Vol. 142, No. 16 — August 6, 2008

Registration

SOR/2008-237 July 28, 2008

EXCISE TAX ACT

Regulations Amending the Automobile Operating Expense Benefit (GST/HST) Regulations

P.C. 2008-1349 July 28, 2008

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to clause 173(1)(d)(vi)(A) (see footnote a) and section 277 (see footnote b) of the Excise Tax Act (see footnote c), hereby makes the annexed Regulations Amending the Automobile Operating Expense Benefit (GST/HST) Regulations.

REGULATIONS AMENDING THE AUTOMOBILE
OPERATING EXPENSE BENEFIT
(GST/HST) REGULATIONS

AMENDMENTS

1. (1) The portion of paragraph 2(a) of the Automobile Operating Expense Benefit (GST/HST) Regulations (see footnote 1) before subparagraph (i) is replaced by the following:

(a) 9% if

(2) Paragraph 2(b) of the Regulations is replaced by the following:

(b) 3%, in any other case.

APPLICATION

2. Section 1 applies to amounts that are required to be included in computing an individual’s income for the purposes of the Income Tax Act for the 2008 and subsequent taxation years.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issue and objectives

The amendments to the Automobile Operating Expense Benefit (GST/HST) Regulations (the Regulations) are consequential to the January 1, 2008 rate reduction in the goods and services tax (GST) and federal component of the harmonized sales tax (HST). Amending the Regulations is necessary to ensure that the appropriate amount of GST/HST is remitted in respect of automobile operating expenses paid by an employer or corporation and incurred in relation to the personal use of an automobile by an employee or shareholder.

Description and rationale

Automobile operating expense benefits are benefits that are based on the amounts paid by an employer or corporation for automobile operating expenses incurred in relation to the personal use of an automobile by an employee or shareholder. Such benefit amount is included in the employee’s or shareholder’s income for income tax purposes. In addition, the GST or HST is applicable to the benefit, and the employer or corporation must account for and remit the GST/HST at a prescribed rate. The Regulations prescribe the rates of GST and HST applicable to the value of the benefit reported by the employee or shareholder. The prescribed rates are lower than the GST and HST rates to reflect the fact that a portion of the total automobile operating expense benefit reported for income tax purposes relates to GST and HST-exempt expenses such as insurance.

On October 30, 2007, the Government’s 2007 Economic Statement proposed to implement a one percentage point reduction in the GST and federal component of the HST from 6% to 5% effective January 1, 2008. Consequential to the GST/HST rate reduction, the 2007 Economic Statement also proposed revised prescribed rates for automobile operating expense benefits. The amendments to the Regulations reduce the prescribed rate from 10% to 9% in respect of the HST and from 4% to 3% in respect of the GST. The costs of the amendments were taken into account at the time of the 2007 Economic Statement.

The revised rates will apply to amounts that are required to be included in computing an individual’s income for 2008 and subsequent taxation years.

Consultation

On October 30, 2007, as a part of the 2007 Economic Statement, the Minister of Finance announced the Government’s plan to reduce the GST and federal component of the HST by one percentage point. Materials relating to the Economic Statement were prepared at that time and outlined the proposed amendments contained in these Regulations. Canada Revenue Agency (CRA) prepared a GST/HST Info Sheet and a GST/HST Notice regarding the proposed rate reduction, which were published on CRA’s Web site. These documents contained the proposed revised automobile operating expense benefit rates.

Contacts

Ryan Stammers
Sales Tax Division
Department of Finance
L’Esplanade Laurier
140 O’Connor Street
Ottawa, Ontario
K1A 0G5
Telephone: 613-943-2908

Excise GST/HST Rulings Directorate
Canada Revenue Agency
Place de Ville, 16th Floor
Ottawa, Ontario
K1A 0L5
Telephone: 613-952-0301

Footnote a
S.C. 1997, c. 10, s. 22(1)

Footnote b
S.C. 1993, c. 27, s. 125(1)

Footnote c
R.S., c. E-15

Footnote 1
SOR/99-176

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