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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: For purposes of the rollover under paragraph 60(j.1) of the Act, can an individual use the years that the person worked for the payor while being paid by another employer while on secondment to the payor?
Position: Inconclusive.
Reasons: Question of fact who the employer is during the period of secondment and whether the employer and payor are related for purposes of paragraph 60(j.1).
XXXXXXXXXX 2000-005381
M. P. Sarazin
Attention: XXXXXXXXXX
November 30, 2000
Dear Sir\Madam:
Re: Retiring Allowance and Years of Service while on Secondment
This is in reply to your letter of October 30, 2000, requesting an interpretation regarding the computation of the number of years that may be used for purposes of paragraph 60(j.1) of the Income Tax Act (the "Act") in respect of an employee that will be retiring from an employer (the "Employer") on March 31, 2001.
The employee started to work for the Employer on January 20, 1970 and she joined the Employer's pension plan on February 1, 1971. From November 1, 1965 until January 20, 1970, the employee worked for and was paid by the provincial government but she was on secondment from the provincial government and performing duties for the Employer during this period.
Opinions concerning proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. For more information concerning advance tax rulings, please refer to Information Circular 70-6R3 dated December 30, 1996, issued by the Canada Customs and Revenue Agency (the "Agency"). Copies of information circulars and interpretation bulletins are available on the Internet at the following site - http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. However, we can provide you with the following general comments.
The Agency's general views regarding retiring allowances are found in Interpretation Bulletin IT-337R3 titled "Retiring Allowances". Paragraph 12 of IT-337R3 discusses the amount of a retiring allowance that may be eligible for transfer to a registered retirement savings plan ("RRSP') under paragraph 60(j.1) of the Act. You will note that the transfer limit is computed as the aggregate of $2,000 times the number of years before 1996 during which the employee was employed by the employer or a person related to the employer and $1,500 times the number of years before 1989 that the employee was employed by the employer or a person related to the employer wherein the employee did not have any vested rights to employer contributions to a pension plan or a deferred profit sharing plan for those years.
Under subparagraphs 60(j.1)(iv) and (v) of the Act, certain employers are considered related for the purposes of paragraph 60(j.1) of the Act. As noted in paragraph 13 of IT-337R3, where an employer has acquired the business of another employer or where the employer's pension plan provides the employee with benefits in respect of the employee's service with the previous employer, the employers will be related for the purposes of determining the amount eligible under paragraph 60(j.1) of the Act. We note that this determination is a question of fact.
Where an employee of one employer is seconded to another employer, it is also a question of fact whether the individual who is seconded to the other employer is the employee of the first-mentioned employer or the other employer. It is our view that the employer is not necessarily the person who pays the salaries if that person is not the person to whom the individual reports on a daily basis. Accordingly, where an individual remains on the payroll of one employer and works for another employer it is necessary to ascertain with which employer he or she has an employer-employee relationship.
We trust that our comments will be of assistance.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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