5 December 2008 External T.I. 2008-0286381E5 - Employer Provided 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: Taxability of employer-provided parking.

Position: Question of fact, but in this case it appears that there would be a benefit.

Reasons: The parking cost is paid on a per employee basis. As such, it does not appear to be scramble parking since each employee appears to be provided with, or has access to, a parking space and the fair market value of that space can easily be determined. While a question of fact, it also appears that in most cases the employees are not required to use their automobiles in the performance of their duties of employment on a regular basis.

XXXXXXXXXX 							Michael Cooke
								2008-028638
December 5, 2008

Dear XXXXXXXXXX :

Re: Employer-Provided Parking

This is a response to your letter of July 9, 2008, concerning whether employer-provided parking would result in a taxable benefit under the Income Tax Act (the "Act") in the circumstances described in your letter.

Briefly, you indicate that all employees are provided with employer-paid parking at the particular work location (XXXXXXXXXX ) where they report for work. In some situations, due to the time an employee's shift may start or end, public transit may not be available.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Canada Revenue Agency ("CRA") Tax Services Office. While the determination of whether a parking benefit has been conferred on any employee remains a question of fact that must be determined on a case-by-case basis by the appropriate TSO, we are prepared to offer the following comments.

The general position of the CRA on employer-provided parking is outlined in Guide T4130, "Employers' Guide Taxable Benefits". As noted therein, employer-provided parking generally constitutes a taxable benefit to an employee under paragraph 6(1)(a) of the Act whether or not the employer owns the lot. The amount of the taxable benefit is based on the fair market value of the parking minus any payment the employee may make to use the parking space. There are, however, some exceptions to the general position.

For example, there is no taxable benefit where parking is provided to an employee who is regularly required by the employer to use his or her own automobile (or an employer- provided automobile) in the performance of employment duties. As a general guideline, if an employee is required to use his or her automobile 3 or more days on a weekly basis for employment-related travel and requires a parking space for this purpose, the parking space would be considered to be used regularly for employment-related reasons. Therefore, in such circumstances the employer would be considered as being the "primary beneficiary" (see discussion below) such that the employee would not be in receipt of a taxable benefit.

"Scramble parking" (i.e. where there are fewer parking spaces than there are employees who require parking and the parking spaces are available on a first-come, first-served basis) is another exception to the general position. Although a benefit is conferred, its value to any particular employee is difficult to determine. For this reason, the CRA has administratively decided not to require the reporting of such a benefit. It may be that a particular business is open 24 hours per day and a parking lot is made available to the various shift employees who work during this period. It is our view that a true scramble parking situation does not exist simply because there would be an insufficient number of spaces if every employee of the business were to arrive at the same time. Occasional unusual events that would limit availability would not result in a blanket characterization of scramble parking.

In your situation, it does not appear that the employer-paid parking would be considered as "scramble parking" as each employee appears to get a parking space and the employer actually pays the parking fee for each employee. As such, it appears that the fair market value of the employee's parking space at the particular work location can be readily determined.

In determining whether taxable employment benefits arise in your situation, you may consider the recent decision of the Tax Court of Canada ("TCC") in Adler et al v. The Queen, 2007 DTC 783. In Adler, the TCC considered whether parking provided by an employer to 16 of its employees resulted in a taxable benefit. The TCC found that 14 out of the 16 employees received an economic advantage in respect of the free parking that accrued primarily for their benefit (i.e. a taxable benefit). The TCC also indicated that such a determination "requires an examination of the totality of the evidence with a view to assessing on a reasonable, practical basis whether under the particular circumstances the employee's enjoyment of the expenditure by the employer was ancillary to the benefit derived by his employer". The TCC also cited several factors in paragraph [159] of its decision that could be considered by an employer providing such benefits to its employee if taxation is a matter of concern.

We trust our comments will be of assistance.

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch