Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Marginal note:Limitation re cost of leasing passenger vehicle

67.3 Notwithstanding any other section of this Act, where

• (a) in a taxation year all or part of the actual lease charges in respect of a passenger vehicle are paid or payable, directly or indirectly, by a taxpayer, and

• (b) in computing the taxpayer’s income for the year an amount may be deducted in respect of those charges,

in determining the amount that may be so deducted, the total of those charges shall be deemed not to exceed the lesser of

• (c) the amount determined by the formula

  (A × B)/30 - C - D - E

  where

  A

  is $600 or such other amount as is prescribed,

  B

  is the number of days in the period commencing at the beginning of the term of the lease and ending at the earlier of the end of the year and the end of the lease,

  C

  is the total of all amounts deducted in computing the taxpayer’s income for preceding taxation years in respect of the actual lease charges in respect of the vehicle,

  D

  is the amount of interest that would be earned on the part of the total of all refundable amounts in respect of the lease that exceeds $1,000 if interest were

  • (i) payable on the refundable amounts at the prescribed rate, and

  • (ii) computed for the period before the end of the year during which the refundable amounts were outstanding, and

  E

  is the total of all reimbursements that became receivable before the end of the year by the taxpayer in respect of the lease, and

• (d) the amount determined by the formula

  (A × B)/0.85C - D - E

  where

  A

  is the total of the actual lease charges in respect of the lease incurred in respect of the year or the total of the actual lease charges in respect of the lease paid in the year (depending on the method regularly followed by the taxpayer in computing income),

  B

  is $20,000 or such other amount as is prescribed,

  C

  is the greater of $23,529 (or such other amount as is prescribed) and the manufacturer’s list price for the vehicle,

  D

  is the amount of interest that would be earned on that part of the total of all refundable amounts paid in respect of the lease that exceeds $1,000 if interest were

  • (i) payable on the refundable amounts at the prescribed rate, and

  • (ii) computed for the period in the year during which the refundable amounts are outstanding, and

  E

  is the total of all reimbursements that became receivable during the year by the taxpayer in respect of the lease.