In the course of a comprehensive discussion of the deferred salary leave plan (“DSLP”) rules in Reg. 6801(a), CRA provided an example of an arrangement in which, during an employee leave, the employee first receives amounts whose recognition was deferred under the DSLP rules, and then receives advances of salary or wages which are to be earned after returning – with CRA stating that both types of amounts “must be included in the employee's income in the leave year under subsections 6(3) and 5(1).” After noting that such an arrangement implies a “repayment period” in which the advances are repaid out of reduced pay cheques following the return to work, CRA stated:
Paragraph 6801(a) does not apply during the repayment period, as there is no deferred amount or an EBP [employee benefit plan] within the meaning of subsection 248(1) of the Act during that period. Subsections 6(3) and 5(1) of the Act require that the total salary or wages earned by the employee during that period (the gross amounts, before deduction of the repayment amounts) be included in income. However, paragraph 8(1)(n) of the Act applies so that the employee can deduct from his or her employment income the amounts deducted by the employer as repayment of the employee advances received by the employee during the leave.