13 October 2000 GST/HST Ruling 8329 - Interaction Between Subsection 173(1) and Paragraph 170(1)(b) of the ETA - Employer Provided Parking - Taxable Benefits

Dear XXXXX :

Thank you for your letter of August 30, 1999, to Mr. Owen Newell, Manager of the Municipal and Health Care Services Unit, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to taxable benefits, specifically employer provided parking. I have been asked to respond to your enquiry.

In response to the ruling you received from the XXXXX dated July 7, 1999, you would like to clarify the application of sections 170 and 173 of the Excise Tax Act (ETA), as these provisions relate to parking benefits provided to your employees. XXXXX[.] Please note that effective November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (CCRA).

Statement of Facts

The City of XXXXX (the City), a GST/HST registrant owns four properties that are available for employee parking. The parking spots located on these properties are for the exclusive personal use of designated City employees. The City's employees do not pay for the use of these parking spots.

The parking privilege provided to these designated City employees is considered a taxable benefit under paragraph 6(1)(a) of the Income Tax Act (ITA). The four properties in question were acquired by the City prior to 1991 and, therefore, GST was not applicable in respect of their initial acquisition.

Any maintenance of the properties (i.e., sweeping, cleaning, snow removal, etc.) is provided internally by the City. As a result, the City has not been claiming input tax credits in respect of these internal costs. If the City incurs external costs associated with the maintenance of these properties, it claims the municipal rebate equal to 57.14% of the GST paid or payable, if any, in respect of those costs.

Ruling Requested

Is the City required to include an amount of tax in respect of the taxable benefits identified above, pursuant to subsection 173(1) of the ETA, in its net tax calculation, or is it precluded from having to do so because of the application of section 170 of the ETA?

Ruling Given

Based on the information provided, it is our view that the City would be required to "self-assess" tax in respect of the taxable benefit attributable to employer provided parking in determining its net tax, pursuant to subsection 173(1) of the ETA. As such, we are hereby confirming the earlier ruling issued by the XXXXX.

Explanation

It is the City's position that subsection 173(1) of the ETA does not apply to employer provided parking because of the application of section 170 of the ETA. As well, it is the City's view that it is not relevant that GST was not paid or payable on the last acquisition of the four properties used to provide parking benefits to employees. It is the City's position that it would not be obligated to "self-assess" tax under subsection 173(1) of the ETA since the parking spaces were for the exclusive personal use of City employees.

Subsection 173(1) of the ETA applies where a registrant makes a supply (other than a zero-rated or an exempt supply) of property or service to an employee and an amount is required to be included in the employee's income under paragraph 6(1)(a), (e), (k) or (l) of the Income Tax Act (ITA), subject to certain exceptions.

The City made a taxable supply to its employees and amounts were required to be included in the income of employees under paragraph 6(1)(a) of the ITA with respect to the employer provided parking. Fundamentally, the City provided its employees with the right to use real property, and we would regard the external maintenance costs associated with providing that parking benefit to employees as being "incidental".

As you are aware, there are a few exceptions which relieve registrants from having to "self-assess" tax under subsection 173(1) of the ETA. Subparagraph 173(1)(d)(i) of the ETA is one of those exceptions. Essentially, this exception provides that a registrant would not be required to "self-assess" tax in respect of a taxable benefit where the registrant was denied an input tax credit in respect of the last acquisition of the property or service as a result of the application of section 170 of the ETA.

Since the four properties in question were acquired prior to 1991, the City would not have paid the GST in respect of their initial acquisition. As such, the City would not have been denied input tax credits under paragraph 170(1)(b) of the ETA, since no tax would have been payable in respect of the acquisition of the properties. Rather, the City would not have satisfied one of the very basic conditions under subsection 169(1) of the ETA, which requires tax to be paid or payable for an input tax credit to be claimed by a person.

The preamble to section 170 of the ETA specifically requires tax to be payable for the restrictions under that provision to apply. It is our view that section 170 of the ETA did not apply in respect of the acquisition of the properties in question. Consequently, the exception under subparagraph 173(1)(d)(i) of the ETA would not apply, and the City would be required to "self-assess" tax in respect of the taxable benefit attributable to employer provided parking.

I regret that a more favourable response could not be provided to you concerning this matter.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that there are no relevant changes in the future to the Excise Tax Act, or to CCRA interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling. For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-9699.

Yours truly,

Douglas Wood, CGA
A/Technical Analyst
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate