September 13, 2017
Tax Changes Opposed
COPA is supporting the Canadian Business Aviation Association’s opposition to tax changes that could make business aviation inaccessible to some Canadian businesses. In a statement, COPA President Bernard Gervais said that a significant number of COPA members own their aircraft in companies and will potentially face huge tax increases by flying their aircraft. The Canada Revenue Agency is considering sharply increasing the value of taxable benefits for those who use business aircraft for personal use. Until 2012, personal use of a business aircraft was assessed at the same value as a business class ticket for a comparable flight on a commercial airline. CRA is proposing three levels of taxable benefit assessments on those who use business aircraft for personal use.
If an employee who has to use the business aircraft for a business trip and wants to take a spouse or other guest, who will not be working, along, that person will pay tax based on the value of a business class flight. But if an employee uses the plane for personal use, CRA says that should be comparable to chartering a similar aircraft and tax paid on that amount. But what’s particularly concerning to CBAA and COPA is the so-called Category Three which deals with the personal use of aircraft by the owners of the business that owns the aircraft.
In that scenario, the taxable benefit would be based on a proportional share of the total cost of ownership of the aircraft as well as an “available for use” benefit based on the original capital cost of the aircraft. In other words the owner of company set up to own an aircraft would have to pay personal income tax on the total value of every hour that aircraft was flown for personal use.
Quite a few of our COPA members do have their aircraft registered in their company and would thus fall into the third category which makes absolutely no sense,” said Gervais. “We totally agree and support CBAA in their view that “Category three is unlawful and produces personal benefit valuations that exceed the fair market value of the personal benefit actually received.”
CRA also hasn’t thought things through very carefully. For instance, many destinations used by business aircraft don’t have commercial service (which is often the main reason for owning a business airplane) and many places that do get scheduled service don’t have any business class seats going there.
CBAA has met with CRA officials to voice concerns and the changes are still at the proposal stage. CBAA has asked its members to complain to their MPs and CRA about the proposals and prepared a letter template for them. Download it here.
Mondaq, a legal analysis Web site has a good summary of what’s at stake here.