One of the most common perks enjoyed by executives is the coveted parking
space. This seems like a freebie for the executives, but the Canada Customs and
Revenue Agency believes otherwise. The taxman has long believed parking provided
by a company constitutes a taxable benefit to the worker. The amount of this
benefit is based on the going rate for the space. And that rate can be quite
high, especially in Canada's biggest cities. For example, a reserved underground
space in Toronto's BCE Place approaches $500 a month. Multiply that by 12 months
and the employee is facing a taxable benefit of close to $6,000 a year, which,
at the top marginal tax rate, would cost him close to $3,000 in tax. So much for
'free' parking. However, executives and employers may be in store for some
relief based on a recent decision of the Tax Court of Canada. The case, heard in
December, 2000, involved two employees of Telus Corp. in Edmonton who were
reassessed for the 1994 year on the value of their employer-paid parking as a
taxable benefit. The fundamental question, according to the judge, was whether
'there [was] an economic benefit to the employee as opposed to the employer' in
respect of the parking. 'If the advantage is primarily for the employee, then it
is a taxable benefit.' Telus, like other companies, reimburses employees who
work late with taxi chits for the trip home. Because the Telus managers were
always working long hours, it was cheaper for the company to provide a parking
space than to pay cab fares. As a result, the primary benefit was to Telus,
which benefited each month by the extra hours of overtime work -- which far
exceeded the value of the parking provided. The judge found in favour of the
Telus workers and ruled that there was no taxable benefit. The decision comes
just in time as employers scramble to complete T4s for their workers by Feb. 28.
The value of employer-paid parking has traditionally been reported on the T4 as
a taxable benefit. But this recent decision in favour of employees may have
companies scrambling, eventually running to their tax advisors for answers.