Is an employer entitled to deduct from an employee's income tax allowance for the first 5,000 kilometres of driving expenses?
Canada (Federal), Canada
The following excerpt is from Ville de Beauport v. Canada (Minister of National Revenue), 2001 FCA 198 (CanLII):
Furthermore, under section 7306 of the Income Tax Regulations, a company could deduct a maximum of 31 ¢ /km for the first 5 000 kilometres for allowances paid to employees who use their vehicles during the period at issue. Although the limits prescribed under that section are not applicable to subparagraph 6(1)(b)(vii.1) of the Act, they constitute nevertheless a useful reference point to determine what the legislator considers to be a reasonable allowance (O'Connel v. The Queen, 98 D.T.C. 2155, at page 2158 (T.C.C.)). At the very least, the Regulations suggest that an amount higher than 31 ¢ /km would exceed the reasonable amount an employer could deduct in consideration for an allowance.
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