Content has been updated for clarity, completeness and plain language.
The changes identified by the tags are effective January 1, 2022 and is identified with:
- Update to CRA administrative policy
- New CRA administrative policy
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Determine if a benefit is taxable
Generally, parking you provide or reimburse to your employees is a taxable benefit. This includes situations where you provide parking to your employee at a cost that is less than the fair market value (FMV) of the parking space.
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.
Depending on your situation, the CRA's administrative policy makes an exemption for parking you provide or reimburse. If the CRA's administrative policy applies, the benefit is not taxable.
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
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
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, refer 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
- 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 as operations require
Does not include
- 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
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 the 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, refer 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 open to both employees and the public
- Parking spaces are available free of charge
- Parking spaces are not assigned to employees
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 who is blind
If your employee has a disability, the parking benefit is generally not taxable.
Learn more: Disability-related employment benefits
Calculate the value of the benefit
If the benefit is taxable, the value of the benefit is equal to the FMV of:
- +plus Parking
- -minus Any payment the employee makes to use the space
- =eqauls Value of the benefit
Examples: Calculations for parking
The amounts must be included in the pay period they were received or enjoyed.
|Parking spaces – For province of Ontario in the year 2022||Example 1||Example 2||Example 3|
|Parking space – Administrative policy applies (($250 x 1 day/5 days) x 12 months)||-||-||− $600|
|Value of the benefit (FMV − amount paid by employee)||= $2,400||= $2,640||= $1,200|
|HST (Ontario) – Included in non-cash taxable benefit||= $257.14 ($2,400 x 12/112)||= $282.86 ($2,640 x 12/112)||= $128.57 ($1,200 x 12/112)|
|Amount to be included on T4||= $2,400||= $2,640||= $1,200|
|Amount of HST to remit (to be included in the GST/HST return that includes February 28 of the following year)||= $257.14||= $282.86||= $128.57|
Withhold payroll deductions and remit GST/HST
If the benefit is taxable, you must withhold the following deductions. The amounts must be included in the pay period they were received or enjoyed.
Non-cash and near-cash: Option 1
- Income tax
- EI (do not withhold)
Cash: Option 2
- Income tax
- GST/HST – Reimbursements
- GST/HST – Allowances (do not remit)
Report the benefit on a slip
If the benefit is taxable, you must report the following on the T4 slip.
- Remitting GST/HST on employee benefits
- GST/HST memorandum: Taxable Benefits (Other than Automobile Benefits)
- ITA: Section 6
- Amounts to be included as income from office or employment
- ITA: 6(1)(a)
- Value of any benefit is to be included as income from office or employment
- ITA: 6(1)(b)
- Allowance for any purpose
- CPP: 12(1)
- Amount of contributory salary and wages
- ETA: 173
- Taxable benefit is considered a supply for GST/HST purposes
- IECPR: 2(1)
- Amount of Insurable Earnings
- IECPR: 2(3)
- Earnings from Insurable Employment
- IECPR: 2(3)(a.1)
- Earnings from Insurable Employment – amount excluded as income under 6(1)(a) or (b), 6(6) or (16) of the Income Tax Act
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