What is the maximum vehicle allowance an employer can pay to an employee?
Our Canadian Income Tax Act sets fixed amounts per kilometre as reimbursement to employees for motor vehicle expenses acquired while using their personal vehicle to commute for business purposes. Employers can pay their employees this much, tax free:
First 5,000 km: $0.54
Over 5,000 km: $0.48
Please note that the CRA can tax these vehicle allowances if the employer pays a rate that is too low or too high and therefor not acceptable, or if he/she pays a rate that is not dependant on the amount of kilometres accumulated by the employee.
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