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: Will a lump-sum payment received on retirement in respect of unused vacation leave qualify as a retiring allowance?
Position: No.
Reasons: Vacation pay does not meet the definition of retiring allowance in subsection 248(1) of the Act and it is considered income from employment for purposes of the Act.
XXXXXXXXXX 991216
M. P. Sarazin
August 10, 1999
Dear Sir:
Re: Vacation Leave Payment and Retiring Allowance
This is in reply to your letter dated April 30, 1999, wherein you requested our views as to whether a lump sum payment received on retirement in respect of unused vacation leave would qualify as a retiring allowance.
You are of the view that the reasons given by the Supreme Court of Canada in rendering its decision in Harel V. Quebec (77 DTC 5438) would apply to support a conclusion a lump sum payment received on retirement in respect of unused vacation pay qualifies as a retiring allowance.
The enclosed Interpretation Bulletin IT-337R3 titled Retiring Allowances provides the Department's general views in respect of retiring allowances for purposes of the Income Tax Act (the "Act").
We note that paragraph 5 of IT-337R3 discusses whether payments for unused sick leave credits and unused vacation leave credits would qualify as a retiring allowance for purposes of the Act. It also refers to the above noted Supreme Court of Canada decision in support of the position on unused sick leave credits. In our view the reasoning in Harel does not extend to unused vacation and the interpretation bulletin clearly states that a payment for accumulated vacation leave is considered to be ordinary remuneration and is included in the recipient's income in the year of receipt pursuant to subsection 5(1) or 6(3) of the Act.
We trust the above comments will be of assistance.
Yours truly,
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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