Parking Policy


Slide 1

Hello. Thank you for joining us for this webinar about parking benefits. 

Today’s webinar is the third in a four-part series about taxable benefits.  Also, I would like to mention that today’s webinar will be recorded and posted on the Canada Revenue Agency’s (CRA) website at a later date. 

Slide 2

Today, we will discuss parking benefits, an issue that affects a large number of Canadians, employers and employees alike. We’ll talk about: the policy and concepts; scramble parking, reporting, and books and records.

Many employees don’t know the parking spot their employer provides them with may be a taxable benefit unless certain criteria are met.

Some employers may not be aware of the criteria that allow the value of a parking spot to be excluded from an employee’s income. During today’s presentation, we will look at the CRA’s parking policy, along with several examples.

By the end of the presentation, you will have a better understanding of when parking provided to employees is a taxable benefit, what you have to do to make sure it is correctly included in the employees’ income, and what payroll obligations you must meet.

Slide 3

To begin, we will first go over some basic concepts that are helpful to keep in mind when discussing taxable benefits. We will then explain the parking policy.

In terms of parking, employees are given an economic advantage when they are provided with a parking spot for which other employees would normally have to pay. Offering free parking may provide an employer with a competitive advantage in attracting employees.

Consider a potential employee who receives two job offers. The employers are in the same neighbourhood.  The salary, the responsibilities, and the opportunities for advancement are the same. However, one employer has a parking lot and employees are permitted to park for free. The other employer does not have a parking lot, and their employees must pay for parking in the surrounding area, where prices range from $225 to maybe $240 per month. The employee with a free parking spot has $2,700 to $2,880 more in their pocket at the end of the year than the other employee who has to pay for a parking spot in the area.

Given these facts, which employer is the employee likely to choose?

In essence, the free parking is part of the employee’s pay package in the same way salary and wages are. Therefore, like salary and wages, the value of the parking spot and other benefits provided to employees, is taxed. This levels the playing field for employers and employees and ensures that an employee’s entire pay package, including the value of benefits, is included in income and taxed appropriately.

Slide 4

Generally, it is the employee’s responsibility to get to work at the specified time. How an employee chooses to get to work, by driving, walking, carpooling, or public transit is a matter of personal choice.

Even if the employee’s personal circumstances leave the employee no practical alternative but to drive, for example, when the employee must pick up their child at day care after work, this does not change the fact that expenses associated with travel to and from work, including parking, are personal in nature. And when the employer pays for an employee’s personal expenses, or provides goods and services for an employee’s personal use, it is a taxable benefit for that employee.

The Tax Court of Canada and the Federal Court of Appeal have consistently upheld that, generally, the cost of parking at work is a personal expense.

Let’s take a look at the parking policy.

Slide 5

Legislatively, the only exception to the taxability of parking is when parking is provided for reasons of disability. To meet the criteria for the legislative exemption, the disability must be one that would generally allow the employee to qualify for the disability tax credit. For more information on the disability tax credit, go to the CRA website.

In addition to this exemption, the CRA has an administrative policy that allows parking to be excluded from income in other situations.

Specifically, when parking is provided for business reasons and the employee regularly has to use it for business reasons.

Throughout today's presentation, I may use the term business reasons, business purposes, or business use, interchangeably. All these terms mean employees using a vehicle to perform their duties of employment.

I’d like to take this opportunity to expand a little on business reasons.

Slide 6

The CRA defines business reasons in terms of the parking policy as the employee requiring the use of a vehicle to perform their duties of employment.

For example: an employee has to drive from site to site or visit clients' premises in the course of their duties.

This is different from an employee who gets up in the morning, gets in the car, drives to work, parks the car, goes into the building, does their work, and drives home at the end of the day. In that situation, although the employee uses a car to get to and from work, the employee is not using the vehicle to do their work.

Here are some examples of situations that do not meet the business use criteria:

It is important to note that public transit, the availability or practicality of public transit are not factors in our parking policy. These factors do not influence whether the parking provided is a taxable benefit.

