5 February 1993 Ruling 9231281 F - Meaning of "Remuneration"

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.

STATEMENT OF PRINCIPAL ISSUE

TAXPAYERS XXXXXXXXXX

REP:

XXXXXXXXXX

PER:

TOPIC:

Meaning of the term REMUNERATION

ISSUE:

Various pension regulations use the terms "compensation" and "remuneration" but only the term "compensation" is defined in the pension reform legislation. Various results can be achieved under certain regulations depending on how we define "remuneration" (see "The Act - Provisions in Question)

ANALYSIS:

I. Pension benefits are presently controlled by at least two significant provisions, the "PA" calculation and the maximum pension benefit mechanism.

SUMMARY:

Subject to specific provisions of the Act, compensation and remuneration should be defined as meaning the same thing except to the extent the definition of compensation modifies the term.

Remuneration should include all amounts included as income from employment and adjustments for one time or irregular amounts of remuneration should be made when determining rates of remuneration.

The treatment of benefits under wage loss replacement plans will depend on whether they are taxed as remuneration SUBs or are not taxable. This is noted in the taxpayers reply.

DETAILED ANALYSIS

COMPENSATION

II. The "PA" is the measure of pension benefits earned in a year by a member of a pension plan and is calculated using fairly complex formulas based on future pension benefits. Subsection 147.1(8) of the Act limits the maximum PA that can be accrued in a year. In part, this limit is 18% of a members "compensation" earned in a year.

Compensation is defined in 147.1(1) of the Act. The explanatory notes issued in December 89 (see b-1) describe it as being:

"the salary, wages and other amounts in respect of the individuals employment...that ...is required by sections 5 and 6 of the Act to (be) include(d) in income..."

and the technical notes of a Dept. of Finance Information release of August 19, 1989 (B-2) states:

"...where the benefits determined in respect of a year ...depend on payments made after the year in respect of services rendered in the year (bonuses or back-pay, for example), the PA is based on the Taxpayer's earnings paid in the year ...."

At page 203 of the Finance booklet: Saving for Retirement, Proposed Regulations and Explanatory Notes (C-2) Finance also states:

"Where an individual is employed on a regular basis throughout a year, the individual's compensation for the year from an employer, as defined in subsection 147.1(1) of the Act will generally be the salary or wages received by the individual from the employer in the year, plus any other amounts (such as the benefit from the use of an automobile) required to be included in computing the individual's income for the year to the extent that the amounts relate to the individual's employment with the employer."

8504 setting out the maximum pension rules are complex but in simplistic terms limit pension benefits to 2% of a members average compensation for his best three years. Of note to us however are the provisions of 8504(3)(a) which permits benefits to be paid based on compensation computed as if bonuses or back-pay were actually paid in the year earned. Accordingly, benefit accruals might be calculated on a different basis to the PA limit as discussed immediately above.

REMUNERATION

III. Remuneration was defined in Information Circular 72-13R8 - "Registered Pension Plans":

"For purposes of this circular "remuneration" may include all salary, wages, bonuses, vacation pay, honoraria, directors' fees, commissions, taxable allowances, the value of taxable benefits and any other payments actually received by the member during the year for services during the year as an officer or employee of a participating employer that are reasonable in the circumstances."(a-2)

It is of note that the paragraph is permissive as opposed to definitive in as much as it states that remuneration "may include" certain amounts. The circular was directed to providing a definition of remuneration on which maximum pensions could be based and employers could provide a pension on any basis provided it did not exceed this limit. Under the old provisions there were no comparative calculations as found in the current regulations, now under review, and there were no minimums. Therefore, only a statement of a maximum inclusion was necessary.

OLD RULES

IV. The old rules, as described in the circular, provide for the inclusion of a few periods of reduced pay or no pay in the calculation of eligible service. However, except for one exception, no consideration was given to providing benefits in respect of remuneration not earned during these periods. The one exception was for periods of leave due to total disability. In those cases, the bulletin provided that the formula for determining pension benefits could include remuneration for the period based on either:

A.     a per annum rate not in excess of the remuneration paid in the year preceding the disability period but adjusted for increases in the cost of living; or

B.      the benefits received under a sickness and accident insurance plan including any cola adjustments. (a-2)

It should be noted, however, that the provision was again permissive and not comparative.

The definition of compensation in the explanatory notes is almost identical to the definition of remuneration in the old information circular. However, compensation as defined in 147.1(1) of the Act is, in general, more restrictive as to source. (ie it excludes foreign remuneration). It does not appear to me that any greater deviation of the two definitions was intended.

TRANSITIONAL RULES

V. Regulation 8302(10) provides rules for periods of reduced pay in 1990 and 1991. Unlike the old rules, the provision includes periods other than periods of disability. The regulation is applicable for the purposes of regulation 8302(9)(d) which acts to limit a pension plan member's benefit accrual rate. It is of interest to note that 8302(9) first applies a test to determine if a plan provides an accrual based on an employees remuneration. Then, if it does, it applies a rule to limit the accrual rate to 2% of the employee's compensation (as adjusted under the section).

Regulation 8302(10) applies in respect of a period when an employee receives no remuneration or a reduced rate of remuneration. It acts to adjust compensation by adjusting the remuneration component of compensation.

8302(9) and (10) expand the pre-reform rules to allow recognition of earnings forgone during a greater variety of periods but only for 1990 and 1991 and only for the purpose of limiting the benefit accrual rate.

