Taxable benefits for the personal use of corporate vehicles make both leasing and buying unadvisable unless you acquire a corporate vehicle that costs you less than the alternative (ie. delivery/courier, Uber or job-based rentals).
Vehicles that will cost you less than the alternative will be efficient at hauling as much cargo as required (efficiency here refers to the aggregate of hauling capacity, fuel efficiency, and drag coefficient). Remember do not choose the full-size version unless it will be 100% full at least 80% of the time.
Similar to CRA’s rule for clothes: when in doubt it has to be so business focused that you can not wear for anything but business (ex. coveralls) or drive for anything but business (ex. GMC W4500).
Approved Business Vehicles
- Mercedes-Benz Metris Cargo Van, Sprinter Cargo/Chasis
- Ford Transit Connect, Transit, Transit CC-CA
- Chevrolet City Express, Express Cutaway
- Nissan NV200 Compact Cargo, NV Cargo, Frontier*
- Toyota Tacoma*
Approved Heavy-Duty Vehicles
- GMC W4500
*Anything markedly different than the 16 examples would be difficult to prove that the acquisition costs are less than the alternatives (ie. delivery/courier, Uber or job-based rentals). To claim vehicle expenses for an unapproved vehicle, please have your corporation write you a cheque for a tax-free mileage reimbursement.
Click here for the current year’s rate: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/automobile/automobile-motor-vehicle-allowances/automobile-allowance-rates.html
There are 2 possible sources to trigger the post-assessment review (the precursor to the audit)
- When we file the corporate tax return the financial statement will have an account like “Equipment rental” and certain industry codes have an expected equipment rental amount. For example, salons have 0.
- There is also a schedule for non-leased assets which is schedule 8 and they ask the details of additions to Class 10 (vehicle code) especially if they are over $30,000.
- CRA has access to registry data and conducts post-assessment reviews to see how vehicles are being accounted for.
Protip: White vehicles are statistically the least involved in accidents. While the darker the color the higher it is statistically involved in accidents. Black is statistically the most involved in accidents.
- If you purchase a commercial van/truck, the write-off stems from CRA’s prescribed depreciation rate of 30% of the COST. This way you save the most in the early years of ownership and less and less as its worthless and less for tax purposes. Keep in mind CRA’s requirements are much stricter than the IRS so much of the information on the internet is NOT applicable. The smartest thing for you to do is to FINANCE the purchase at a low rate so that you don’t miss out on the opportunity cost of forking over a chunk all at once.
- Leases reduce your taxes by each lease payment so the write-off matches the payment and spreads it evenly over the term, and in some cases gives you optionality (which you pay for) in returning the lease.