A summary of the 2019 Federal Zero-Emission Vehicle Incentives

In the Liberal’s first year in office, they quickly discarded a series of ‘Harper era’ tax credits, including the child fitness credit, the child arts credit, the transit pass credit, the textbook and education tax credit, and dependent tax credits – to name a few. They even scrapped Harper’s planed reduction in the small business tax rate to 9% until the private company uprising of 2017, when the Liberals reintroduced the rate reduction. Despite apparently being opposed to ‘boutique benefits’, only three short years later (just in time for the federal election) the Trudeau Liberals have introduced two of their own boutique programs for those wealthy enough to buy new cars: 1) the Incentives for the Zero-Emission Vehicles (iZEV) Program; and 2) an enhanced first-year CCA (tax depreciation) rate of 100% for zero-emission vehicles.

So what do these boutique incentives mean for your private company? and is this something that your business should take advantage of? I’ll assume you’ve done your own research on the environmental costs and benefits of EVs, here’s how these incentives work:

1)   Incentives for Zero Emission Vehicles (iZEV)

Transport Canada has a great website (here) that will help you navigate this incentive, and which provides answers to most of your questions about it. In a nutshell, anyone (including a company) is eligible to receive a rebate at the dealer when they buy, or lease, a new eligible vehicles on or after May 1, 2019 (click here for the full listof eligible vehicles, including rebate amounts).

The amount of the rebate is either $2,500 (for short range plug-in hybrids) or $5,000 (battery-electric, hydrogen fuel cell, and longer-range plug-in hybrids).

Some other interesting points about the iZEV:

  • For vehicles up to 6 seats, the base model MSRP must be less than $45,000 (sorry – no Tesla model S or X, but the model 3 is good to go!). Higher priced trims of the same vehicle, up to a maximum MSRP of $55,000 will be eligible.
  • For vehicles with 7 or more seats, the base model MSRP must be less than $55,000. Higher priced trims of the same vehicle, up to a maximum MSRP of $60,000 will be eligible.
  • The vehicle is still eligible even if charges like delivery, freight and other fees, such as vehicle colour and add-on accessories, push the actual purchase price over these set limits.
  • Business who participate in the program, are only eligible to claim 10 of these incentives per calendar year.

The iZEV program has limited funding and is available on a first-come, first-serve basis ending when the budget runs out or in 2022; whichever comes first.

2)   Enhanced first-year CCA (tax depreciation) rate of 100% for zero-emission vehicles

 A company that chooses to take advantage of this accelerated tax depreciation rate will receive a deduction in the year of purchase equal to the full value of the car up to $55,000, however, they will not be eligible to receive the iZEV rebate at the dealer. On the surface, this sounds like a great deal. A bit of investigation shows that the company is better off to take advantage of the iZEV and depreciate the remaining purchase price at the standard CCA rates in class 54 and 55.

Can businesses participate in the iZEV program?

Yes, businesses are eligible for the federal zero-emission vehicle (ZEV) incentive. However, businesses that take advantage of the federal incentive, will not be able to take advantage of the new tax write-off for ZEVs that was also announced in Budget 2019.

Here’s a comparison of the two scenarios assuming a $55,000 car using the combined CCPC tax rate in Alberta (11% – 2019), and assuming 5-years of ownership (note – the benefit of #1 widens as the purchase price of the car decreases):

Other considerations

Buy vs lease

There are many business, tax, and practical advantages to leasing company vehicles – particularly if the company tends to trade them in every few years. Leased vehicles are never capitalized and depreciated for tax purposes so if you are leasing #1 (iZEV) is the only sensible option. Under the iZEV program, the $2,500 or $5,000 rebate reduces the lease payments. The full value of the rebate is available on 48-month leases and a prorated rebate is available for shorter lease terms. The minimum lease term eligible for the rebate is 12-months, however, that lease term would only be eligible for 25% (12/48 months) of the full iZEV rebate.

Personal use of company vehicles.

Under either program, if an employee or owner of the company drives the vehicle for personal purposes, the same rules apply as with any other vehicle. Personal use of company vehicles results in the company having to prepare calculations and include benefits in employee’s income, on which the employee will pay taxes. To find out more about using personal use of company vehicles and many more common tax questions, check out our FAQ page here, or give us a call. We’re happy to help!

Should I use my personal car or buy a company vehicle?

This is a very common question and is almost always dependent on the particular circumstances of the business and the owner/employee. There are several factors such as the age and value of the car, the amount of KMs drive for personal use vs company use, is the employee or the company paying for the maintenance and fuel for the car? If you would like help determining whether you should buy a vehicle personally or use a company vehicle, please reach out to us! That’s what we’re here for!

 In summary

If you’re thinking about taking advantage of one of the new Zero-Emissions incentives in your company, it is important to look at all the options. The accelerated CCA rate is exciting at first blush but may not be as beneficial as the iZEV in the long run. To determine which path is right for you and your company, get in touch with us today!

Note: For a full list of all eligible vehicles click here.