PERSONAL TAX TRAINING

EMPLOYER-PROVIDED PARKING

Parking benefits provided by employers can often be considered taxable. However, there are scenarios where these benefits may be excluded from taxation, depending on the specific circumstances. Below is an explanation of the rules surrounding employer-provided parking under the Canada Revenue Agency (CRA) guidelines.

General Tax Rules

The value of employer-provided parking is usually considered a taxable benefit. This is calculated based on the fair market value (FMV) of the parking spot, minus any amount the employee pays for its use. The FMV reflects what one would reasonably pay for a similar parking arrangement in an open market.

Situations Where Parking Benefits May Be Exempt

• Unassigned (Scramble) Parking: Parking spaces that are not specifically allocated to employees may be exempt from tax if:
  • The number of parking spots is significantly fewer than the number of employees needing parking (e.g., two spots for every three employees).
  • Access to the parking spaces is unpredictable or based on a first-come, first-served system.
• Vehicle Use for Work: Employees who are required to use their vehicles regularly for job-related duties (e.g., traveling for work three or more days per week) may qualify for tax-free parking benefits.
• Accommodation for Disabilities: Parking provided for employees with significant mobility impairments or disabilities is generally exempt from taxation.

Tax Reporting Requirements

Employers must include the value of the parking benefit in the employee's taxable income. This amount should be reported on the employee’s T4 slip, and deductions for income tax and Canada Pension Plan (CPP) contributions may apply.

Legal Precedents and Examples

There have been numerous legal cases to clarify when parking benefits are taxable. Examples include:

• Taxable Benefits: In cases like Bernier and Toronto Parking Authority, parking benefits were deemed taxable because they were designated for personal convenience.
• Non-Taxable Benefits: Cases such as Long and Saskatchewan Telecommunications determined that parking benefits were not taxable when primarily for business purposes or incidental usage.

CRA Updates on Parking Benefits

During temporary workplace closures, such as those caused by COVID-19, the CRA allowed employer-provided parking to remain non-taxable. However, once employees resumed working onsite, regular rules applied, and parking benefits became taxable again if usage was re-established.

Additional Resources