Slide 7

For employer-provided parking to be excluded from an employee’s income, the employee has to use the vehicle for business purposes. The employee must make use of it for business purposes regularly.

So that raises the question of what do we mean by regularly?

Generally, regularly means a minimum of three days in a five-day work week on average. So basically, the employee has to use a vehicle to perform their duties of employment more than half the time.

In the parking policy, we allow proration if the employee has less frequent business use of the vehicle, but not quite often enough to meet the regular criteria. In this case, if the employee uses a vehicle on average, one day out of a five-day work week, we allow a reduction of 20% of the benefit, which represents one day of business use out of the five-day work week.

Slide 8

Another concept that's very important to understand in relation to the parking policy, and is quite useful generally for other taxable benefits as well, is the concept of Fair Market Value (FMV).

The Income Tax Act or (the Act) requires that the value of all benefits be included in calculating a taxpayer's income for the year. The term "value" has generally been interpreted to mean FMV. The Act, however, does not define the term "fair market value."

Therefore, the CRA takes its definition from the Black's Law Dictionary, which states that the FMV is the highest price that can be obtained in an open market between two parties dealing at arm's length.

To explain the FMV, in an open market, the seller is looking to sell at the highest price possible, and the buyer is looking to buy at the lowest price possible.  The price they agree upon, therefore, reflects both of those objectives, meaning that it is the price the market will bear.

The FMV is essentially a fair and objective way of measuring a benefit, and it ensures that employees in similar circumstances are treated the same way.

Slide 9

It is the employer's responsibility to determine the FMV and to periodically review and adjust it so that its value remains accurate.

The FMV, like any values and prices, may change over time. As neighbourhoods increase or decrease in popularity, the FMV can fluctuate accordingly.

Consider a situation where an office tower is built that attracts 2,000 new employees to a neighbourhood to compete for the same number of parking spots.

In this situation, the new office building is likely to drive up the value of parking in the area, making it more expensive to park.

Employers can determine the FMV by comparing the parking they offer their employees to other parking in the area, and by comparing the prices and amenities such as is the parking covered? Is the parking secured? Is the parking well lit? All of these elements influence the FMV.

It is important to note that the employer’s cost in providing the parking is not the FMV.

All parking has an FMV, even if that value is $0.  Employers should maintain the records necessary to demonstrate to the CRA that the decisions made with regard to the FMV are reasonable.

Slide 10

The CRA recognizes that, in some circumstances, the administrative burden associated with determining the value of parking for employees may be unreasonably high.  In these limited situations, the CRA allows that no benefit be included in income.

This may happen when a business operates from a shopping mall or an industrial park where parking is available to customers and employees free of charge; or when the employer provides scramble parking.  We will discuss scramble parking in more detail later in the presentation.

Let’s look at four examples that will help you better understand how to apply the parking policy to parking situations you may encounter.

Slide 11

In this example – an employer has a building lease and it includes access to a large parking facility at the rate of $10 per parking spot per month. So, in addition to the price the employer pays for the office space, the employer pays an additional fee of $10 per parking spot.

The employer allows their employees to park in those parking spots for free.

While other employees parking in the same area and in the same lot pay $18 a day or $275 a month for parking.

What do you think? Is the employer providing a taxable benefit to employees?

Slide 12

The answer is yes. The employees are in receipt of a taxable benefit and the value of that benefit is $275 per month, which is the amount other employees pay to park in the same lot.

The taxable benefit is not the $10 per month the employer pays for the use of that spot. If the benefit were valued at the employer's cost, the employees would also gain a significant advantage over other people who are paying the fair market value.

Slide 13

Example number 2 –

ABC Co. operates in an industry where employees are in high demand.

As a result, ABC Company decided to offer free parking as a way of attracting and retaining employees.

The company believes that it is the primary beneficiary of the free parking. In other words, the company has business reasons for offering free parking.

