When you incorporate, you and the business become two separate legal people. That separation opens up an option a sole proprietor doesn't have: if you own the truck personally and drive it for the corporation's work, the corporation can pay you an allowance for every business kilometre you drive.

Done properly, that allowance is tax-free in your hands and a deductible expense for the corporation. It's one of the cleanest ways to get money out of your corporation without paying personal tax on it.

How the Per-Kilometre Allowance Works

The Department of Finance sets the maximum rate each year. For 2026, it's 73 cents per kilometre for the first 5,000 kilometres driven and 67 cents for each kilometre after that.

Example: You drove 7,000 km on corporate business this year.

  • First 5,000 km × $0.73 = $3,650
  • Next 2,000 km × $0.67 = $1,340
  • Total allowance: $4,990

The corporation pays you $4,990 and deducts it as a business expense. You don't report it as income. Your fuel, insurance, and repairs stay your personal costs. The allowance is what covers them.

Why does this work for an owner? As a director of your corporation, you're an officer of it, and the allowance rules apply to officers and employees alike. That's what lets the corporation treat you the same way it would treat an employee who drives their own vehicle for work.

The Rules That Keep It Tax-Free

The allowance stays tax-free only if it's set up correctly. Get any of these wrong and the CRA can treat the whole amount as taxable income to you.

  • Pay only for business kilometres. The allowance has to be based on the kilometres you actually drove for the business, nothing else.
  • Stay at or under the rate. Paid at or below the CRA rate, the allowance is tax-free. Paid above it, it can become a taxable benefit. The corporation's deduction is also capped at the prescribed rate.
  • Don't double up. When both a flat monthly car allowance and a per-kilometre amount are paid for the same vehicle, the combined amount is generally treated as taxable income. The same goes for having the corporation pay your fuel or repair bills and paying you per kilometre. Pick the per-kilometre allowance and let it cover your costs.

What Counts as Business Driving

  • Counts: driving to job sites, supply runs, quoting jobs, meeting clients, banking for the business.
  • Doesn't count: personal errands, and your regular commute from home to the shop or yard. If your home is the corporation's base of operations, the trips out to job sites are generally business.

Keep a Logbook

The allowance is only as defensible as your records. Log each business trip: date, destination, purpose, and kilometres. This logbook is the support for the corporation's deduction and for your allowance being tax-free, so it needs to exist before the money moves, not after.

In practice, most owners total up their logbook monthly or quarterly and have the corporation pay the allowance from the business bank account to their personal account, with the calculation kept on file. That keeps a clean trail between the two legal people, which is the whole point of having a separate business bank account in the first place.

A GST Bonus

If your corporation is registered for GST, it can generally claim an Input Tax Credit on the allowance it pays you, even though you didn't charge it GST. In Alberta, that works out to 5/105 of the allowance. On the $4,990 example above, that's about $238 back to the corporation.

What If the Corporation Owns the Truck?

Everything above applies when you own the vehicle personally. If the corporation owns or leases the truck instead, the rules are completely different: the corporation deducts the actual costs, and you may have a taxable benefit for any personal use. That's worth talking through with your accountant before you decide who should own the truck.

The Bottom Line

If you own your truck and drive it for your corporation, the per-kilometre allowance is one of the simplest tax-free ways to get paid back. Keep it to business kilometres, stay at or under the rate, don't stack it with other vehicle payments, and keep the logbook that proves it.

Running as a sole proprietor instead? See using your personal vehicle as a sole proprietor.

This article is for general informational purposes only and does not constitute legal or tax advice. For guidance specific to your situation, consult a CPA or Canadian tax professional.