The rules · sources read on or since 14 September 2026
Can a corporation claim GST/HST on the mileage it pays its owner?
A GST/HST registrant that pays an allowance based solely on business kilometres is deemed by ETA s.174 to have paid tax inside it, and claims the tax fraction of the allowance: 5/105 where only GST applies, 13/113 in Ontario and 15/115 in the Atlantic HST provinces.
The rule
Section 174 of the Excise Tax Act treats a reasonable per-kilometre allowance as if the corporation had itself bought the fuel, the tyres and the repairs, and had paid GST/HST on all of it. The allowance is therefore tax-included: the corporation does not add tax to the payment, it extracts tax from it.
That makes the credit a fraction of the whole allowance rather than a percentage on top of it. Where only the 5% GST applies the fraction is 5/105; in Ontario, where HST is 13%, it is 13/113; in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island it is 15/115. Quebec's QST runs under its own regime and is never part of this credit.
The jurisdiction therefore changes the credit and never the deduction. The allowance itself is set federally, at 73¢ for the first 5,000 km of business driving in the calendar year and 67¢ after, 4¢ higher in the territories.
What it is worth, and why it is usually missed
Five thousand business kilometres at 73¢ is an allowance of $3,650. In British Columbia the credit inside it is about $174 — every year, on driving the owner was doing anyway, and almost always unclaimed. There is no separate receipt to find, because there is no separate purchase: the logbook is the evidence.
It is missed because nothing on a bank statement says "tax". The payment leaves the corporation as one round number, the bookkeeping records one round number, and the fraction inside it is visible only if somebody knows to look for it. This is the rule LedgerLodge got wrong itself until recently, which is the most honest reason there is to write it down.
What has to be true for it to hold
The allowance must be reasonable, and paying the prescribed per-kilometre rates is what makes it so. A flat monthly car allowance is not based solely on kilometres, so it is a taxable benefit to the owner and carries no s.174 credit.
The corporation must be a GST/HST registrant. An unregistered corporation recovers nothing, because there is no return for the credit to be claimed on.
And the log has to exist: date, destination, purpose and distance for each trip, plus the vehicle's odometer reading at the start and end of the year. A reconstruction written at year end is what gets an allowance reduced on audit.
Where this comes from
- CRA — Automobile and motor vehicle benefits and allowances — read 14 September 2026.
- CRA — Input tax credits — read 14 September 2026.
- Department of Finance Canada — 2026 automobile deduction limits and expense benefit rates — read 14 September 2026.
Questions
GST/HST on a mileage allowance.
What fraction of a mileage allowance is recoverable as GST/HST?
The tax fraction of the allowance: 5/105 in the GST-only provinces, 13/113 in Ontario and 15/115 in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. On a $3,650 allowance in British Columbia that is about $174.
Does the province change how much mileage is deductible?
No. The per-kilometre rates are federal — 73¢ then 67¢ for 2026 — so the deduction is the same everywhere. Only the GST/HST fraction inside the allowance moves with the province.
Is a flat monthly car allowance eligible for the same credit?
No. ETA s.174 applies to an allowance based solely on the kilometres actually driven. A flat monthly amount fails that test, is a taxable benefit to the person receiving it, and carries no input tax credit.
Can the credit be claimed without a mileage log?
Not defensibly. The allowance has to be based on business kilometres, and the log — date, destination, purpose, distance, plus the year's opening and closing odometer readings — is the only evidence that it was. Without it both the deduction and the credit are at risk.
Is QST part of the mileage allowance credit?
No. Quebec's QST is its own regime, with its own input tax refund, and is never part of the GST/HST fraction. A Quebec corporation calculates the QST side separately.
Put a number on it.
LedgerLodge applies this rule to every record as it is entered, stores the calculation snapshot that produced the figure, and carries both into the year-end package your accountant works from. It prepares the figures a return is built from; it does not file anything.