NEW RULES

VI. The definition of compensation in 147.1(1) of the Act provides for the addition of prescribed amounts to permit the inclusion of amounts in compensation when calculating PA or maximum pension benefits, as discussed above, or certain other amounts that are based on compensation. The provision is primarily directed towards allowing the accrual of pension benefits in respect of periods of reduced earnings in four situations:

1.     during periods of disability;

2.     during periods of reduced pay/and or service;

3.     during deferral and leave periods under deferred salary leave plans; and

4.     during other absences.

8500(1) defines an "eligible period of reduced pay", a "period of temporary absence" and a "period of disability". Included as a description of an eligible period of reduced pay is the condition that the period must be one throughout which remuneration received is less than the remuneration that would have been received had the employee rendered services throughout the period on a regular basis and had the rate of remuneration been commensurate with the rate of remuneration before the period. This wording is not contained in the definition of a period of disability or a period of temporary absence since no remuneration (as we generally define it) is paid in such periods.

8507(3) then provides a definition of a "qualifying period". In part, it defines it as either an eligible period of reduced pay or a period of temporary absence for which lifetime retirement benefits are provided under a defined benefit provision or contributions are made under a money purchase provision where the benefits or contributions exceed the benefits or contributions that would otherwise be determined if the benefits or contributions were based on the services actually rendered and the remuneration actually received.

8507(1) prescribes the amount to be added to compensation in respect of these periods as the amount calculated in accordance with 8507(2) for qualifying periods and the amount calculated in accordance with 8507(2)(a) for periods of disability. 8507(2)(b) sets a limitation on the amount that can be prescribed. However, this limit is eliminated for periods of disability.

Paraphrased, 8507(2) provides the prescribed amount in respect of qualifying period for an individual from an employer is the lesser of:

(a)     the amount by which

(i)     the amount that would have been the remuneration of the individual if the individual had rendered services throughout the period

exceeds

(ii)     the remuneration of the individual for the period from the employer, and

(b)     the amount determined by the formula

(5)     + A + B - C) x D

where D in the formula is:

"the amount that it is reasonable to consider would have been the individual's remuneration for the year from the employer if the individual had rendered services to the employer on a full-time basis throughout the year and the individual's rate of remuneration had been commensurate with the individual's rate of remuneration before the beginning of the complete period of reduced pay of which the period is a part."

Paragraph (b) provides that over time, a total of five years remuneration can be added to compensation for all leaves plus ("A") an additional 3 years compensation for "period of parenting" leave (defined in 8507(3)).

DEFERRED SALARY LEAVE PLANS

VII. 8508 provides comparable rules for Deferred Salary Leave Plans but clarifies that the treatment extends to cover the period for which an employee defers salary or wages as well as the leave of absence period. Paragraph (b) then clarifies that:

"the amount that it is reasonable to consider would have been the remuneration of the employee for any period from the employer shall be determined on the basis that the employee's rate of remuneration was the amount that it is reasonable to consider would, but for the arrangement, have been the employee's rate of remuneration".

COMMENTS

Highlighted above in these provisions has been the comparative remuneration provisions.

Where an employee receives a clearly defined wage such as an hourly wage, or a fixed annual salary, there does not appear to be any problem in the interpretation or application of these provisions. Any differences in remuneration are traceable and a rate of remuneration is calculable. The problem arises when remuneration in other forms must be factored in. As noted above, remuneration has been taken to mean all amounts taxable under section 5 and 6 of the Act.

This problem can be divided into three concerns:

1.     what remuneration should include in a period before a qualified period;

2.     what additional remuneration should be included for a qualified period; and

3.     what remuneration should be counted to determine if a qualified period has occurred.

The key to solving these is to note that in each provision the key element to be determined is the amount that it is reasonable to assume would have been an employees remuneration in a given period. In my view the proper means to determine this would be to:

1.     Determine a members remuneration in the preceding period.

2.     Determine and deduct from the remuneration under 1. those amounts which do not have any correlation to services performed in the period leaving as the balance only those amounts correlated to services performed.

3.     Determine the members correlated balance for the period under review giving weight to any appropriate adjustments and using the amount from 2. as the base.

4.     Determine the actual remuneration in the subject period.

5.     Determine the remuneration included therein amounts which do not have any correlation to services performed in the period.

6.     Add the amount determined under 3 to the amount determined under 5 to determine the reasonable rate of remuneration that would have been received in the period.

7.     Subtract the amount under 4. from the amount under 6. to determine the amount to be prescribed.

VIII. Examples:

Bonuses and Backpay As noted above, for PA limits, the position is that bonuses should be accounted for in the year of receipt. However, for the pension benefit limits, the regulations permit a plan to account for bonuses in the calculation of compensation in the year they apply. In my opinion, the treatment of bonuses in the computation of remuneration should be consistent with the treatment afforded in the plan for compensation.

If the plan treats the bonuses as a periodic accrual, they should be treated as correlated salary in the foregoing steps. If the plan accounts for them on an as received basis, they should also be treated as uncorrelated receipts.

Other lump sum payments As previously noted 8504(3)(a) only allows the special treatment of bonuses and backpay in the calculation of compensation. When other types of unusual remuneration are received there are no similar rules and the presumption has to be that they are to be treated on a cash basis else the provisions of 8504(3)(a) would be meaningless. In my view, we should maintain the same restrictions for defining remuneration to obtain consistent application. When the above process is taken this will not result in any problems except in determining if certain payments have a correlation to services performed. SAR payments may have this problem if an individual person's services can be said to relate to the performance of a SAR.

If the above process is not followed, Significant difficulty will result in determining what remuneration is reasonable when varied or sporadic amounts are paid. Additionally, a plan member could achieve unwarranted control over his pension entitlements by timing his receipt of amounts in relation to periods of reduced pay. Section 7 amounts would be easily controlled in this fashion.

