5 Determined Value for Travel Allowances
The determined value of a motor vehicle is the starting point of the calculation of the Cost Scale rate per kilometer and is defined in a regulation to the Income Tax Act (included in the appendix to this manual).
In non-legalese language, the ‘determined value’ of the motor vehicle is specified as follows –
1. The original cost to the employee if the motor vehicle was purchased by the employee under a bona fide agreement of sale or exchange, including any VAT but excluding any finance charge or interest payable by the employee, or
2. The cash value as contemplated in the definition of “cash value” in section 1 of the Value-Added Tax Act if the motor vehicle was purchased under an ‘instalment credit agreement’, or
3. In any other case, the market value of that motor vehicle at the time when the employee first obtained the vehicle or the right to use it, plus the VAT which would have been payable if the employee had purchased the vehicle at that time at a price equal to that market value.
Note that in contrast to the determined value of a company car that can be depreciated, the determined value of a motor vehicle for a travel allowance is not depreciated over the years. The original purchase cost of the vehicle (whether new or second hand) is never changed.