| 19(1) | File No. 5-9766 |
| D.S. Delorey | |
| (613) 957-3495 |
April 9, 1990
Dear Sirs:
Re: Deferred Salary Leave Plan (the "Plan") Paragraph 6801(a) of the Income Tax Regulations
This is in reply to your letter of March 12, 1990 and further to our letter of March 14, 1989 concerning the above-referenced Plan.
Our review of the Plan indicated that in general it complies with the requirements set our in paragraph 6801(a)of the Income Tax Regulations. However, for the purposes of clarification and greater certainty, we suggest that the following amendments be made to the Plan.
1. 24(1) the words "of Income Tax Act Regulations" should be replaced with "of paragraph 6801(a) of the Income Tax Regulations".
2. We suggest that the following comments be made as a 24(1)
"Any such interest paid to a participant under the Plan represents employment income rather than income from property. Accordingly, form T4 should be used by the financial institution to report the interest and the usual tax withholdings and remittances must be made."
3. The following words should be added at the end of 24(1)
"and the leave of absence must commence immediately after the deferral period."
4. It should be noted in the Plan that unemployment insurance premiums will be based on the gross salary during the deferral period and will not be payable during the leave period, and that Canada pension plan ("CPP") deductions will be based on net salary during both the deferral period and the leave period. Where the deferral amounts are 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 trustee/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.
This letter is not an advance income tax ruling but is merely a statement of opinion on the specifics of your proposed Plan and is not binding on the Department, as explained in paragraph 24 of Information Circular 70-6R. However, should your Plan be amended as indicated above, it is our opinion that it would meet the requirements set out in paragraph 6801(a) of the Income Tax Regulations.
We trust that our comments are of assistance to you.
Yours truly,
for Director Financial Industries Division Rulings Directorate