6 February 1990 Income Tax Severed Letter AC59501 - CPP and UI Premiums for Contributions To, and Payments Out of, Deferred Salary Leave Plan

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.

19(1) 5-9501

A.B. Adler
(613) 957-8962

February 6, 1990

Dear Sirs:

Re: Canada pension plan (CPP) and unemployment insurance (UI) Premiums Deferred salary Leave Plans Section 6801 of the Income Tax Regulations

Further to the telephone conversation on February 2, 1990 between
19(1) and our Mr. Adler this is to advise you of our
position concerning CPP and UI premiums in respect of
contributions to, and payments out of, a deferred salary leave
plan (DSLP).

The Department has determined that:

• a) UI premiums are to be based on the employee's gross salary before deferrals during the period of deferral ad no premiums are to be withheld from the deferred amounts when paid to the employee during the leave period.
• b) CPP premiums 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 during the leave period. When the deferred amounts are paid to the employee by a trustee of the DSLP during the leave period, that trustee is deemed by the CPP Act to be an employer of that 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 CPP contributions from amounts otherwise payable tot eh employee, it is our view that this 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.

We trust that out comments will be sufficient for your purposes.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate

Document Disclosed Pursuant to the Access to Information Act Document Divulgué en vertu de la loi sur l'accès à l'informationLANGIND E DOCNUM AC59503 REPLACES TYPEKEY R AUTHORDV LEGS AUTHOR DDELOR DESCKEY 5 RATEKEY 1 REFDATE 900228 ETADYEAR ETADSORT ADMINACC LEGS ACCESSLV LEGS99 SUBJECT Securities lending SECTION ITA-132(6)(b), 131(8)(b), 260(1) SECTION SECTION SECTION SECTION $$$$

19(1) D.S. Delorey
(613) 957-3495

February 28, 1990

Dear Madam:

This is in reply to your letter of February 1, 1990 written on
behalf of the 24(1)

You comment that the 24(1)

In this regard, where a corporation or a trust engages in such securities lending activity, you ask if, by virtue only of such activity,

• (a) the corporation could not qualify as a mutual fund corporation on the basis that it has an undertaking other than the investing of funds of the corporation and, therefore, the requirement in paragraph 131(8)(b) of the Income Tax Act (the "Act") would not be met, or
• (b) the trust could not qualify as a mutual fund trust on the basis that it has an undertaking other than the investing of funds of the trust and, therefore, the requirement in paragraph 132(6)(b) of the Act would not be met.

For the purposes of our reply, you ask us to assume that the securities lending activity would occur under "securities lending arrangements" and would involve only "qualified securities" as those terms are defined in proposed legislation set out in Bill C-28; in particular, in proposed subsection 260(1) of the Act. It is our view that, in general, the lending of securities by the corporation or trust would constitute an undertaking that is the investing of funds of the corporation or trust within the meaning of paragraphs 131(8)(b) and 132(6)(b), respectively, of the Act.

The above comments are an expression of opinion only and are not binding on the Department, as explained in paragraph 24 of Information Circular 70-6R. We trust however that they are of assistance to you.

Yours truly,

W. Douglas
for Director
Financial Industries Division
Rulings Directorate

Document Disclosed Pursuant to the Access to Information Act Document Divulgué en vertu de la loi sur l'accès à l'information