The Government of Canada makes it expensive to have personal use vehicles held in a corporation as a taxable benefit will be deemed to have been provided and HST on top of that benefit will be also be required to be remitted too. Then on top of that there will be payroll taxes. It does not matter if the vehicle is purchased or leased. The calculations will be different but the conclusion will be the same. To make things worse, if the vehicle has a cost of more than $30,000 the amount that may be depreciated over time for income tax purposes is restricted to the first $30,000. It is not hard to see that over a few years you will have paid for the vehicle twice, once upon the purchase and twice in income taxes. For full details on calculating the amount of taxable benefit for having a company vehicle, see the CRA web site.https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/automobile/automobile-motor-vehicle-benefits/calculating-automobile-benefits.html Note that the calculations can be complex and likely to be done incorrectly. That is another reason to avoid having a personal use vehicle held by a corporation. What can be done? If there is absolutely no way to get a vehicle outside the company, buy a less expensive vehicle. You should want reliable transportation and a vehicle that looks presentable. I purchased an 8 year old Ford Fusion with all-wheel drive and a three year/60,000km warranty for about $13,000 tax included. The car looks good and I have received compliments about it. The taxable benefit will be much smaller and capital cost allowance will be available on the full price. The lower the cost of the vehicle, the lower the taxable benefit from holding the vehicle in a corporation. I believe the best solution is to purchase a vehicle under your own name. If you use the car for business, not including going from home to work and back, bill your company for the kilometres driven. The amount will be deductible by the company and not taxable by the recipient. The 2017 CRA rate for the automobile allowance is 54¢ per km for the first 5,000km and 48¢ thereafter. Input tax credits may be claimed on the automobile allowance. For the moment, there is still a tax deferral for Canadian controlled private corporations. The Ontario combined Federal and Ontario rate is 15% as opposed to a top personal rate of over 53%. If you can spend less on personal expenses by, for example, driving a less expensive car, you reduce feeding the government beast and the Justin’s virtue signaling. If you have concerns as to whether or not you are managing your vehicles optimally for income tax purposes, call me to arrange a complimentary consultation to discuss what can be done.
Steven Agulnik, B.Comm., CPA, CGA Certified Quickbooks Pro Advisor 202 O’Connor Street Ottawa, Ontario K2P1T6 613-233-0028 email@example.com