What is the fair market value (FMV) of the parking space

FMV is the highest price that can be obtained in an open market between an informed and willing buyer and an informed and willing seller who are dealing at arm's length.

Generally, the FMV of a parking spot is the price that could be reasonably charged for the use of that spot in an open market (that is, the market price for a similar spot in the surrounding area). Normally, the cost to the employer is not a factor in determining the value of the benefit. For example, where the employer owns the lot, the value would be based on the FMV, not the employer's cost.

When to re-evaluate the FMV

Generally, you should re-evaluate the FMV of the parking benefit when there is a significant change to the market for parking in the area that may impact the FMV.

The CRA suggests you research the value of the parking based on the following:

• The rates charged to the public for a similar parking space in the same area as the parking being provided to your employee
• The same conditions of use as the parking being provided to your employee

This determination must be done based on a review of the facts in each specific situation.

Situation: Parking you provide or reimburse to an employee because of the closure of the place of employment for the period of March 15, 2020 to December 31, 2022 CRA's temporary COVID administrative policy

Non-taxable situation

Under the CRA's administrative policy, if you provide or reimburse an employee for parking for the period of March 15, 2020 to December 31, 2022, the benefit is not taxable if all of the following apply:

• COVID-19 caused a closure of the place of employment during the period, including situations where:
  • the employees were sent home by the employer
  • they were given the option to work from home on a full-time basis due to the pandemic
• Parking benefit relates to the period when the place of employment was closed

Taxable situation

Once an employee returns to their regular place of employment to perform their duties, including situations where an employee regularly returns to their regular place of work to perform their employment duties on a part time basis, the policy no longer applies. This means it is taxable as an employee benefit.

To calculate the benefit, go to Calculate the value of the benefit.

Situation: Parking you provide or reimburse to an employee for business purposes

Parking is provided for business purposes where the employee is regularly required to use a vehicle in the performance of their job, such as travelling off-site to meetings or service calls. Travel between work and home is not considered travel for business purposes.

Examples: Business purposes versus not for business purposes

• Business purposes

  • Parking provided at other branches of the employer's business around the city where the employee regularly has to leave their home branch to conduct the employer's business
  • Parking cost reimbursed where the employee makes a service call to a client of the employer
  • Parking at the parking lot of the employer where the employee uses their vehicle four days a week to visit different worksites of the employer
  • Parking provided when an employee is working in a management position and is required to visit different work locations

• Not for business purposes

  • Parking at the parking lot of the employer where it relates to driving from the employee's home to the office where they work and back and their job does not require them to regularly use their vehicle for employment duties
  • Parking to facilitate working irregular or extended hours
  • Parking where the employee drove to work but used another means of transportation for off-site business activities (for example, walking or taking a taxi to a meeting at the office of a business client)
  • Using a vehicle only to establish the regular use for business purposes criteria (for example, driving to a meeting across the street, or to a meeting where the employee would generally carpool or take a taxi)

Employee uses the vehicle regularly for business purposes – Average of 3 or more days out of 5 work days

Non-taxable situation

Under the CRA's administrative policy, if you provide or reimburse an employee for parking for business purposes, the benefit is not taxable where the employee regularly has to use a vehicle to perform their duties of employment. The CRA considers "regularly" to be an average of at least 3 days in a 5 day work week.

Taxable and partially taxable situation

If the employee needs the use of a vehicle for business purposes less frequently, the CRA will accept a proration of the benefit. For example, if the employee uses a vehicle in the course of their duties an average of 1 day in a 5 day work week, the value of the parking benefit may be reduced by 20%, which represents 1 day of business use out of a 5 day work week.

To calculate the benefit, go to Calculate the value of the benefit.

Situation: Parking you provide to an employee at a shopping centre or industrial park

Under the CRA's administrative policy, if you provide parking at a shopping centre or industrial park, the benefit is not taxable if all of the following apply:

• parking lot is open to both employees and the public
• parking spaces are available free of charge
• parking spaces are not assigned to employees

Example

A supermarket operates out of a mall. The mall has a large parking lot which is available for use by both employees and customers. The supermarket's lease with the mall includes a right to use the parking lot. Although the right to use a parking space is considered a benefit to the employee, the employer is not required to include an amount on their T4.

