When an employer pays reasonable motor
vehicle allowances to an employee for the
reimbursement of the employee's motor vehicle expenses
while on the job (see Tax free
motor vehicle allowances),
an input tax credit can be claimed.
The GST rate was reduced from 7% to 5% effective January 1,
2008, which changed the rates to be used for input tax credits on motor
vehicle allowances.
The input tax credit amount for 2008 and later years
is:
15/115 x the allowance when the expenses are incurred in a province with
15% HST
14/114 x the allowance when the expenses are incurred in a province
with 14% HST
13/113 x the
allowance when the expenses are incurred in a province with 13% HST
12/112 x the allowance when the expenses are incurred in a province
with 12% HST
5/105 x the
allowance when the expenses are incurred in a GST
province.
The input tax credit amount for July 1, 2006 to December
31, 2007 was:
14/114 x the
allowance when the expenses are incurred in an HST
province, and
6/106 x the
allowance when the expenses are incurred in a GST
province.
The input tax credit amount prior to July 2006 was:
15/115 x the
allowance when the expenses are incurred in an HST
province, and
7/107 x the
allowance when the expenses are incurred in a GST
province.