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.
MAY 11 1988
Specialty Rulings Directorate Personal and General Section N.M. Sheerin 957-2135
SUBJECT: Vacation Pay Trust
Payments of Replacement Vacation
Pay out of Income of the Trust
The attached letter is forwarded for your attention and reply, since the problem raised XXXX would appear to require an administrative solution rather than a technical reply.
The situation described in XXXX letter and which we assume is a rare occurrence, is as follows:
1. A defaulting employer fails to remit vacation pay contributions to the vacation pay trust but includes the vacation pay contributions in the employee's T4 slip.
2. Subsequently and possibly in the following taxation year, the trustee of the vacation pay trust pays the employee his replacement vacation pay out of the income of the trust.
Interpretation Bulletin 1T-389R2, paragraph 8, states that where an amount is paid to an employee out of the income of a vacation pay trust, the trustee is required to withhold tax and to report the amount as a taxable benefit to the employee. XXXX points out that if the Department insists on the trustee withholding tax and reporting a taxable benefit in circumstances where the defaulting employer has already included the vacation pay contributions in the employee's T4 slip, this will result in double taxation for the employee.
One solution would be for the employee to obtain an amended T4 slip from the trustee in bankruptcy or receiver (i.e. a T4 slip with the vacation pay deleted from his gross earnings). If he has already filed his return when he discovers his predicament, he would then have to request an adjustment to his return.
The matter could be greatly simplified if the Department was willing to waive the withholding and reporting requirement, in respect of replacement vacation payments paid from trust income in the exceptional circumstances outlined in XXXX letter. We are therefore referring this matter for your consideration.
We have asked XXXX to submit a copy of the trust documents so that we may be in a position to reply to the questions on page 2 of her letter.
Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
Attachment
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1988
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1988
Email this Content