Company cellphones may cause new tax headache

The use of a company-supplied smartphone, laptop or other electronic device is commonplace these days, and employers know full well that employees will use them both for work and personal purposes.

However, new guidelines from Canada Revenue Agency suggest employers may have to take a fresh look at how much of the cost of these devices can be attributed to their commercial activities.

“Tax authorities around the world have recognized that the vast majority of usage of a cellphone these days is personal,” says Thom Damstra, Toronto-based founder and chief executive of data analytics firm MobilityView.

While there’s a potential for use of company-supplied phones to be considered a “personal taxable benefit” several tax experts say that’s not new and the tax rules give employers ways to minimize the impact on their employees.

Companies will soon have to provide more documentation to the Canada Revenue Agency if they want to get credit for the commercial usage of mobile devices and services provided to employees.

CRA guidelines issued in April that say companies may have to demonstrate that at least 10 per cent of a mobile phone’s usage is for commercial purposes to qualify for the GST/HST credits.

Even above the 10 per cent threshold, the CRA says tax credits must be proportionate to commercial usage.

In other words, if a company claims that 50 per cent of a mobile phone’s usage is for commercial purposes — it may have to prove that claim if challenged by a CRA auditor.

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