Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Would the 6801(a) condition requiring the participant's return to work be satisfied where the participant returns for 2-3 weeks then takes unpaid leave for the balance of the return period?
Position: No.
Reasons: The provision requires that the participant returns to his or her regular employment with the employer or another employer that participates in the same or similar arrangement for a period that is not less than the period of leave. An unpaid leave would not satisfy this condition.
June 1, 2000
OTTAWA TAX SERVICES OFFICE HEADQUARTERS
Business Windows M.P. Sarazin
824-5441
Attention: André Lessard
2000-002679
Deferred Salary Leave Plan
We are writing to you in response to your facsimile dated May 19, 2000, wherein you requested our views regarding the return to work condition in subparagraph 6801(a)(v) of the Income Tax Regulations (the "Regulations").
You have been asked to comment on whether the condition described in subparagraph 6801(a)(v) of the Regulations would be satisfied if a participant in a deferred salary leave plan returns to work for two or three weeks after his or her leave of absence and takes unpaid leave for the balance of the period that he or she has agreed to return to work.
Subparagraph 6801(a)(v) of the Regulations imposes one of the conditions that has to be satisfied under the written deferred salary leave plan agreement between the employer and employee before the plan or arrangement will be excluded under paragraph 6801(a) of the Regulations from being a salary deferral arrangement, within the meaning assigned by subsection 248(1) of the Income Tax Act. Under this condition, the employee must agree to return to his regular employment with the employer or an employer that participates in the same or a similar arrangement after the leave of absence for a period that is not less than the period of the leave of absence.
The February 4, 1988 Regulatory Impact Analysis Statement describing the condition in subparagraph 6801(a)(v) states that the employee must return to his or her regular employment with the employer after the period of leave. The purpose of the provision, in general, appears to contemplate a period of leave of absence from work, followed by a return to work and not a subsequent retirement or absence from work. Consequently, even though an employee may be considered employed when they are on unpaid leave, we would not consider such unpaid leave to be a return to regular employment as required under subparagraph 6801(a)(v) of the Regulations. In our view, a proposal to combine a deferred salary leave plan with the utilization of unpaid leave entitlements violates the intent of paragraph 6801(a) of the Regulations because the employee does not intend to return to his or her regular employment.
We trust these comments will be helpful.
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
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