Comparable parking lots in the area near ABC Company charge between $40 and $60 per month for a parking spot.

Is this a taxable benefit?

Slide 14

The answer is yes. The parking is a taxable benefit to ABC Company employees.

Generally, the reason employers offer benefits to employees is because it advantages them in some way.

Employers make choices that benefit their business and operate their business in the best manner possible. It doesn't change the fact that what they're providing to their employees is a personal item, a personal service, or a personal expense.

So, when an employer provides personal goods or services to their employees or pays for personal expenses, employees have received a taxable benefit. Taxing these benefits addresses the economic advantage these employees receive compared to those who do not receive the perk.

Slide 15

In our third example –

XYZ Company is located in a town that does not have public transit, and many of their employees live in another town 35 kilometers away.

The company provides free parking to its employees while comparable parking lots in the XYZ Company area charge $40 per month.

Do you consider this as a taxable benefit?

Slide 16

The answer is yes. XYZ Company employees are receiving a taxable benefit.

The availability or the practicality of public transit has no influence on whether an employer-provided parking is considered a taxable benefit. Travel between home and work is a personal cost, personal in nature, and, therefore, when the employer pays for parking, it is a taxable benefit.

Slide 17

A final example –

Jane is a manager whose job requires her to travel frequently away from the office by car to meet with clients.

She usually has to travel three or four days per week.

Her employer provides her with free parking in the same way the employer provides free parking to other managers and executives of the company.

Is this a taxable benefit?

Slide 18

The answer is no. It is not a taxable benefit because Jane meets the business use criteria in that she regularly uses a vehicle to perform her duties of employment.

This example illustrates the fact that the parking policy is not a one-size-fits-all policy. It’s based on a case-by-case analysis of each employee's individual situation.

So it's quite possible that a single company may have employees who have:

Keeping good books and records allows you to better make those decisions and later support them to the CRA when needed.

Slide 19

Now we're going to talk about scramble parking, a subject that interests many.

Scramble parking is when there are significantly fewer parking spots available than there are employees looking for a parking spot.

The CRA does not provide a threshold or a ratio of what a significant number is. It is up to the employer to make that determination and, as always, to demonstrate that the decision made is reasonable.

It is important to note that it is not the number of parking passes handed out, or the total number of employees that determines whether there is, in fact, scramble parking; it is the number of employees actually looking for a parking spot on any given day.

Basically, it has to be random or uncertain whether employees will find parking on a given day for scramble parking to exist.

It is important to mention that unassigned parking is not scramble parking.

The following examples may help you better understand scramble parking.

Slide 20

R.O.B.N. Incorporated has 60 employees and they all look for a parking spot on most days; but there are only 35 parking spots available.

Is this a scramble parking situation?

Slide 21

In this situation, yes it is scramble parking because there are significantly fewer spots available than there are employees looking for a parking spot.

However, it is no longer scramble parking if the employer reimburses employees for the parking costs they incur when they can't find a spot in the employer's lot or if the employer makes an arrangement with a nearby business to provide parking to their employees.

The key to determining scramble parking is when it is excessively burdensome for the employer to determine exactly how much of a benefit an employee has received. For example: employee  A  may have parked 13 times in one month, 17 times in the next two months, but only 3 times in the month after that.

Therefore, we don't require that the benefit be tracked or included in income. However, when reimbursements are made or other arrangements are made, it then becomes possible to determine the value, and it is no longer a scramble parking situation.

Slide 22

J.N.A.S. Incorporated has 52 employees who drive to work and all of them require a parking spot. J.N.A.S. Inc. has 50 parking spots available.

What do you think? Is this scramble parking?

Slide 23

This is not a scramble parking situation because most employees are able to find a spot on most days.

Slide 24

N.U.M.B.E. Incorporated has 400 parking spaces and 600 employees.  The business runs three equal shifts over a 24-hour period.

