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: Will we consider a person to have returned to his or her "regular employment" (in the context of subparagraph 6801(a)(v) of the Regulations) if he or she is on long-term vacation leave?
Position: No.
Reasons: Even though a person may be considered employed by the employer while on vacation, the person will not be considered to have satisfied the condition in 6801(a)(i) or (v) of the Regulations of returning to regular employment if they are on long-term vacation leave.
XXXXXXXXXX 990710
M. P. Sarazin
Attention: XXXXXXXXXX
June 2, 1999
Dear Sirs:
Re: Deferred Salary Leave Plans
This is in reply to your letter dated March 17, 1999, wherein you ask whether a person would be considered to have returned to his or her regular employment for purposes of subparagraph 6801(a)(v) of the Income Tax Regulations (the "Regulations") when the person arranges to take banked vacation leave, banked overtime or banked sick time after the period of leave for a period equal to the period of leave.
Subparagraph 6801(a)(v) of the Regulations imposes one of the conditions that has to be satisfied under the written deferred salary leave plan agreement between the employer and employee before the plan or arrangement will be excluded from being a salary deferral arrangement, within the meaning assigned by subsection 248(1) of the Income Tax Act (the "Act"), under paragraph 6801(a) of the Regulations. Under this condition, the employee must agree to return to his regular employment with the employer or an employer that participates in the same or a similar arrangement after the leave of absence for a period that is not less than the period of the leave of absence.
The February 4, 1988 Regulatory Impact Analysis Statement describing the condition in subparagraph 6801(a)(v) states that the employee must return to his or her regular employment with the employer after the period of leave and the purpose of the provision, in general, appears to contemplate a period of leave of absence from work, followed by a return to work and not a subsequent retirement from work. Consequently, even though an employee is generally considered to be employed when they are on vacation leave, we would not consider such a long-term vacation leave to be a return to regular employment as required under subparagraph 6801(a)(v) of the Regulations. In our view, a proposal to combine a deferred salary leave plan with the utilization of vacation leave entitlements violates the intent of paragraph 6801(a) of the Regulations because the employee does not intend to return to his or her regular employment.
We believe that the same conclusion would be reached in respect of banked overtime and banked sick time.
We trust these comments will be of assistance
Yours truly,
Paul Lynch
for Director
Financial industries Division
Income Tax Rulings and
Interpretations Directorate
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