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.
External Affairs and International Trade Canada Ottawa, Ontario K1A 0G2
Attention: Ms Lynn Smith Self-Funded Leave Coordinator Compensation and Benefits (ABPB)
Dear Sirs:
RE: Self-Funded Leave Programme
This is in reply to your letter of August 27, 1993, concerning the above noted subject. You ask us to identify the departmental contact to whom you should send information concerning employees who fail to return to employment after taking a leave of absence in accordance with your self-funded leave programme, and to describe the tax consequences of such a failure.
Subparagraph 6801(a)(v) of the Income Tax Act Regulations states that a deferred salary leave plan must provide that the employee return to regular employment with the employer after the leave of absence for a period equal to the leave of absence. Where the arrangement contains this provision but it is reasonable to assume or is known, at the time into which the arrangement is entered or at a later date, that either or both parties do not intend to, or cannot, abide by the provision, then the arrangement between the employer and the employee will fail to meet the requirements of the Income Tax Act. Consequently, the employer should terminate the arrangement and all deferred amounts plus interest, if any, should be paid to the employee less the applicable wihholding tax. There is no additional penalty imposed by the Income Tax Act and no need for the employer to notify the Department in these circumstances.
We trust this information is helpful.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993