On the surface, this may look like scramble parking because there are quite a few more employees than there are parking spots. Do you think this is scramble parking?

Slide 25

This is not a scramble parking. This particular business runs three equal shifts over a 24-hour period, which means that all their 600 employees are never looking to park at the same time. All employees needing a spot are able to find one at any given time. Therefore, this is not a scramble parking situation.

Slide 26

A final example –

There’s a semi-annual company-wide meeting, which requires the attendance of all employees: teleworkers, employees from satellite offices, etc.

On the day of the meeting, a significant number of employees cannot find parking.

Normally, all employees who work at that particular location are able to find parking.

Is this a scramble parking situation?

Slide 27

No, this is not scramble parking because the meeting only happens twice a year. Also, on most days, all employees are able to find a parking spot.

Slide 28

Now that we’ve covered taxable parking, I'd like to talk to you about reporting. Once you've determined that the benefit provided to employees is taxable, it is necessary to report it in their income. You may wonder how to do that.

The FMV of the parking benefit is included in income. If the parking is not entirely free, but rather is subsidized, the employee pays a portion of the FMV. The difference between the FMV and what the employee pays is taxable.

For example, if the FMV of the parking is say $100 a month, but the employee pays only $40 for it. The amount to be included in the employee's income is $60 per month.

Taxable parking benefits are subject to withholding of income tax, Canada Pension Plan, and if paid in cash, employment insurance premiums (EI). An example of when a parking benefit may be paid in cash is when an employee pays for their parking and then is reimbursed by their employer. Since the employee receives cash in hand, it is considered a cash benefit and therefore subject to EI premiums.

At the end of the year when completing the employee's T4 slip, the value of the parking benefit is included in box 14 along with the employee's regular salary and wages, and the amount of the parking benefit is also included in the other information area using code 40.

Slide 29

It is very important to maintain books and records.

The Act requires that an employer maintain the records necessary to accurately calculate an employee’s income, which includes the value of taxable benefits received in the year.  As it relates to parking benefits, an employer’s records should show:

Slide 30

The CRA is mandated to conduct reviews of employers’ books and records to ensure they comply with their payroll obligations. This includes verifying that taxable benefits were correctly included in income and appropriate withholdings were made.

This is a review of the employers’ compliance, which means that the CRA’s discussion and contact is with the employers.

The CRA does not seek more information from the employees. It is the employer’s responsibility to ensure that the benefits provided can be linked to a particular employee.

Slide 31

Here’s an example of a situation that illustrates why it is important to maintain the necessary books and records.

A company has 110 parking spots and 100 employees in total.

All employees are provided with parking passes.

30 of those employees do not drive to work and, therefore, do not require parking. 12 employees need a vehicle to perform their duties of employment.

The employer in this situation did not maintain the necessary records and did not include a taxable benefit in any of the employees' income.

How will the CRA determine if the parking is a taxable benefit?

Slide 32

First, this is not a scramble parking situation because there are more parking spots than there are employees.

Also, because the employer does not have the records to demonstrate who used the parking and who did not, the CRA will conclude that every employee who received a parking pass is in receipt of a taxable benefit.

This is why it's important that the employer maintain the records necessary to demonstrate which employees received the benefit and which employees may have their benefit excluded from income and why.

Slide 33

To recap:

Slide 34

If you want more information about any of the items covered in today’s webinar, there are resources available to you on the CRA website.

Go to and visit our web pages for businesses.

Slide 35

The CRA offers a number of references that may help you understand parking and other taxable benefit policies as well as other payroll obligations.

They can generally be found on our website and payroll webpages.

The guides that will be useful to you about taxable benefits and payroll deductions are:

Also, specific to parking, the CRA has developed an interactive questionnaire that may help you to determine on a case-by-case basis whether an employee's parking is a taxable benefit.

I would like to thank you, again, for joining me today. I hope that this webinar has provided you with a better understanding of the parking policy as a taxable benefit.

 Thank you.


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