6(1)(f) Income From Employment Insurance Benefits

These types of payments must be included in compensation by definition. Therefore they should be accounted for in the calculation of remuneration and following the above steps will lead to an appropriate prescribed amount.

If wage loss plans are fully employee funded, benefits under them are not taxable and would not be included in remuneration as we have defined it. However, this will not lead to complications

In example: Assume a person earning 30,000 per year is in a 2% pension, is laid off for a year but collects wage loss insurance for a year of 25,000. The employer and the employee continue to fund the pension for this period. If the insurance is taxable as employment income, the prescribed amount to include in compensation is 5,000 (30,000-25,000) which returns the persons compensation to 30,000 provides a 600 maximum pension accrual for the year (2% of 30,000), a PA of 4,400 (9*600-1000) and a PA limit of $5,400.

On the other hand, if the amount is not remuneration, the person's compensation is increased by 30,000 (30,000 - 0) and the same result will prevail.

If one treats 6(1)(f) benefits under insurance contracts as not being remuneration from an employee's employer, the comparative provisions providing for an inclusion of the difference between the amount actually received from an employer and the amount that the employee would normally receive from the employer will not account for the insurance benefit. Therefore a larger prescribed amount will be included in compensation from that employer. However, the same result, as discussed above, will prevail since a prescribed amount is included in compensation solely for the determination of pension calculations and limitations in respect of a specific employer. The prescribed amount will not increase employment income and it will not effect the employee's overall pension limits. XXXXXXXXXX asks whether or not remuneration which is not pensionable earnings under a specific plan should be included in the calculation of remuneration under the comparative calculations.

As discussed above the provisions provide a prescribed amount for the definition of compensation from an employer. This in turn places limits on the pension benefit and pension accruals but does not otherwise alter or effect the determination of pensionable earnings. Whether or not certain amounts are excluded from the definition of remuneration is of little consequence as long as both parts of the equation are treated equally. It is of interest to note, however, that the regulations do not define pensionable earnings and where remuneration is cited as a factor in determining benefits, such as in the determination of Normalized pension, that term is also not defined or delimited. In consequence, a reference to a phrase such as "depends on remuneration" in the regulation must be interpreted as meaning a reference to all or any portion of a members remuneration.

REGISTRATIONS COMMENTS

The issue was presented to Registrations for their comment, which was received as a memorandum from H.H. Sorensen dated January, 25, 1993.

Registrations extended the above analysis to look at the consequences that may arise with application of the paragraph (b) part of the provision in question. TO REITERATE, paraphrased regulation 8507(2) provides the prescribed amount in respect of a qualifying period for an individual from an employer to be the lesser of:

(a)     the amount by which

(i)     the amount that would have been the remuneration of the individual if the individual had rendered services throughout the period

exceeds

(ii)     the remuneration of the individual for the period from the employer, and

(b)     the amount determined by the formula

(5)     + A + B - C) x D

where D in the formula is:

"the amount that it is reasonable to consider would have been the individual's remuneration for the year from the employer if the individual had rendered services to the employer on a full-time basis throughout the year and the individual's rate of remuneration had been commensurate with the individual's rate of remuneration before the beginning of the complete period of reduced pay of which the period is a part."

This provides that a total of five years remuneration can be added to compensation for any leave plus an additional 3 years compensation for "period of parenting" leave (defined in 8507(3)).

Registrations comments, at page two, on the inclusion of bonuses, overtime etc. in parts (a)(i) and (a)(ii) of the formula. They concur that when such payments are included in both parts, (or excluded) no problems occur. They are however concerned that problems will arise if such amounts are included under only one part and in particular only under part (ii).

Registrations concern is that by only including certain amounts in (ii), the employee will be able to decrease his prescribed amount and thereby prolong increase the total length of time the employee can prescribe amounts.

Increasing the prescribed amount for a year would, in general, be far more beneficial than increasing the time period over which smaller prescribed amounts can be taken. The future room should be reduced by the prescribed amount used and if it is, at the very least the trade off will be neutral over the long run. Therefore I don't see Registrations' comments as a concern.

Technically, with respect to bonuses, overtime etc, the wording of (ii) seems very clear. All remuneration in a period must be included under (ii) and as discussed above, it has been generally agreed that all amounts included as income under sections 5 and 6 do form a person's remuneration. I do not see any basis upon which an amount could logically be excluded for the purposes of this provision. Nor, as just discussed can I see any logical reason to exclude such amounts.

With respect to inclusions under (i) I can not see how it could ever be reasonable to consider that amounts of the above nature which are actually paid in a certain period would not also be included in the remuneration for that period. Therefore I don't see any method whereby such amounts would not be included under both parts.

Registrations comments do highlight one problem area dealing with registered wage loss replacement plans or SUPs. Benefits under these plans are generally employer sponsored and taxable to an employee. However they are taxable under section 56 and not section 5 or 6 and in consequence, they do not fit the mould as outlined.

The intent of the subject provisions is to prescribe an amount that will place an employee in the same position he would have been in if the reduction in remuneration had not occurred. When a substituted amount is received and taxed as remuneration it follows that the reduction in pensionable income is reduced and a lesser prescribed amount is required to return the employee to his former position. However, if any amount is received in substitution such as under a SUB and not included in income, it also follows that a larger prescribed amount is required to bring the employees pensionable earnings back to par. The taxability of the amount is not at issue. Merely whether it is already accounted for in pensionable earnings. Registrations is therefore correct that any suggestions that SUB payments could be included under (ii) would be misleading and our proposed reply should be amended to clarify this.

Amounts paid under a taxable wage loss replacement plan that are included in remuneration are related to the employment source whether or not paid from the employer or an insurer and in consequence are part of an employee's compensation. In my opinion the fact that they may be paid by an insurer does not support their exclusion under (ii).

