Allowance for the Use of a Motor Vehicle
An allowance received by an employee for the use of a motor vehicle is taxable unless it is considered a reasonable allowance.
An allowance is considered reasonable if the following conditions are met:
- The allowance is calculated solely on the basis of the actual number of kilometres the vehicle is used by the employee in the performance of his or her duties.
- The per-kilometre rate is reasonable.
- You do not pay an allowance and also reimburse the employee for some or all of the expenses related to the use of the vehicle, unless the reimbursement is for supplementary business insurance, tolls or ferry charges not covered by the allowance.
Therefore, if the allowance you pay an employee for the use of a motor vehicle is reasonable, it does not have to be included on the RL-1 slip, as this allowance is not taxable.
However, if the allowance is not reasonable, you must include the full amount of the allowance in boxes A, G, I and L of the employee's RL-1 slip (see courtesy translation RL-1-T).
Reasonable per-kilometre rate
As a rule, the per-kilometre rate we consider reasonable is the rate that an employer subject to income tax can use to calculate the amount of the allowance they can deduct as a business expense under Québec tax laws and regulations.
The type of vehicle and the driving conditions may also be taken into consideration in determining whether a given rate is reasonable. A rate that does not cover the expenses incurred by the employee is not considered reasonable.
|Year||First 5,000 kilometres||Additional kilometres|
Lump-sum allowance combined with a reasonable per-kilometre allowance
If you pay a lump-sum allowance that is not based on the number of kilometres travelled, the allowance is taxable and must be included in boxes A, G, I and L of the employee's RL-1 slip.
If you pay, for the use of the same motor vehicle, both a lump-sum allowance and an allowance based on the number of kilometres travelled, both allowances are taxable and must be included in boxes A, G, I and L of the employee's RL-1 slip.
Deduction for the use of a motor vehicle
An employee who meets the requirements set out in the Taxation Act can claim a deduction for the use of a motor vehicle in their income tax return.
For more information about employment expenses and the forms to be completed, see IN-118-V, Employment Expenses.