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.
5-930880
XXXXXXXXXX W.C. Harding
(613) 957-8953
Attention: XXXXXXXXXX
April 21, 1993
Dear Madam:
Re: Section 6801 of the Income Tax Regulations (the "Regulations")
This is in reply to your letter of March 26, 1993 regarding the minimum and maximum percentage salary that may deferred under a deferred salary leave plan (a "DSLP") in any particular year.
Subparagraph 6801(a)(ii) of the Regulations provides that the amount of salary or wages deferred by an employee under all arrangements for services rendered by the employee to the employer in a year can not exceed 33% of the salary or wages that the employee would normally be expected to receive in respect of the services provided in that year. The Regulation does not, on the other hand, provide a minimum limit on the amount that may be deferred. Nevertheless, it does provide that a plan must be established for the main purpose of permitting an employee to fund, through salary or wage deferrals, a leave of absence.
Generally it would be acceptable for a plan to provide for different rates of deferral over several years. However, if it is evident that the intent of the plan is not mainly to fund a deferral period but is, in fact, primarily directed to deferring the taxation of otherwise taxable income the arrangement may be offside. For example, if an employee expecting to receive an unusually high level of income in a particular year, were to enter into an agreement that applied a high deferral rate in that year and it is evident that his intention is to defer the taxation of a portion of that income to a later year when the employee expected a lower taxable income, the plan might not constitute a valid DSLP.
We trust these comments are satisfactory to your needs.
Yours truly,
for Director Financial Industries Division Rulings Directorate
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