RECOMMENDATIONS

1.     Subject to specific provisions of the Act, define remuneration and compensation to be the same except to the extent the definition of compensation specifically modifies the term.

2.     Following 1., define remuneration as including all amounts included in income under sections 5 and\or 6 of the Act.

3.     That remuneration be analyzed in accordance with the steps noted above to determine a reasonable remuneration in any situation.

4.     That the term "rate of remuneration" be defined as the remuneration normally received for a full period of service pro-rated on the bases of the level of services provided in a period. THE ACT

PROVISIONS IN QUESTION

8302(10) Period of Reduced Remuneration

For the purposes of paragraph (9)(d), where a member of a registered pension plan is provided with benefits under a defined benefit provision of the plan in respect of a period in 1990 or 1991

(a)     throughout which, by reason of disability, leave of absence, lay-off or other circumstance, the member rendered no services, or rendered a reduced level of services, to employers who participate in the plan, and

(b)     throughout which the member received no remuneration, or a reduced rate of remuneration,

the member's compensation shall be determined on the assumption that the member received remuneration for the period equal to the amount of remuneration that it is reasonable to consider the member would have received if the member had rendered services throughout the period on a regular basis (having regard to the services rendered by the member before the period) and the member's rate of remuneration had been commensurate with the member's rate of remuneration when the member did render services on a regular basis.

8500(1) "eligible period of reduced pay" of an employee with respect to an employer means a period (other than a period in which the employee is, at any time after 1990, connected with the employer or a period any part of which is a period of disability of the employee)

(a)     that begins after the employee has been employed by the employer or predecessor employers to the employer for not less than 36 months,

(b)     throughout which the employee renders services to the employer, and

(c)     throughout which the remuneration received by the employee from the employer is less than the remuneration that it is reasonable to expect the employee would have received from the employer had the employee rendered services throughout the period on a regular basis (having regard to the services rendered by the employee to the employer before the period) and had the employee's rate of remuneration been commensurate with the employee's rate of remuneration before the period;

8507(2) Additional Compensation in Respect of Qualifying Period

For the purposes of paragraph (1)(a) and subsection (5), the amount that is determined in respect of a period in a calendar year that is a qualifying period of an individual with respect to an employer is the lesser of

(a)     the amount, if any, by which

(i)     the amount that it is reasonable to consider would have been the remuneration of the individual for the period from the employer if the individual had rendered services to the employer throughout the period on a regular basis (having regard to the services rendered by the individual to the employer before the complete period of reduced pay of which the period is a part) and the individual's rate of remuneration had been commensurate with the individual's rate of remuneration before the beginning of the complete period of reduced pay

exceeds

(ii)     the remuneration of the individual for the period from the employer, and

(b)     the amount determined by the formula

(5)     + A + B - C) x D

where

A is the lesser of 3 and the amount that would be the cumulative additional compensation fraction of the individual with respect to the employer, determined to the time that is immediately before the end of the period, if the individual's only qualifying periods had been periods that are also periods of parenting,

B is

(i)     if no part of the period is a period of parenting, nil, and

(ii)     otherwise, the lesser of

(A)      the amount, if any, by which 3 exceeds the amount determined for A, and

(B)      the ratio of

(I)      the amount that would be determined under paragraph (a) if the remuneration referred to in subparagraphs (a)(i) and (ii) were the remuneration for such part of the period as is a period of parenting

to

(II)      the amount determined for D,

C is the cumulative additional compensation fraction of the individual with respect to the employer, determined to the time that is immediately before the end of the period, and

D is the amount that it is reasonable to consider would have been the individual's remuneration for the year from the employer if the individual had rendered services to the employer on a full-time basis throughout the year and the individual's rate of remuneration had been commensurate with the individual's rate of remuneration before the beginning of the complete period of reduced pay of which the period is a part.

8507(3) Qualifying Periods and Periods of Parenting

For the purposes of this section,

(a)     a period in a calendar year is a qualifying period of an individual in the year with respect to an employer if

(i)     the period is an eligible period of reduced pay or temporary absence of the individual in the year with respect to the employer,

(ii)     either

(A)      lifetime retirement benefits are provided to the individual under a defined benefit provision of a registered pension plan (other than a plan that is, in the year, a specified multi-employer plan) in respect of the period, or

(B)      contributions are made by or on behalf of the individual under a money purchase provision of a registered pension plan (other than a plan that is, in the year, a specified multi-employer plan) in respect of the period,

pursuant to terms of the plan that apply in respect of periods that are not regular periods of employment,

(iii)     the lifetime retirement benefits or the contributions, as the case may be, exceed the benefits that would otherwise be provided or the contributions that would otherwise be made if the benefits or contributions were based on the services actually rendered by the individual and the remuneration actually received by the individual,

(iv)     the individual's pension adjustment for the year with respect to the employer includes an amount in respect of the lifetime retirement benefits or the contributions, as the case may be,

(v)     no benefits are provided in respect of the period to the individual under a defined benefit provision of any registered pension plan in which the employer does not participate, and

(vi)     no contributions are made by or on behalf of the individual in respect of the period under a money purchase provision of a registered pension plan or a deferred profit sharing plan in which the employer does not participate,

and, for the purposes of this paragraph, an amount that is allocated to an individual from forfeited amounts or a surplus under a money purchase provision of a registered pension plan is deemed to be a contribution that is made on behalf of the individual under the provision; and

(b)     a period of parenting of an individual is all or a part of a period that begins

(i)     at the time of the birth of a child of whom the individual is a natural parent, or

(ii)     at the time the individual adopts a child,

and ends 12 months after that time.

