3 May 1995 Internal T.I. 9511467 - 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.

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:

Whether a T4 or a T5 Supplementary should be issued for interest earned on deferred amounts in a DSLP.

Position TAKEN:

T4 Supplementary

Reasons FOR POSITION TAKEN:

These amounts must be treated as employment income.

							May 3, 1995

	ST-JOHN'S TAXATION CENTRE		HEADQUARTERS
M. Shea-DesRosiers
	Attention:  Wayne Gallop		(613) 957-8953
	            Employers Services Division

							7-951146

Deferred Salary Leave Plan ("DSLP")
Section 6801 of the Income Tax Regulations (the "Regulations")
XXXXXXXXXX

This is in reply to your request to the Assessment of Returns Directorate, concerning the procedure for reporting interest earned on deferred amounts in a DSLP, which was forwarded to our Division for reply, and is also further to our telephone conversation (Gallop/Shea-DesRosiers) of April 26, 1995.

As understood in our telephone conversation mentioned above, each participant has its own DSLP account with the financial institution. Pursuant to subparagraph 6801(a)(iv) of the Regulations, any interest or additional amounts that may reasonably be considered to have accrued for the benefit of the employee (XXXXXXXXXX in this case) in a year must be paid in that year to the employee. These amounts are to be treated as employment income for the purpose of the Income Tax Act. In consequence, the amounts, when received, must be included on the employee's T4 Supplementary and the usual tax withholdings and remittances must be made. Said form must be used by the plan trustee or the employer as the case may be to report the earnings. Where a T4 Supplementary is issued, no T5 Summary or T5 Supplementary should be issued by the financial institution, the XXXXXXXXXX in this case, to either the employer or the participants.

The XXXXXXXXXX should be advised to continue issuing T4s Supplementary for their employees participating in a DSLP and the XXXXXXXXXX should be told to stop issuing T5s Summary for these employees. To that effect, the XXXXXXXXXX should give the XXXXXXXXXX a list of its employees participating in the DSLP for whom it issues a T4 Supplementary.

If the employee elects to leave the interest in the DSLP instead of withdrawing it each year, it will be considered a contribution by the employee to the plan. Interest income earned on these amounts will also be considered employment income and must be reported annually by the employee.

For your information, we enclose a copy of the Department's publication ATR-39 which describes a deferred salary leave plan that complies with the requirements of section 6801 of the Regulations. We draw your attention more particularly to paragraph 7.3 which deals with the question of interest paid to an employee participating in a DSLP and indicates how the interest should be treated and reported.

We trust the above comments will be of assistance to you. Should you need further information, you can contact M. Shea-DesRosiers at the above indicated number.

for Section Chief
Financing, Leasing and
Deferred Income Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch