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.
Revenue Canada Taxation Head Office
October 7, 1987
R. Nanner (613)957-3494
Dear Sirs:
Re: Deferred Compensation/Leave of Absence Plan
This is in reply to your letter of August 20, 1987 wherein you requested our approval of the proposed Deferred Salary Leave Plan (the "Plan") for the employees of the XXXX (the "Employees"). A copy of the Plan was submitted to us.
You do not require our approval to establish a leave of absence plan and furthermore your request for an advance income tax ruling cannot be complied with as the Income Tax Regulations governing such plans have not yet been passed. A copy of the proposed Regulations is being enclosed for your information. In addition, we offer the following comments:
1. Paragraph 3(a) on page 1 of the document titled "Facts and Proposed Transactions" when read in conjunction with paragraph two of the Memorandum of Agreement (the "Agreement") may contravene clause 6801(a)(i) of the Regulations as the total deferral period may exceed six years which is the maximum allowed under the Regulations.
2. Clause 3(f)(ii) of the Agreement contravenes clause 6801(a)(i) of the Regulations as the leave period must not be of less than six months and the deferral period, as mentioned before, must not exceed six years.
3. Amounts to be reported on T4 supplementary during the deferral period would also include the interest or other investment income earned on the deferred compensation as this amount is taxable in employee's hands as employment income.
4. The Plan allows for a maximum deferral of 30% of the annual salary of an employee, however, the maximum deferred under the proposed Regulations is 33 1/3%.
The above comments are based on the premise that the proposed Regulations will be passed as presently worded.
Yours truly,
for Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1987
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© Sa Majesté la Reine du Chef du Canada, 1987
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