| 19(1) | File No. 5-9540 |
| D.S. Delorey | |
| (613) 957-3495 |
February 28, 1990
Dear Sir or Madam:
Re: Deferred Salary Leave Plan
This is in reply to your letter of January 30, 1990 concerning your proposed deferred salary leave plan (the "Plan").
In particular, you wish to know the correct procedures for the deduction of unemployment insurance premiums during both the deferral and leave period. It is our view that such premiums are to be based on the gross salary during the deferral period and are not payable during the leave period.
Note that the Canada pension plan deductions, unlike unemployment insurance premiums, are to be based on the net salary during both the deferral and leave period. Where the deferred salary is paid to the employee by a trustee, that trustee is deemed to be an employer of the employee by the CPP Act and is therefore required to pay the employer's contribution in respect of that employee. If the employee is to pay both his portion and the employer's portion during the leave period (a matter to be arranged between the employer and the employee) and the trust/employer recovers the employer's portion from amounts otherwise payable to the employee, the amount so recovered will not form part of the employee's gross salary.
The provisions governing deferred salary leave plans are contained in paragraph 6801(a) of the Income Tax Regulations, a copy of which is enclosed for your perusal. Please feel free to contact us should you have any further questions concerning your proposed Plan.
We trust our comments are of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate