Two February 7, 2017 French Technical Interpretations (2016-0674811C6, Deslandes, Nancy, and 2016-0674801C6, Brulotte, Isabelle) provided comments on whether certain allowances paid to employees for the business use of their personal vehicles were reasonable, as well as certain other related matters.

An allowance that is too high or not high enough in relation to expenses that an employee is expected to incur in a specific situation is unreasonable. As such, the amount should be included in the employee’s income.

reviewing the allowance policy

CRA noted that where the employee may not receive an allowance for some kilometres driven for employment purposes, the allowance may not be high enough in relation to expected expenses and, therefore, be unreasonable. This could be the case where, for example:

• an employee is provided a per kilometre amount, up to a maximum number of kilometres, after which no allowance is provided;
• an employee is provided a per kilometre amount, but only for the portion of the trip that exceeds a certain number of kilometres; or
• an employee is provided a per kilometre amount, but only to the lesser of the actual distance travelled or the distance to and from the employer’s place of business.

Requirement for Employer to Provide Form T2200
CRA also noted that in order to deduct employment expenses, Subsection 8(10) establishes certain conditions that must be met, including that the employee have a prescribed form (Form T2200) from the employer which certifies that the conditions in Paragraph 8(1)(h.1) are met. The employer is not required to complete or sign Form T2200. However, CRA expects to employers to complete Form T2200 when appropriate.

Electric Vehicles
CRA noted that they do not have a specific policy on per kilometre allowances for an electric vehicle. As such CRA’s general position should be considered.

Similarly, specific rules do not exist for the operating benefit related to an electric car. As such, taxpayers should look to Paragraph 6(1)(k) and Regulation 7305.1, which note that the operating benefit should be $0.25/km for a regular employee and $0.22 for an auto salesperson in 2017.