8508 Salary Deferral Leave Plan

Where an employee and an employer enter into an arrangement in writing described in paragraph 6801(a) or (b),

(a)     the period throughout which the employee defers salary or wages pursuant to the arrangement shall be deemed to be an eligible period of reduced pay of the employee with respect to the employer; and

(b)     for the purposes of section 8507, the amount that it is reasonable to consider would have been the remuneration of the employee for any period from the employer shall be determined on the basis that the employee's rate of remuneration was the amount that it is reasonable to consider would, but for the arrangement, have been the employee's rate of remuneration.

COMPENSATION

147.1(1) "compensation" of an individual from an employer for a calendar year means the aggregate of all amounts each of which is

(a)     an amount in respect of

(i)     the individual's employment with the employer, or

(ii)     an office in respect of which the individual is remunerated by the employer

that is required (or that would be required but for paragraph 81(1)(a) as it applies with respect to the Indian Act) by section 5 or 6 to be included in computing the individual's income for the year, except such portion of the amount as

(iii)     may reasonably be considered to relate to a period throughout which the individual was not resident in Canada, and

(iv)     is not attributable to the performance of the duties of the office or employment in Canada or is exempt from income tax in Canada by reason of a provision contained in a tax convention or agreement with another country that has the force of law in Canada,

(b)     a prescribed amount, or

(c)     an amount acceptable to the Minister in respect of remuneration received by the individual from any employer for a period in the year throughout which the individual was not resident in Canada, to the extent that the amount is not otherwise included in the aggregate;

remuneration

5(1) Subject to this Part, a taxpayer's income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by him in the year.

6(3) Payments by employer to employee. An amount received by one person from another

(a)     during a period while the payee was an officer of, or in the employment of, the payer, or

(b)     on account or in lieu of payment of, or in satisfaction of, an obligation arising out of an agreement made by the payer with the payee immediately prior to, during or immediately after a period that the payee was an officer of, or in the employment of, the payer,

shall be deemed, for the purposes of section 5, to be remuneration for the payee's services rendered as an officer or during the period of employment, unless it is established that, irrespective of when the agreement, if any, under which the amount was received was made or the form or legal effect thereof, it cannot reasonably be regarded as having been received

(c)     as consideration or partial consideration for accepting the office or entering into the contract of employment,

(d)     as remuneration or partial remuneration for services as an officer or under the contract of employment, or

(e)     in consideration or partial consideration for a covenant with reference to what the officer or employee is, or is not, to do before or after the termination of the employment.

Interpretation Bulletins: Primary--IT-196R2. Secondary--IT-75R2; IT-247; IT-337R2; IT-470R; IT-515.

8(1)(c) where the taxpayer is a member of the clergy or of a religious order or a regular minister of a religious denomination, and is in charge of, or ministering to a diocese, parish or congregation, or engaged exclusively in full-time administrative service by appointment of a religious order or religious denomination, an amount equal to

(i)     the value of the residence or other living accommodation occupied by him in the course of or by virtue of his office or employment as such member or minister so in charge of or ministering to a diocese, parish or congregation, or so engaged in such administrative service, to the extent that such value is included in computing his income for the year by virtue of section 6, or

(ii)     rent paid by him for a residence or other living accommodation rented and occupied by him, or the fair rental value of a residence or other living accommodation owned and occupied by him, during the year but not, in either case, exceeding his remuneration from his office or employment as described in subparagraph (i);

8(1)(l.1) Canada Pension Plan contributions and Unemployment Insurance Act, 1971 premium payable by an employee who is an employer.--any amount payable by the taxpayer in the year

(i)     as an employer's premium under the Unemployment Insurance Act, 1971, or

(ii)     as an employer's contribution under the Canada Pension Plan or under a provincial pension plan as defined in section 3 of the Canada Pension Plan,

in respect of salary, wages or other remuneration, including gratuities, paid to an individual employed by the taxpayer as an assistant or substitute to perform the duties of the taxpayer's office or employment if an amount is deductible by the taxpayer for the year under subparagraph (i)(ii) in respect of that individual;

18(1)(p) Limitation re personal services business expenses.--an outlay or expense to the extent that it was made or incurred by a corporation in a taxation year for the purpose of gaining or producing income from a personal services business (within the meaning assigned by paragraph 125(7)(d)), other than

(i)     the salary, wages or other remuneration paid in the year to an incorporated employee of the corporation,

(ii)     the cost to the corporation of any benefit or allowance provided to an incorporated employee in the year,

(iii)     any amount expended by the corporation in connection with the selling of property or the negotiating of contracts by the corporation if the amount would have been deductible in computing the income of an incorporated employee for a taxation year from an office or employment if the amount had been expended by the incorporated employee under a contract of employment that required him to pay the amount, and

(iv)     any amount paid by the corporation in the year as or on account of legal expenses incurred by it in collecting amounts owing to it on account of services rendered

that would, if the income of the corporation were from a business other than a personal services business, be deductible in computing its income;

Interpretation Bulletins: Secondary--IT-73R4; IT-168R3.

61(4)(c) "qualifying payment" means a single payment made before November 13, 1981 (or made on or after November 13, 1981 pursuant to an agreement in writing entered into before that date to make such a payment in respect of his 1981 taxation year, or pursuant to an arrangement in writing made before that date to have funds withheld before 1982 from any of the individual's remuneration described in paragraph (1)(b) earned or received before November 13, 1981 and paid by or on behalf of the individual).

