Questions and Answers – Employment expenses
Question: A friend told me I could use my company to save tax personally. The idea is that I lease a vehicle from my company, deduct the cost of leasing the vehicle from my employment earnings and pay less tax in the company. I’m an employee and my company has no other source of income.
Answer: Smart of you to ask an accountant before doing this. The problem here is that as an employee you can’t deduct any expenses unless your employer signs a T2200 (Declaration of Conditions of Employment). The employer has to state that you are required to have a vehicle to earn your employment income. It’s fine to pay your company a fee to lease a vehicle, if your company owns the vehicle, but unless you have a way to deduct the fee from your employment income, it’s pointless. The reality is that you don’t even need to involve your company. If you get a T2200 from your employer stating that, as a condition of employment you are required use of a vehicle, you can personally deduct costs related to using the vehicle to earn employment income (fuel, insurance, lease, repairs etc).
Tell your friend that you don’t need to use your company, you just need a signed T2200 from your employer.