2 April 1993 Income Tax Severed Letter 9305845 - Employees Profit Sharing Plan

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

                                           5-930584
XXXXXXXXXX                                 Adèle St-Amour
                                           (613) 957-8953

Attention: XXXXXXXXXX April 2, 1993

Dear Sirs:

Re: Employees profit sharing plan ("EPSP") This is in reply to your letter of February 19, 1993, in which you ask the opinion of the Department on whether there are withholding tax requirements pursuant to subsection 153(1) of the Income Tax Act (the "Act") on the amounts paid to the employees out of an EPSP.

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R2. Where the particular transactions are completed, the enquiry should be addressed to the relevant District Taxation Office. The foregoing comments are, therefore, of a general nature only, are not binding on the Department and may not be appropriate in a particular circumstance.

Any portion of an EPSP allocation that is includable in income by virtue of subsection 144(3) of the Act is required to be included in computing income pursuant to paragraph 6(1)(d) of the Act. Section 144 of the Act ensures that there is no double taxation on subsequent distribution of property to employees under an EPSP. Subsection 144(6) provides that an amount received by the beneficiary from a trustee under such a plan shall not be included in computing the beneficiary's income for the year. However, there is no authority for withholding tax on any payment out of an EPSP if such payment pertains to an amount that was allocated to the beneficiary and such allocation was includable in his income on the above-noted basis.

We wish to point out however, that the requirements or non- requirements for an employer to withhold on contributions to an EPSP is presently under consideration.

We trust this is satisfactory. If you have any further questions, do not hesitate to contact us.

Yours truly,

for Director Financial Industries Division Rulings Directorate