In a March 5, 2021 French Technical Interpretation, CRA commented on whether a travel allowance paid to employees on a per kilometre basis, but only up to a limited number of kilometres, could be a non-taxable allowance.

For the allowance to be non-taxable, it must be a reasonable allowance for the use of a motor vehicle when travelling in the performance of employment duties. Further, measurement of the use of the vehicle must be based solely on kilometres, or the allowance will be deemed unreasonable and therefore taxable.

First, CRA opined that placing a cap on the number of kilometres covered would not mean that the measurement was not based solely on kilometres. As such, it would not automatically be unreasonable.

However, the allowance could still be unreasonable since it may not be high enough in relation to the total motor vehicle expenses that the employee is expected to incur in the performance of their employment duties. If considered unreasonable, the allowance would be taxable.