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.
Principal Issues: Deferred Salary Leave Plan - Do the Regulations allow a plan with a deferral period of six years and the leave taken in the seventh year.
Position: Yes
2006-021464
XXXXXXXXXX Bruce Hartt
(613) 946-3558
November 28, 2006
Dear Madame / Sir:
Re: Deferred Salary Leave Plan
ATR - 39 and Section 6801 of the Income Tax Regulations
This is in reply to your e-mail of November 14, 2006 wherein you requested our opinion as to whether or not a Deferred Salary Leave Plan (the "Plan") that allows the employee to defer salary for six years and take the year of leave in the seventh year would meet the requirements of section 6801 of the Income Tax Regulations (the "Regulations").
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Revenue Agency (CRA). All publications referred to herein can be accessed on the CRA website at the following address: http://www.cra-arc.gc.ca/tax/technical/incometax/menu-e.html.
Subparagraph 6801(a)(i) of the Regulations requires that the leave period begin immediately after a period that is no more than six years after the date on which the salary deferrals for the leave begin. The practical result of this requirement is that salary can be deferred for no more than six consecutive years. Therefore, provided a Plan has a deferral period of no more than six years and the leave period begins no later than six years after the date on which the deferrals for the leave began, the Plan would be acceptable.
We trust our comments are of assistance.
Yours truly,
Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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