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 sick leave credits paid annually qualify as a retiring allowance when a person retires and has an amount due for that year?
Position: No
Reasons: We have taken the position that when sick leave is paid annually then it is employment income and not retiring allowance.
September 16, 1999
HEADQUARTERS HEADQUARTERS
Andre' Potvin M.P. Sarazin
Director 824-5441
Trust Accounts Division
Attention: Peter Pustay
992323
Sick Leave Payments and Retiring Allowances
We are writing to you in respect of your facsimile dated August 26, 1999, wherein you requested our comments in respect of the opinion expressed in the letter written by M. Pierre M. Paquette, Director,CPP/EI Eligibility Division which was addressed to Mr. G.W. McFee, Director, Policy and Legislation Development Canada, Human Resources Development Canada.
The letter opines that unused sick leave payable annually on a given date is not considered a retiring allowance even when paid coincidentally with the termination of employment.
Paragraph 5 of Interpretation Bulletin IT-337R3 titled "Retiring Allowances" provides the Department's general views regarding payments in respect of unused sick leave credits. We note that the first sentence of paragraph 5 states that "to qualify as a retiring allowance, a payment must be in recognition of long service or in respect of loss of an office or employment". Consequently, the purpose of the payment will determine whether or not the particular payment will qualify as a retiring allowance.
We agree with the opinion expressed in the above letter. When a payment is not conditional on retirement or loss of office but is paid annually as a term of employment, we are of the view that the payment is considered employment income for purposes of the Income Tax Act (the "Act") and the payment has to be reported in accordance with the provisions of section 5 of the Act.
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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