27 March 1990 Administrative Letter 59726 F - Deferred Salary Leave Plan - Withholding of CPP, UIC and Income Tax

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.

March 27, 1990

Dear Sirs:

Re: Deferred Salary Leave Plan ("DSLP") Withholding of Canada Pension Plan ("CPP") Unemployment Insurance ("UI") and income tax

This is in reply to your letter of March 2, 1990 wherein you request information concerning the above-mentioned subject.

UI premiums are payable on gross salary (i.e. salary before deferrals) during the deferral period. Accordingly, no UI withholdings are exigible during the leave of absence period from the amounts received by the employee.

CPP premiums are to be based on the employee's salary net of the deferred amounts during the period of deferral and on the deferred amounts when paid to the employee during the leave period. When the deferred amounts are paid to the employee by a trustee of the DSLP during the leave period, the trustee is deemed by the CPP Act to be an employer of that employee and is therefore required to pay the employer's CPP contribution in respect of that employee. Where the trustee/employer recovers the employer's CPP contribution from amounts otherwise payable to the employee, it is our view that this recovered amount will not be part of the employee's gross salary from that trustee/employer and therefore need not be included on the employee's T4 slip.

As far as the withholding of income tax is concerned, during the deferral period, deductions for income tax purposes will be based on the monies the participating employee actually receives. While on leave, the deferred salary will also be subject to income tax deductions on the amount received by the participating employee.

We trust the above comments will be of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate