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The CBAA is concerned about possible changes to the taxable benefit structure surrounding personal use of corporate aircraft. Eric Dumigan Photo
The Canadian Business Aviation Association (CBAA) is investigating suggestions that the Canada Revenue Agency (CRA) is preparing to clamp down on personal use of corporate aircraft by increasing the value of the taxable benefit which accrues from non-business use.
In an “urgent” email to his membership on March 14, CBAA president Rudy Toering explained that the core concern is what is understood to be a proposed ten-fold increase in that value.
“We understand that the CRA has changed both its approach to determining the fair market value of such flights, as well as the permissibility of certain fixed expenses and capital deductions,” he said. “The previous interpretation was that if an owner uses his business aircraft for personal use, the taxable benefit was the equivalent of the cost of a first class airline ticket.”
Put simply, if the CBAA’s worst fears are realized, the taxable benefit on a Toronto-Vancouver round trip could be deemed to be worth close to six figures for an executive who needed to be on the West Coast for a week, departing on a Sunday and returning the following Saturday.
For comparison’s sake, the actual hourly operating cost of a newish Bombardier Challenger jet, including fuel and routine maintenance, is approximately $2,000.
Assuming five hours each way, Skies calculates the travel benefit to the executive would be worth only about 20 per cent of the value the CRA could propose for income tax purposes.
Toering also said that at least one of the 30 operators he understands are being audited had already been subjected to a “highly punitive” ruling by CRA. “To protect your business and our sector as a whole from this damaging position, the CBAA needs to be armed with detailed information on the number of audits, reassessments, and challenges which are being pursued by CRA … We must work together—dealing with these cases one-by-one may put our entire sector at risk.”
Asked for clarification, Toering told Skies in a March 15 email that the CBAA, which “represents the majority of the successful businesses in Canada,” was “carefully gathering the facts” and “should have a clearer picture . . . within the next two weeks.”
The CRA, which routinely targets specific sectors, says on its website that it carries out more than 120,000 audits annually and that the result is “more than $11 billion in additional taxes assessed as well as penalties and interest.” The latter can exceed the additional taxes. It also says that more than $7 billion of the extra revenue “involves international and large business aggressive tax planning, including high net worth individuals and multi-nationals.”
Calling the prospect of a huge increase in taxable benefits a “devastating interpretation” of the rules, Toering said the CBAA has engaged legal counsel “to ensure that our members are protected.”
