit rate determines the amount of an employee’s taxable benefit where an employer pays the operating costs of an automobile that the employee uses for personal purposes. The rate is set under section 7305.1 of the ITR.
To reflect changes in the cost of acquiring, financing and operating automobiles for business purposes, as announced by the Minister of Finance in a news release entitled “Government Announces 2015 Automobile Deduction Limits and Expense Benefit Rates for Business” issued by the Department of Finance on December 23, 2014.
As announced in the news release, the current tax-exempt per-kilometre allowance limits are increased by 1 cent per kilometre as of 2015, to generally 55 cents per kilometre for the first 5 000 kilometres and to 49 cents per kilometre for subsequent kilometres.
No changes are needed to the capital cost ceiling, the interest expense limit, the leasing limit and the operating expense benefit rates.
These Regulations are not expected to impose new administrative costs on business. Therefore, the “One-for-One” Rule does not apply.
Small business lens
These Regulations are not expected to impose significant new compliance and administrative costs on small business. Therefore, the small business lens does not apply.
Canadians in general were given opportunities to comment on the recommended changes following the December 23, 2014, issuance of the news release by the Department of Finance via its Web site. No comments have been received.
The amendment continues an annual process, and is necessary to ensure the rates and limits remain appropriate and reflect changes in the costs associated with acquiring, financing and operating an automobile for business purposes.
Implementation, enforcement and service standards
The Act provides the necessary compliance mechanisms. These mechanisms allow the Minister of National Revenue to assess and reassess tax payable, conduct audits and seize relevant records and documents.
Tax Legislation Division
Department of Finance
James Michael Flaherty Building
90 Elgin Street