22 June 2005 External T.I. 2005-0134251E5 - Taxable Benefit Parking

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether employer provided parking constitutes a taxable benefit.

Position: Question of fact depending on the circumstances.

Reasons: No taxable benefit exists when the employer provides a free parking space for business reasons, and the employee regularly has to use his or her vehicle to carry out the duties of employment. As well, if the fair market value cannot be determined, no benefit is applicable to the employee. This could be the case, for example, where a business operates from a shopping center or industrial park and parking is available to both employees and non-employees.

2005-013425
XXXXXXXXXX Charles Rafuse
613-957-8967
June 22, 2005

Dear XXXXXXXXXX:

Re: Taxable Benefits - Parking

We are writing in reply to your letter of June 1, 2005, concerning whether employees of the XXXXXXXXXX should be assessed a taxable benefit for employer- provided parking spaces.

Specifically, you have indicated that XXXXXXXXXX currently assesses a $XXXXXXXXXX per month taxable benefit to employees who park at various locations. XXXXXXXXXX offices are located in a strip mall and another is located in an industrial area. Parking in available to both employees and non-employees. XXXXXXXXXX has been allocated a few assigned parking spaces according to the terms of the rental agreements and employees who regularly use their automobiles to perform employment duties are using these spaces.

Our comments

Paragraph 6(1)(a) of the Income Tax Act (the Act) requires the inclusion in income of any benefit received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment. Generally, the fair market value of an employer-provided parking space, minus any amount paid by the employee for use of the parking space, is a taxable employment benefit under paragraph 6(1)(a) of the Act. This is set out in paragraph 2.14 of the Employers Guide: Taxable Benefits 2003-2004 (Employer's Guide).

As detailed in the Employer's Guide, employer-provided parking constitutes a taxable benefit to the employee regardless of whether the employer owns the parking lot. Further, no taxable benefit exists when the employer provides a free parking space for business reasons, and the employee regularly has to use his or her vehicle to carry out the duties of employment. As well, if the fair market value cannot be determined, no benefit is applicable to the employee. This could be the case, for example, where a business operates from a shopping center or industrial park and parking is available to both employees and non-employees. Accordingly, it is our opinion that the XXXXXXXXXX employees parking at the strip mall and industrial park locations, that do not have assigned parking spaces, should not be assessed a taxable benefit.

For those that have assigned parking spaces, no taxable benefit would exist if they regularly use their vehicle for employment circumstances. Such a determination can only be made after reviewing all of the facts. Examples of factors that may have an impact include the number of days in which the vehicle is required to be used for employment purposes throughout the year, the nature of the employment contract and whether the employee or employer is the major beneficiary of the space being made available to the employee. One single factor should not be taken in isolation to make a determination of whether an employee regularly has to use his or her vehicle for employment purposes. As noted, there is no taxable benefit to the employee when it is established that there is regular business use.

Where it is determined that there is only incidental use for the employer's business and there is employer-provided parking, a reduction in the parking benefit otherwise included in income under paragraph 6(1)(a) of the Act would be appropriate. The reduction should be made on some reasonable basis to account for the incidental business use. For example, the benefit otherwise determined could be reduced on the basis of the number of days used in the employer's business in the calendar year.

We trust our comments will be of assistance to you.

Yours truly,

Charles Rafuse
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch