13 September 1994 External T.I. 9421945 - DSLP

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:dslp review

Position TAKEN:routine comments

Reasons FOR POSITION:routine

XXXXXXXXXX 5-942194

Attention: XXXXXXXXXX

September 13, 1994

Dear Sirs:

Re: Deferred Salary Leave Plan ("DSLP")

This is in reply to your letter of August 18, 1994, in which you requested us to review your company's proposed deferred salary leave plan.

As the subject of your enquiry relates to a factual proposal, we are unable to provide you with any specific binding comments on it at this time since confirmation of the tax implications in respect of particular proposals may only be provided by this Directorate where they are the subject matter of an advance income tax ruling request submitted in the manner set out in the Department's Information Circular 70-6R2 (enclosed).

We can also not advise whether you should seek an advance income tax ruling since that is a decision that must be made by each taxpayer. However, we can note that there is no requirement to have DSLPs approved or registered prior to there implementation.

While we are unable to address your specific situation, we can offer the following general comments on certain elements of your plan:

1.a plan must comply with the requirements of section 6801 of the Income Tax Regulations (the "Regulations") in order for it to qualify as a DSLP. Under subparagraph 6801(a)(iii) the arrangement must provide that during the leave of absence the employee will not receive any salary or wages from the employer or from any other person or partnership with whom the employer does not deal at arm's length except reasonable fringe benefits and the employees salary that was deferred under the arrangement. Your proposal uses the term "current salary or wages" but does not define the term and does not restrict payments from non arm's length persons;

2.with respect to article XXXXXXXXXX of your proposed plan, it should be noted that the plan must provide that the leave period is to start immediately after the deferral period; and

3.while not a matter of law, we note that article XXXXXXXXXX provides that the amount deferred can not be less than 10% or greater than 30% of "actual salary received". It would appear to us that this phrase should be "Normal Gross Salary".

These comments are based on our understanding of the law as it applies in general and may or may not apply to the circumstances of a particular case. They do not form an advance income tax ruling and they are not binding on the Department. Should you desire a ruling, we will be pleased to review your plan upon its finalization and issue a ruling thereon.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate