May 14, 1991
Staff Relations and Financial Industries
Compensation Division Division
D. Duff
Attention: Christiane Rodier 957-89537-911245
Deferred Salary Leave Plan Your File: 3519-22(426)
This is in reply to your memorandum of May 6, 1991 requesting our opinion as to whether contributions to a registered retirement savings plan ("RRSP") should be based on the gross salary earned or the net salary, after deferrals, for individuals in deferred salary leave plans.
RRSP contributions are limited by a taxpayer's earned income as defined in paragraph 146(1)(c) of the Income Tax Act (the "Act"). This provision includes income from an office or employment in earned income. Subsection 5(1) of the Act defines income from an office or employment as "the salary, wages and other remuneration, including gratuities, received by him in the year". Therefore, an employee includes only the net salary, after deferral, in his taxable income, and this same net amount is included in his earned income on which the maximum RRSP contribution is based.
Such deferred salary leave plans that comply with Regulation 6801 of the Act are considered to be employee benefit plans. Paragraph 6(1)(g) requires a taxpayer to include amounts received from employee benefit plans in his income from an office or employment. Therefore, during the period of leave, such payments will be included in earned income in determining the RRSP contribution limits.
for Director Financial Industries Division Rulings Directorate
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