61(1) In computing the income for a taxation year of an individual resident in Canada, there may be deducted an amount equal to the lesser of

(a)     such amount as he may claim, not exceeding the aggregate of amounts each of which is a single payment

(i)     made by him in the year or within 60 days after the end of the year as consideration for an income-averaging annuity contract of the individual, and

(ii)     in respect of which no amount has been deducted in computing his income for the immediately preceding taxation year, and

(b)     the amount, if any, by which the aggregate of

(i)     the remainder obtained when the aggregate of the amounts deductible in computing the taxpayer's income for the year by virtue of paragraphs 60(j), (k) and (l) is deducted from the aggregate of amounts described in subsection (2) in respect of the individual for the year,

(ii)     the amount, if any, by which the amount determined under paragraph 3(b) in respect of the individual for the year exceeds the aggregate of amounts each of which is an allowable business investment loss of the individual for the year,

(iii)     the individual's income for the year from the production of a literary, dramatic, musical or artistic work,

(iv)     the individual's income for the year from his activities as an athlete, a musician or a public entertainer such as a theatre, motion picture, radio or television artist, and

(iv.1) the amount, if any, by which the amount included in computing the income of the individual for the year by virtue of section 59 exceeds the aggregate of amounts deducted in computing his income for the year under sections 64, 66, 66.1, 66.2 and 66.4 and under section 29 of the Income Tax Application Rules, 1971,

exceeds

(v)     the aggregate of amounts each of which is the annual annuity amount of the individual in respect of an income-averaging annuity contract in respect of the consideration for which any amount has been deducted under this subsection in computing his income for the year.

63(3)(b) "Earned income" of a taxpayer means the aggregate of

(i)     all salaries, wages and other remuneration, including gratuities, received by him in respect of, in the course of, or by virtue of offices and employments, and all amounts included in computing his income by virtue of sections 6 and 7,

(ii)     amounts included in computing his income by virtue of paragraph 56(1)(m), (n) or (o), and

(iii)     his incomes from all businesses carried on either alone or as a partner actively engaged in the business;

78(4) Where an amount in respect of a taxpayer's expense that is a superannuation or pension benefit, a retiring allowance, salary, wages or other remuneration (other than reasonable vacation or holiday pay or a deferred amount under a salary deferral arrangement) in respect of an office or employment is unpaid on the day that is 180 days after the end of the taxation year in which the expense was incurred, for the purposes of this Act other than this subsection, the amount shall be deemed not to have been incurred as an expense in the year and shall be deemed to be incurred as an expense in the taxation year in which the amount is paid.

81(2) Where an elected member of a provincial legislative assembly has, under an Act of the provincial legislature, been paid an allowance in a taxation year for expenses incident to the discharge of his duties as a member, the allowance shall not be included in computing his income for the year unless it exceeds 1/2 of the maximum fixed amount provided by law as payable to him by way of salary, indemnity and other remuneration as a member in respect of attendance at a session of the legislature, in which event there shall be included in computing his income for the year only the amount by which the allowance exceeds 1/2 of that maximum fixed amount.

153(1) Every person paying at any time in a taxation year

(a)     salary or wages or other remuneration,

(b)     a superannuation or pension benefit,

(c)     a retiring allowance,

(d)     a death benefit,

(d.1)      an amount as a benefit under the Unemployment Insurance Act, 1971,

(e)     an amount as a benefit under a supplementary unemployment benefit plan,

(f)     an annuity payment or a payment in full or partial commutation of an annuity,

(g)     fees, commissions or other amounts for services,

(h)     a payment under a deferred profit sharing plan or a plan referred to in section 147 as a revoked plan,

(i)     a training allowance under the National Training Act,

(j)     a payment out of or under a registered retirement savings plan or a plan referred to in subsection 146(12) as an "amended plan",

(k)     an amount as, on account or in lieu of payment of, or in satisfaction of, proceeds of the surrender, cancellation or redemption of an income-averaging annuity contract,

(l)     a payment out of or under a registered retirement income fund or a fund referred to in subsection 146.3(11) as an "amended fund",

(m)     an amount as a benefit under the Labour Adjustment Benefits Act,

(m.1)     an income assistance payment made pursuant to an agreement under section 5 of the Department of Labour Act,

(n)     one or more amounts to an individual who has elected for the year in prescribed form in respect of all such amounts,

(o)     an amount described in paragraph 115(2)(c.1),

(p)     a contribution under a retirement compensation arrangement,

(q)     an amount as a distribution to one or more persons out of or under a retirement compensation arrangement, or

(r)     an amount on account of the purchase price of an interest in a retirement compensation arrangement

shall deduct or withhold therefrom such amount as may be determined in accordance with prescribed rules and shall, at such time as may be prescribed, remit that amount to the Receiver General on account of the payee's tax for the year under this Part or Part XI.3, as the case may be.

REGULATIONS

100(1) "remuneration" includes any payment that is

(a)     in respect of

(i)     salary or wages, or

(ii)     commissions or other similar amounts fixed by reference to the volume of the sales made or the contracts negotiated (referred to as "commissions" in this Part),

paid to an officer or employee or former officer or employee,

(b)     a superannuation or pension benefit (including an annuity payment made pursuant to or under a superannuation or pension fund or plan),

(b.1)     an amount of a distribution out of or under a retirement compensation arrangement,

(c)     a retiring allowance,

(d)     a death benefit,

(e)     a benefit under a supplementary unemployment benefit plan,

(f)     a payment under a deferred profit sharing plan or a plan referred to in section 147 of the Act as a "revoked plan", reduced, if applicable, by amounts determined under subsections 147(10.1), (11) and (12) of the Act,

(g)     a benefit under the Unemployment Insurance Act, 1971,

(h)     a training allowance paid under the National Training Act, except to the extent that it was paid to the recipient thereof as or an account of an allowance for his personal or living expenses while he was away from home,

