5 April 1990 Income Tax Severed Letter AC59803 - Deferred Salary Leave Plan

19(1)                                   5-9803
                                        D. Duff
                                        (613) 957-3498

April 5, 1990

Dear Sirs:

Your letter of march 8, 1990 to the Halifax district Taxation Office of Revenue Canada, taxation, regarding a Deferred Salary Leave Plan, has been forwarded to this office for reply.

Regulation 6801 of the Income Tax Act contains no requirement for a minimum deferral period for such plans.

Where, in a taxation year, the deferral period stars or ends on a date that does not coincide with the individual's taxation year (December 31), the maximum deferral for that taxation year cannot exceed the lesser of the salary or wages that the individual would otherwise receive for services rendered after the start of or before the end of the deferral period, as the case may be, and 33 1/3% of the individual's salary or wages for that taxation year.

An employee can receive mare than his normal salary during the period of leave. The only restriction on the amount being deferred is the yearly restriction of 33 1/3 percent of the employee's salary for the year. He can defer this amount for each year of the 6 year deferral period.

We trust that our comments will be of assistance to you.

Yours truly,

for Director Financial Industries Division Rulings Directorate