Do your employees receive an employment related benefit? The Canada Revenue Agency (CRA) considers a benefit to mean when the employer pays or gives something personal in nature to the employee. The result of the personal benefit is a taxable benefit.
One of the most common taxable benefits is related to the use of an employer provided automobile or employee owned vehicle. An employer provided automobile results in a taxable benefit to the employee when the vehicle is available to the employee for personal use. Both Federal and Quebec Tax Acts require the benefit to be reported as such.
When calculating the benefit of an employer provided automobile, the stand-by charges, the operating costs, and any reimbursements provided by the employee, must be taken into consideration. The use of this calculation is only used when an employee uses a company vehicle or a company leased vehicle.
On the other hand, an employer may require the employee to use his/her personal vehicle for business purposes. The amount paid to the employee for the use of the vehicle may result in a taxable benefit when the employer reimburses the employee for mileage using a rate other than the CRA prescribed rate. A flat amount provided to the employee for the use of the vehicle is considered an allowance and it is considered taxable.
Employers should be aware of the different payments that could potentially result in a taxable benefit to their employees, as these are considered other forms of remunerations.
For more information on taxable benefits, follow the links below or reach out to your PEO Payroll Administrator!
Jeanette Benedith, PCP / Payroll Administrator / PEO Canada