(i)     a payment made during the lifetime of an annuitant referred to in subparagraph 146(1)(a)(i) of the Act out of or under a registered retirement savings plan of that annuitant, other than

(i)     a periodic annuity payment, or

(ii)     a payment made by a person who has reasonable grounds to believe that the payment may be deducted under subsection 146(8.2) of the Act in computing the income of any taxpayer,

(j)     a payment out of or under a plan referred to in subsection 146(12) of the Act as an "amended plan" other than

(i)     a periodic annuity payment, or

(ii)     where paragraph 146(12)(a) of the Act applied to the plan after May 25, 1976, a payment made in a year subsequent to the year in which that paragraph applied to the plan,

(j.1)      a payment made during the lifetime of an annuitant referred to in paragraph 146.3(1)(a) of the Act under a registered retirement income fund of that annuitant, other than a payment to the extent that it is in respect of the minimum amount (within the meaning assigned by paragraph 146.3(1)(b.1) of the Act) under the fund for a year,

(k)     a benefit under the Labour Adjustment Benefits Act,

(l)     an amount as, on account or in lieu of payment of, or in satisfaction of, proceeds of the surrender, cancellation or redemption of an income-averaging annuity contract, or

(m)     in respect of an amount that can reasonably be regarded as having been received, in whole or in part, as consideration or partial consideration for entering into a contract of service, where the service is to be performed in Canada, or for an undertaking not to enter into such a contract with another party;

1206(1) "Canadian exploration and development overhead expense" of a taxpayer means a Canadian exploration expense or a Canadian development expense of the taxpayer made or incurred after 1980

(a)     that was in respect of the administration, management or financing of the taxpayer,

(b)     that was in respect of the salary, wages or other remuneration or related benefits paid in respect of a person employed by the taxpayer whose duties were not all or substantially all directed towards exploration or development activities, ...

5202 In this Part, except as otherwise provided in section 5203 or 5204, ...

"salaries and wages" means salaries, wages and commissions, but does not include any other type of remuneration, any superannuation or pension benefits, any retiring allowances or any amount referred to in section 6 or 7 of the Act.

8302(3) For the purposes of paragraph (2)(a), and subject to subsection (11), the normalized pension of an individual under a defined benefit provision of a registered pension plan at the end of a particular calendar year is the amount (expressed on an annualized basis) of lifetime retirement benefits that would be payable under the provision to the individual immediately after the end of the particular year if

(a)     where lifetime retirement benefits have not commenced to be paid under the provision to the individual before the end of the particular year, they commenced to be paid immediately after the end of the year;

(b)     where the individual had not attained 65 years of age before the time at which lifetime retirement benefits commenced to be paid (or are assumed by reason of paragraph (a) to have commenced to be paid) to the individual, the individual attained that age at that time;

(c)     all benefits to which the individual is entitled under the provision were fully vested;

(d)     where the amount of the individual's lifetime retirement benefits would otherwise be determined with a reduction computed by reference to the individual's age, duration of service or both, or with any other similar reduction, no such reduction were applied;

(e)     where the amount of the individual's lifetime retirement benefits depends on the remuneration received by the individual in a calendar year (in this paragraph referred to as the "other year") other than the particular year, the remuneration received by the individual in the other year were determined in accordance with the following rules:

(i)     where the individual was remunerated for both the particular year and the other year as a person who rendered services on a full-time basis throughout each of the years, the remuneration received by the individual in the other year is identical to the remuneration received by the individual in the particular year,

(ii)     where subparagraph (i) is not applicable and the individual rendered services in the particular year, the remuneration received by the individual in the other year is the remuneration that the individual would have received in the other year (or a reasonable estimate thereof determined by a method acceptable to the Minister) had the individual's rate of remuneration in the other year been the same as the individual's rate of remuneration in the particular year, and

(iii)     where subparagraph (i) is not applicable and the individual did not render services in the particular year, the remuneration received by the individual in the other year is the remuneration that the individual would have received in the other year (or a reasonable estimate thereof determined by a method acceptable to the Minister) had the individual's rate of remuneration in the other year been the amount that it is reasonable to consider would have been the individual's rate of remuneration in the particular year had the individual rendered services in the particular year;

(f)     where the amount of the individual's lifetime retirement benefits depends on the individuals remuneration and all or a portion of the remuneration received by the individual in the particular year is treated under the provision as if it were remuneration received in a calendar year preceding the particular year for services rendered in that preceding year, that remuneration were remuneration for services rendered in the particular year;

(g)     where the amount of the individual's lifetime retirement benefits depends on the individual's remuneration and the particular year is 1990, 1991, 1992 or 1993, benefits, to the extent that they can reasonably be considered to be in respect of the following range of annual remuneration, were excluded:

(i)     where the particular year is 1990, the range from $63,889 to $86,111,

(ii)     where the particular year is 1991, the range from $69,444 to $86,111,

(iii)     where the particular year is 1992, the range from $75,000 to $86,111, and

(iv)     where the particular year is 1993, the range from $80,556 to $86,111;

(h)     where

(i)     the amount of the individual's lifetime retirement benefits depends on the individual's remuneration,

(ii)     the formula for determining the amount of the individual's lifetime retirement benefits includes an adjustment to the individual's remuneration for one or more calendar years,

(iii)     the adjustment to the individual's remuneration for a year (in this paragraph referred to as the "specified year") consists of multiplying the individual's remuneration for the specified year by a factor that does not exceed the ratio of the average wage for the year in which the amount of the individual's lifetime retirement benefits is required to be determined to the average wage for the specified year (or a substantially similar measure of the change in the wage measure), and

