Explore the intricacies of incentivizing employees without falling into salary deferral arrangements, as outlined in the Income Tax Act Canada. This article by Jordan Fremont, Anu Nijhawan, and Hennadiy Kutsenko delves into the nuances of deferred cash bonuses, the Three-Year Bonus Exception, and recent CRA guidance. Essential reading for understanding the tax efficiency and legal implications of employee compensation plans, corporate fiscal policies, and incentive award structuring.
On November 30, 2023, the federal government introduced Bill C-59, Fall Economic Statement Implementation Act, 2023 Bill C-59, which included proposed amendments to the Income Tax Act Canada ITA to implement changes respecting the treatment of retirement compensation arrangements RCAs that had previously been announced as part of the 2023 Federal Budget.
On June 22, 2023, Bill C-47 received royal assent, implementing a variety of amendments to the Income Tax Act Canada ITA and its regulations ITA Regulations tabled as part of the 2023 Federal Budget.
Retirement compensation arrangements RCAs are, in appropriate circumstances, a useful tool for employers to provide supplemental pension benefits to employees, but such arrangements come at a cost of refundable tax under the Income Tax Act Canada the ITA. The 2023 Federal Budget the Budget, released on March 29, 2023 Budget Day, proposes to amend the ITA to exempt, from the refundable tax, fees or premiums to the extent paid for the purposes of securing or renewing a letter of credit or a surety bond for an RCA structured as supplemental to a registered pension plan.