Should an employee vehicle allowance that is too low (related to expected expenses) be included in the employee's income?

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.

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.

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.

For further information see Video Tax News Monthly Tax Update Newsletter, Issue No. 429