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.
RULINGS DIRECTORATE
CORRESPONDENCE SUMMARY
Principal Issues:
Whether deferred salary leave plan meets prescribed conditions in Reg.6801(a)
Position TAKEN:
Yes
Reasons FOR POSITION:
Routine
XXXXXXXXXX 3-953314
Attention: XXXXXXXXXX
XXXXXXXXXX, 1996
Re: Advance Income Tax Ruling
This is in reply to your letter of XXXXXXXXXX requesting an advance income tax ruling in respect of your proposed deferred salary leave plan (the "Plan"). You attached a copy of the proposed Plan, the Plan Application form and the Plan Memorandum of Agreement with your request.
The details of the proposal are as follows:
Proposed Plan
1.XXXXXXXXXX proposes to establish the Plan for certain employees of the XXXXXXXXXX. The Plan will permit participants to defer the receipt of salary in order to fund a leave of absence.
2.The terms of the Plan will be as provided with the ruling request.
Purpose of Proposed Plan
The purpose of the Plan is to enable the employees to take a leave of absence with the assurance that the compensation deferred under the Plan will be taxed when it is received from the Plan.
As confirmed in our telephone conversation (XXXXXXXXXX / XXXXXXXXXX) of January 5, 1996, to the best of the knowledge of the XXXXXXXXXX none of the issues involved in the ruling request is being considered by a tax services or tax centre in connection with an income tax return already filed, and none of the issues involved is subject to a Notice of Objection.
XXXXXXXXXX Tax Services and the XXXXXXXXXX Tax Centre are the locales for income tax return filing and processing with respect to the taxpayers involved in this ruling.
Rulings Given
Provided that the terms and conditions of the Plan are accurate, the above information constitutes complete disclosure of the relevant facts, and the Plan is implemented as proposed, we rule that
A.the Plan will satisfy the requirements set out in paragraph 6801(a) of the Income Tax Regulations and will therefore be excluded from the definition of a "salary deferral arrangement" as that term is defined in subsection 248(1) of the Act;
B.amounts of income deferred under the Plan by an employee will not be included in the employee's income in the taxation year in which they are deferred, nor in any taxation years in which they are held in the Plan but not paid; and
C.amounts received in a year by an employee under the provisions of the Plan, including any interest, will be included in the employee's income under paragraph 6(1)(g) of the Act for that year.
These rulings are given subject to the general limitations and qualifications set forth in Information Circular 70-6R2 dated September 8, 1990 and the Special Release thereto dated September 30, 1992, issued by Revenue Canada, and are binding provided the Plan is implemented by XXXXXXXXXX.
The following general comments concern Canada Pension Plan (CPP) contributions and Unemployment Insurance Act (UI) premiums.
CPP contributions are to be based on the employee's salary net of the deferred amounts during the period of deferral and on the deferred amounts when paid to the employee. When the deferred amounts are paid to the employee by a trustee of the deferred salary leave plan, that trustee is deemed by the CPP to be an employer of the employee and is therefore required to pay the employer's CPP contributions in respect of that employee. Where the trustee/employer recovers the employer's contributions from amounts otherwise payable to the employee, the recovered amount will not be part of the employee's gross salary from that trustee/employer and therefore need not be included on the employee's T4 slip.
UI premiums are to be based on the employee's gross salary before deferrals during the period of deferral and no premiums are to be withheld from the deferred amounts when paid to the employee.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings &
Interpretations Directorate
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