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.
Principal Issues:
Whether withholding must be made when the employer makes a contribution to an Employee Profit Sharing Plan ("EPSP").
Position TAKEN:
No withholding required.
Reasons FOR POSITION TAKEN:
3-941214
5-942025
XXXXXXXXXX L. Roy
Attention: XXXXXXXXXX
September 1, 1994
Dear Madam:
Subject: Employee Profit Sharing Plans - Obligations to withhold tax
This is in reply to your letter of August 3, 1994 wherein you requested our views regarding the requirement for an employer to withhold on contributions to an Employee Profit Sharing Plan ("EPSP").
All references to statute are to the Income Tax Act S.C. 1970-71-72, c.63, as amended, consolidated to June 10, 1993 (the "Act").
Paragraph 153(1)(a) of the Act provides that a person paying at any time in a taxation year "salary or wages or other remuneration" shall withhold therefrom such amount as may be determined in accordance with prescribed rules. Those prescribed rules are set out in sections 102 and 103 of the Income Tax Regulations which refer to a payment made by the employer to the employee.
By virtue of paragraph 6(1)(d) of the Act, amounts allocated, pursuant to subsection 144(1) of the Act, to an employee in the year, by the trustee of an EPSP, are included in the employee's income. In that respect, subsection 144(1) of the Act requires that the trustee of an EPSP allocate each year the employer's contributions to the EPSP to the employee.
Since the employer's contributions included under paragraph 6(1)(d) of the Act are allocated to the employee and not paid, it is our view that withholding is not required on employer's contributions, pursuant to paragraph 153(1)(a) of the Act and the related Income Tax Regulations.
The foregoing comments are not rulings and in accordance with the guidelines set out in Information Circular 70-6R2 dated September 28, 1990, are not binding on the Department.
We trust the above comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
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