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.
Principal Issues: What is the maximum amount of salary that may be deferred under 6801(a).
Position: Subparagraph 6801(a)(ii) of the Regulations provides that the amount of salary or wages that may be deferred under all arrangements by an employee for the services rendered by the employee to the employer in a year cannot exceed 33 1/3% per cent of the amount of the salary or wages that the employee would normally be expected to receive in the year in respect of those services.
Reasons: Clear words of legislation.
XXXXXXXXXX 2004-006758
J. Gibbons, CGA
June 4, 2004
Dear XXXXXXXXXX:
Re: Prescribed Salary Deferral Arrangement
Your letter to the Sudbury Tax Services Office, dated February 26, 2004, concerning your organization's self-funded leave plan was forwarded to us for reply. In particular, you wish to have our views regarding the amount of salary and wages that may be deferred under such plans.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Revenue Agency ("CRA").
Your question appears to relate to the definition of "a prescribed plan or arrangement" in paragraph 6801(a) of the Income Tax Regulations (the "Regulations), in particular, the requirements therein that limit the amount of salaries or wages that may be deferred. In this regard, subparagraph 6801(a)(ii) of the Regulations provides that the amount of salary or wages that may be deferred under all arrangements by an employee for the services rendered by the employee to the employer in a year cannot exceed 33 1/3% per cent of the amount of the salary or wages that the employee would normally be expected to receive in the year in respect of those services. A plan that qualifies as a prescribed plan or arrangement is excluded from the definition of a "salary deferral arrangement" in subsection 248(1) of the Income Tax Act by virtue of paragraph (l) of that definition.
We trust that these comments will be of assistance.
Yours truly,
Roxane Brazeau-LeBlond, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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