A CRA communication dated March 7, 2018 provided updated commentary on taxable benefits arising from the personal use of a business aircraft.
CRA categorized the types of flights into three groups, as follows:
- Mixed-use flights – If a shareholder or employee takes a flight which has a clear business purpose, they would not generally be subject to a taxable benefit. An individual’s purpose is a question of fact. If others take the same flight (such as a non-employee spouse or child) for purely personal purposes, the taxable benefit would be equal to the highest priced ticket available for an equivalent commercial flight available in the open market for the accompanying individual(s).
- Full personal use flights – Where there is no business purpose to the flight, the shareholders or employees will be considered to have received a taxable benefit equal to the price of a charter on an equivalent aircraft for an equivalent flight in the open market (split amongst relevant individuals on the flight). Limited exceptions may apply where an open market charter is not a viable option.
- Full personal use by non-arm’s length persons – For shareholders or employees who do not act at arm’s length with the business (such as an owner who controls the business), where the aircraft is used primarily for personal purposes relative to the aircraft’s total use, the taxable benefit will equal their portion of the aircraft’s operating costs plus an available-for-use amount. The available-for-use amount is computed as the original cost multiplied by the prescribed interest rate for the percentage of personal usage. The available-for-use amount on leased aircrafts is based on the monthly leasing costs of the actual usage multiplied by the proportion of personal usage.
Taxable benefits in respect of passengers that are non-employee family members or friends would be assessed on the shareholder or employee.
If employees are using a business aircraft for personal use, attention should be paid to whether employment benefits are being properly calculated and reported.