Need help from CRA? Here are the answers to some of your most common questions.

If you’ve ever called CRA’s Business Enquiries Line and hung up more confused than when you started, you’re not alone. CFIB members often tell us the answers they receive are wrong, contradictory, or just plain unclear. That’s why we’ve been calling CRA ourselves anonymously as “secret shoppers” to test their service, hold them accountable, and ensure you get the right answers. Below are four common scenarios that we tested for you.

SCENARIO #1: How to pay sales taxes when providing a service in another province

Question: “For a consulting company that’s looking to provide services across the country, when they should be applying PST, GST or HST?”

Answer:

• The company should apply GST/HST according to the customer’s address, regardless of where the service was performed.  For example, if you provide training in B.C., but the contract is with the company’s head office in Ontario, you apply Ontario’s HST rate.
• Place of supply rules for services can be complex. Check the “place of supply” rules, found under Services – general rules on the CRA website. If you are unsure, consult a tax professional for your specific situation.

SCENARIO #2: Paying EI premiums for family members

Question: “My understanding is that if a business owner is hiring their child, they may not have to collect EI premiums.  Is that true? What process needs to be followed to get this done?”

Answer:

• The employer needs to determine if a non-relative would have been hired under a similar employment contract regarding remuneration, terms and conditions, work hours, timing and duration, and the nature and importance of the work. If the answer is yes, the work is considered “at arm’s length” and EI premiums should be collected.
• By virtue of being related, family members may have more (or fewer) duties, responsibilities and privileges than a worker that is not related to you. For example, a son whose sole responsibility is plumbing alongside other plumbers would likely be considered arm’s length, and his employment would likely be insurable. On the other hand, if that same son also handles accounting, sets his own schedule, and is the only employee with a company truck, the extra responsibility and benefits would likely be seen by CRA as existing because he is your son, and he would therefore likely not be considered to be operating at arm’s length to your business. 

If you are unsure, only the CRA can determine whether a related employee’s employment is insurable. The employee or business can ask the CRA for a CPP/EI ruling by signing into My Business Account or MyAccount or submit a CPT1- Request for Ruling. Learn more on CRA’s resource.

SCENARIO #3: Investing in equipment for my business

Question: My client, a garden tool manufacturer, is buying used machinery to increase their manufacturing capacity. Are they eligible for the Capital Cost Allowance (CCA)? 

Background:
The Capital Cost Allowance is the yearly amount a business owner can claim on their taxes for the cost of property that wears out over time, like buildings, furniture or equipment. The changes, which were introduced in fall 2018, apply to property and equipment acquired after November 20, 2018, and available for use before 2028. Applicants will base their CCA claim on the fiscal period ending in the current tax year, not the calendar year.

Important for 2026: The enhanced first-year allowance rules have been updated by federal legislation (Bill C-15, Royal Assent March 26, 2026). For eligible property acquired on or after January 1, 2025, and available for use before 2030, the accelerated investment incentive has been reinstated. For eligible manufacturing and processing machinery and equipment, a 100% first-year deduction is available. A phase-out begins for property available for use after 2029. Note that CRA's guidance page has not yet been updated to reflect these changes. We strongly recommend confirming the rate and eligibility that applies to your specific situation and equipment class with a tax professional or checking CRA's Accelerated Investment Incentive page for the latest information.

Answer:

Yes, second-hand equipment qualifies for the enhanced allowance under CCA rules, provided neither the business owner nor a non-arm's length person (see below) previously owned the equipment, and it has not been transferred on a tax-deferred "rollover" basis. More can be found on CRA’s webpost on Accelerated Investment Incentive in the Additional Restrictions section. The same applies for the purchase of clean energy equipment. Find out more about Classes of depreciable property on CRA’s website.

• Claiming CCA is not always the right choice for every business. It requires documentation to support the claim, and the decision to accelerate deductions in the short term can have tax implications down the road. If you are unsure, speak with a tax professional to determine whether claiming CCA makes sense for your specific situation.
• A non-arm’s length person:
  • Has a blood, adoption, marriage or common-law tie to the business owner. However, blood relationships do not typically include aunts, uncles, nieces, nephews or cousins for the purposes of the Income Tax Act.
  • Has a common mind (a common purpose or interdependent relationship) with the business owner that directs the bargaining for both parties.
  • Has de facto control of the business—that is, enforced by social influence despite no legal control.
• See these links:
  • Income tax act s. 251(1), s. 251(2) 
  • Income tax folio - Related persons and dealing at arm's length (CRA’s interpretation of the rules)

SCENARIO #4: Car allowance

Question: We pay our salespeople a car allowance. Is that a taxable benefit?

Answer:
It depends on how you calculate it.

Flat-rate allowance: Yes, if you pay your employee an allowance based on a flat rate that is not related to the number of kilometres driven, it is a taxable benefit and must be included in the employee's income.

Per-kilometre allowance: No, if the car allowance is based on a per-kilometre rate that is considered “reasonable” by CRA standards, the employer does not deduct CPP contributions, EI premiums or income tax. Employees must record the distances they travel to ensure this can be done.

The CRA considers an allowance reasonable if all the following conditions apply:

• The allowance is based only on the number of business kilometres driven in a year.
• The rate per-kilometre is reasonable.
• The employer did not reimburse the employee for other business expenses related to using the vehicle (excluding the likes of tolls, ferry charges or supplementary business insurance, if the allowance was initially determined without factoring in these reimbursements).

2026 prescribed rates: The CRA considers the allowance reasonable if the rate is not more than $0.73/km for the first 5,000 kilometres and not more than $0.67/km for any additional kilometres.

Additional links:

• Reasonable kilometre allowance
  • Employer provides vehicle
  • Employee uses own vehicle
• Employers’ Guide: Taxable Benefits and Allowances