Ask the Expert… How do I calculate vehicle allowance rates for my employees when they use their personal ZEVs for business?
With so many incentives being offered by the BC and federal governments to encourage zero-emission vehicle (ZEV) adoption, you’re likely to see some of your business’s employees arriving to work in ZEVs soon. If your employees use their personal ZEVs for business purposes, they’ll want to be reimbursed for the associated expenses the same as if they were driving a conventional internal combustion engine vehicle. In this case, you may be wondering if you have to reimburse them differently since the fuel they use (e.g., electricity pulled from an outlet at their home) is purchased and priced in a different manner than fossil fuels.
The good news is the reasonable per-kilometre vehicle allowance rates prescribed in section 7306 of the Income Tax Regulations don’t differentiate between conventional internal combustion engine vehicles and ZEVs when it comes to the reasonable allowance rates you can use.
For 2022, the reasonable vehicle allowance rates prescribed by the CRA are 61¢ per kilometre for the first 5,000 kilometres driven, and 55¢ per kilometre driven after that. Any allowances paid at these rates are considered reasonable and not considered a taxable benefit if:
- The allowance is based on the number of business kilometres driven in a year
- The employee is not reimbursed for expenses related to the same use of the vehicle
These rates represent the maximum amount that you, as an employer, can deduct as business expenses; however, they can be used as a guideline to determine if the allowance paid is reasonable or not. The type of vehicle, such as a ZEV, is one factor to consider.
Visit the reasonable allowance rates page on the CRA Website for more information.