Situation: Parking where you provide a limited number of parking spaces New CRA administrative policy

Under the CRA's administrative policy, if you provide parking with a limited number of parking spaces, the benefit is not taxable if all of the following apply:

• not more than 2 parking spaces available for every 3 employees who want parking (scramble parking)
• parking spaces are not assigned (random or uncertain)
• parking spaces are offered to all employees who want parking

The ratio is based on the average of parking spaces that the employer can reasonably expect to be needed on a regular basis. For example, if over the course of the year, the employer reasonably expects there are 3 employees wanting parking for every 2 available parking spaces on most days, we would view the available parking to be insufficient for that year. The calculation should be made on an annual basis or sooner, if there is a significant change to the ratio.

Since the employee's access to parking is random and uncertain, it may be difficult and excessively burdensome for the employer to determine the benefit enjoyed by any particular employee. In this situation, no taxable benefit will be required to be included in income.

Situation: Parking you provide to an employee with a severe and prolonged mobility impairment or is blind

If your employee has a disability, the parking benefit is generally not taxable.

Learn more: Disability-related employment benefits.

• +plus Parking
• -minus Any payment the employee makes to use the space
• =eqauls Value of the benefit

Example 1 – Calculations

The employer owns a property with a factory and parking spaces on the property. The FMV of the passes for each parking space is determined to be $200 per month ($2,400 annually). The employer provides the employee with access to the parking space. The employee does not pay for parking. The parking space provided to the employee is not required for business purposes. The parking is not available to the public and is not scramble parking.

The parking provided by the employer is a taxable benefit because it was not provided for business purposes and was not scramble parking. The taxable benefit is calculated as follows:

• $2,400 is the FMV of the parking provided to the employee by the employer
• minus $0 because the employee does not pay for the parking
• equals $2,400 is the value of the benefit to be included on the T4 slip

The amounts must be included in the pay period they were received or enjoyed.

Example 2 – Calculations

The employer leases a separate property adjacent to its property, where it owns a factory. Included in the cost of the lease is a monthly price of $180 per parking space. The FMV of each parking space is determined to be $220 monthly ($2,640 annually). The employee does not pay for the parking and the parking spot is not required for business purposes.

The parking provided by the employer is a taxable benefit because it was not provided for business purposes and was not scramble parking. The taxable benefit is calculated as follows:

• $2,640 is the FMV of the parking provided to the employee by the employer
• minus $0 because the employee does not pay for the parking
• equals $2,640 is the value of the benefit to be included on the T4 slip

The amounts must be included in the pay period they were received or enjoyed.

Example 3 – Calculations

The employer owns a property with a factory and parking spaces on the property. The FMV of each parking space is $250 monthly per parking space ($3,000 annually). The employee pays $100 monthly to the employer for the parking space ($1,200 annually). The employee uses the space once a week for business purposes.

The parking provided by the employer is a taxable benefit because it was not used regularly for business purposes and it was not scramble parking. As the parking was used one day a week for business purposes, the employer is allowed to prorate the benefit. The taxable benefit is calculated as follows:

• $3,000 is the FMV of the parking provided to the employee by the employer
• minus $600 is the share of the FMV associated with the one day the parking is used for business purposes ($250 per parking space x 1 day/5 days) x 12 months)
• minus $1,200 is the amount paid by the employee for the parking
• equals $1,200 is the value of the benefit to be included on the T4 slip

The amounts must be included in the pay period they were received or enjoyed.

• Non-cash and near-cash: Option 1

  Withhold:

  • Income tax
  • CPP
  • EI (do not withhold)

  Remit:

  • GST/HST in certain situations

• Cash: Option 2

  Withhold:

  • Income tax
  • CPP
  • EI

  Do not remit:

  • GST/HST

Learn how to calculate deductions and the GST/HST to remit on benefits: How to calculate – Calculate payroll deductions and contributions.

• Non-cash and near-cash: Option 1

  Report on:

  • Box 14 – Employment Income
  • Box 26 – CPP/QPP pensionable earnings
  • Code 40 – Other Information

• Cash: Option 2

  Report on:

  • Box 14 – Employment Income
  • Box 24 – EI insurable earnings
  • Box 26 – CPP/QPP pensionable earnings
  • Code 40 – Other Information

Learn how to report the benefit on a slip: Fill out the slips and summaries – File information returns (slips and summaries).