What are the tax consequences if my Ontario corporation provides me with a car?
When a corporation owns or leases a vehicle and makes it available to a shareholder or employee for personal use, the shareholder must include a taxable benefit in their personal income. The benefit has two components: a standby charge based on the original cost or lease cost of the vehicle, and an operating expense benefit based on the personal kilometres driven.
The standby charge is calculated as a percentage of the original cost of the vehicle (for owned vehicles) or a percentage of the lease payments (for leased vehicles), multiplied by the number of months it was available. It can be reduced if personal use is less than 50% of total kilometres and the vehicle is used at least 50% for business.
The operating expense benefit is a flat amount per personal kilometre driven, set by the CRA annually — confirm the current rate each year. Shareholders who are also employees can elect to include half the standby charge as the operating expense benefit instead of the per-kilometre calculation if that is less.
Keep a detailed mileage log distinguishing business and personal trips. The CRA frequently reviews automobile benefits and requires contemporaneous records. Personal use of a corporate vehicle is not a tax-free perk — model the cost against whether a personal vehicle with a business use claim produces a better result.
Key takeaways
- A corporate vehicle available for personal use creates a taxable standby charge and operating benefit.
- Both components must be included in personal income and reported on the T4 or T5.
- A mileage log distinguishing business and personal kilometres is required by the CRA.
- Compare the corporate vehicle benefit cost against a personal vehicle with a business deduction.