(iv)     the adjustment may reasonably be considered to be made to increase the individual's remuneration for the specified year to reflect, in whole or in part, increases in average wages and salaries from that year to the year in which the amount of the individual's lifetime retirement benefits is required to be determined,

the formula did not include the adjustment to the individual's remuneration for the specified year;

(i)     where the amount of the individual's lifetime retirement benefits depends on the Year's Maximum Pensionable Earnings for calendar years other than the particular year, the Year's Maximum Pensionable Earnings for each such year were equal to the Year's Maximum Pensionable Earnings for the particular year;

(j)     where the amount of the individual's lifetime retirement benefits depends on the actual amount of pension (in this paragraph referred to as the "statutory pension") payable to the individual under the Canada Pension Plan or a provincial plan (as defined in section 3 of that Act), the amount of statutory pension (expressed on an annualized basis) were equal to

(i)     25 per cent of the lesser of the Year's Maximum Pensionable Earnings for the particular year and

(A)      in the case of an individual who renders services throughout the particular year on a full-time basis to employers who participate in the plan, the aggregate of all amounts each of which is the individual's remuneration for the particular year from such an employer, and

(B)     in any other case, the amount that it is reasonable to consider would be determined under clause (A) if the individual had rendered services throughout the particular year on a full-time basis to employers who participate in the plan, or

(ii)     with the option of the plan administrator, any other amount determined in accordance with a method for estimating the statutory pension that can be expected to result in amounts substantially similar to amounts determined under subparagraph (i);

(k)     where the amount of the individual's lifetime retirement benefits depends on the pension (in this paragraph referred to as the "statutory pension") payable to the individual under Part I of the Old Age Security Act, the amount of statutory pension payable for each calendar year were equal to the aggregate of all amounts each of which is the amount of the full monthly pension payable under Part I of the Old Age Security Act for a month in the particular year;

(l)     except as otherwise expressly permitted in writing by the Minister, where the amount of the individual's lifetime retirement benefits depends on the amount of benefits (other than public pension benefits or similar benefits of a country other than Canada) payable under another benefit provision of a pension plan or under a deferred profit sharing plan, the amounts of the other benefits were such as to maximize the amount of the individual's lifetime retirement benefits;

(m)     where the individual's lifetime retirement benefits would otherwise include benefits that the plan is required to provide by reason of a designated provision of the law of Canada or a province (within the meaning assigned by section 8513), or that the plan would be required to provide if each such provision were applicable to the plan with respect to all its members, such benefits were not included;

(n)     where

(i)     the individual attained 65 years of age before lifetime retirement benefits commenced to be paid (or are assumed by reason of paragraph (a) to have commenced to be paid) to the individual, and

(ii)     an adjustment is made in determining the amount of those benefits for the purpose of offsetting, in whole or in part, the decrease in the value of lifetime retirement benefits that would otherwise result by reason of the deferral of those benefits after the individual attained 65 years of age,

that adjustment were not made, except to the extent that the adjustment exceeds the adjustment that would be made on an actuarially equivalent basis;

(o)     except as otherwise provided by subsection (4), where the amount of the individual's lifetime retirement benefits depends on

(i)     the form of benefits provided with respect to the individual under the provision (whether or not at the option of the individual), including

(A)      the benefits to be provided after the death of the individual,

(B)      the amount of retirement benefits, other than lifetime retirement benefits, provided to the individual, or

(C)      the extent to which the lifetime retirement benefits will be adjusted to reflect changes in the cost of living, or

(ii)     circumstances that are relevant in determining the form of benefits,

the form of benefits and the circumstances were such as to maximize the amount of the individual's lifetime retirement benefits on commencement of payment;

(p)     where the amount of the individual's lifetime retirement benefits depends on whether the individual is totally and permanently disabled at the time at which retirement benefits commence to be paid to the individual, the individual were not so disabled at that time; and

(q)     where lifetime retirement benefits have commenced to be paid under the provision to the individual before the end of the particular year, benefits payable as a consequence of cost-of-living adjustments described in paragraph 8303(5)(k) were disregarded.

8503(14) Where

(a)     the amount of lifetime retirement benefits provided under a defined benefit provision of a registered pension plan to a member depends on the member's remuneration,

(b)     remuneration (in this subsection referred to as "excluded remuneration") of certain types is disregarded for the purpose of determining the amount of the member's lifetime retirement benefits, and

(c)     it can reasonably be considered that one of the main reasons that remuneration in the form of excluded remuneration was paid to the member by an employer at any time was to artificially reduce a pension credit of the member under the provision with respect to the employer,

the following rules apply for the purposes of the conditions in subsection 8504(1):

(d)     the member shall be deemed to have been connected with the employer while the member was employed by the employer, and

(e)     the member shall be deemed not to have received such remuneration as is excluded remuneration.

8504(3) Lifetime retirement benefits provided to a member under a defined benefit provision of a pension plan shall be deemed to comply with the conditions in subsection (1) where they would so comply if either or both of the following rules were applicable:

(a)     determine, for the purpose of subsection (2), the member's compensation from an employer for a calendar year by adding to the compensation otherwise determined such portion of the amount of each bonus and retroactive increase in remuneration paid by the employer to the member after the year as may reasonably be considered to be in respect of the year and by deducting therefrom such portion of the amount of each bonus and retroactive increase in remuneration paid by the employer to the member in the year as may reasonably be considered to be in respect of a preceding year; and

(b)     determine, for the purpose of computing the amount J in subsection (2), the portion of the member's compensation from an employer for a calendar year that may reasonably be considered to relate to a month in the year by apportioning the compensation uniformly over the period in the year in respect of which it was paid.