2020-0848641E5 Deferred salary leave plans (DSLPs)

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: Whether the CRA can extend the six-year maximum deferral period for DSLPs.

Position: No, but the issue is under review by Finance.

Reasons: The Regulations governing DSLPs do not provide any discretion to the CRA.

Author: Doiron, Wayne

Section: Regulation 6801(a)

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                                                                                                          W. Doiron
May 14, 2020


Re: Deferred Salary Leave Plan

This is in response to your email of May 1, 2020, in which you raise a concern about the income tax rules that apply to your deferred salary leave plan (DSLP).

Our comments

This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R9, Advance Income Tax Rulings and Technical Interpretations.

The DSLP rules permit employees to defer salary to fund a leave of absence from their employment, subject to certain conditions. One of these conditions is that the deferral period cannot exceed six years with the leave beginning immediately afterwards.

We understand that your DSLP reflects the maximum deferral period. It is scheduled to end in January 2021 at which time you would begin your leave. As you work in the public health sector, you are concerned about taking a leave of absence at a time when your services are needed most. You have asked the Canada Revenue Agency (CRA) to extend the maximum deferral period for your DSLP. If the leave is not taken as scheduled, your DSLP will have to be terminated, resulting in all deferred salary paid to you and included in your income.

The CRA has no discretion to extend the maximum deferral period for DSLPs. This would require an amendment to the Income Tax Regulations.

CRA officials have discussed this concern with officials of the Department of Finance Canada who are presently considering several submissions on issues relating to the DSLP rules that have arisen due to COVID-19. They have agreed to consider this issue as part of their review.

Pending completion of the Department of Finance Canada review, the CRA will not require an employer to terminate an individual’s DSLP in the event that the individual defers their leave of absence beyond the six-year maximum deferral period. This administrative position will apply regardless of the reason for deferring the leave. In addition to providing flexibility to health care workers and others providing essential services, it will accommodate, for example, individuals who had planned to travel during their leave but who are now unable to because of travel restrictions.

We trust our comments will be of assistance.

Yours truly,


Dave Wurtele
Section Manager
for Division Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

c.c.:  Department of Finance Canada

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© Her Majesty the Queen in Right of Canada, 2020

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