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Income Tax Regulations

Version of section 8507 from 2004-08-31 to 2007-12-31:

  •  (1) For the purposes of paragraph (b) of the definition compensation in subsection 147.1(1) of the Act, there is prescribed for inclusion in the compensation of an individual from an employer for a calendar year after 1990

    • (a) where the individual has a qualifying period in the year with respect to the employer, the amount that is determined under subsection (2) in respect of the period; and

    • (b) where the individual has a period of disability in the year, the amount that would be determined under paragraph (2)(a) in respect of the period if the period were a qualifying period of the individual with respect to the employer.

Additional Compensation in respect of Qualifying Period
  • (2) For the purposes of paragraph (1)(a) and subsection (5), the amount that is determined in respect of a period in a calendar year that is a qualifying period of an individual with respect to an employer is the lesser of

    • (a) the amount, if any, by which

      • (i) the amount that it is reasonable to consider would have been the remuneration of the individual for the period from the employer if the individual had rendered services to the employer throughout the period on a regular basis (having regard to the services rendered by the individual to the employer before the complete period of reduced pay of which the period is a part) and the individual’s rate of remuneration had been commensurate with the individual’s rate of remuneration before the beginning of the complete period of reduced pay

      exceeds

      • (ii) the remuneration of the individual for the period from the employer, and

    • (b) the amount determined by the formula

      (5 + A + B - C) × D

      where

      A
      is the lesser of 3 and the amount that would be the cumulative additional compensation fraction of the individual with respect to the employer, determined to the time that is immediately before the end of the period, if the individual’s only qualifying periods had been periods that are also periods of parenting,
      B
      is
      • (i) if no part of the period is a period of parenting, nil, and

      • (ii) otherwise, the lesser of

        • (A) the amount, if any, by which 3 exceeds the amount determined for A, and

        • (B) the ratio of

          • (I) the amount that would be determined under paragraph (a) if the remuneration referred to in subparagraphs (a)(i) and (ii) were the remuneration for such part of the period as is a period of parenting

          to

          • (II) the amount determined for D,

      C
      is the cumulative additional compensation fraction of the individual with respect to the employer, determined to the time that is immediately before the end of the period, and
      D
      is the amount that it is reasonable to consider would have been the individual’s remuneration for the year from the employer if the individual had rendered services to the employer on a full-time basis throughout the year and the individual’s rate of remuneration had been commensurate with the individual’s rate of remuneration before the beginning of the complete period of reduced pay of which the period is a part.
Qualifying Periods and Periods of Parenting
  • (3) For the purposes of this section,

    • (a) a period in a calendar year is a qualifying period of an individual in the year with respect to an employer if

      • (i) the period is an eligible period of reduced pay or temporary absence of the individual in the year with respect to the employer,

      • (ii) either

        • (A) lifetime retirement benefits are provided to the individual under a defined benefit provision of a registered pension plan (other than a plan that is, in the year, a specified multi-employer plan) in respect of the period, or

        • (B) contributions are made by or on behalf of the individual under a money purchase provision of a registered pension plan (other than a plan that is, in the year, a specified multi-employer plan) in respect of the period,

        pursuant to terms of the plan that apply in respect of periods that are not regular periods of employment,

      • (iii) the lifetime retirement benefits or the contributions, as the case may be, exceed the benefits that would otherwise be provided or the contributions that would otherwise be made if the benefits or contributions were based on the services actually rendered by the individual and the remuneration actually received by the individual,

      • (iv) the individual’s pension adjustment for the year with respect to the employer includes an amount in respect of the lifetime retirement benefits or the contributions, as the case may be,

      • (v) no benefits are provided in respect of the period to the individual under a defined benefit provision of any registered pension plan in which the employer does not participate, and

      • (vi) no contributions are made by or on behalf of the individual in respect of the period under a money purchase provision of a registered pension plan or a deferred profit sharing plan in which the employer does not participate; and

    • (b) a period of parenting of an individual is all or a part of a period that begins

      • (i) at the time of the birth of a child of whom the individual is a natural parent, or

      • (ii) at the time the individual adopts a child,

      and ends 12 months after that time.

Cumulative Additional Compensation Fraction
  • (4) For the purposes of this section, the cumulative additional compensation fraction of an individual with respect to an employer, determined to any time, is the aggregate of all amounts each of which is the additional compensation fraction that is associated with a period that ends at or before that time and that is a qualifying period of the individual in a calendar year after 1990 with respect to

    • (a) the employer;

    • (b) any other employer who does not deal at arm’s length with the employer; or

    • (c) any other employer who participates in a registered pension plan in which the employer participates for the benefit of the individual.

Additional Compensation Fraction
  • (5) For the purposes of subsection (4), the additional compensation fraction associated with a qualifying period of an individual in a calendar year with respect to a particular employer is the amount determined by the formula

    E / D

    where

    D
    is the amount that is determined for D under paragraph (2)(b) in respect of the qualifying period, and
    E
    is
    • (a) if

      • (i) all or a part of the qualifying period is a period throughout which the individual renders services to another employer pursuant to an arrangement in respect of which subsection 8308(7) is applicable,

      • (ii) the particular employer is a lending employer for the purposes of subsection 8308(7) as it applies in respect of the arrangement, and

      • (iii) the particular employer and the other employer deal with each other at arm’s length,

      the amount that would be determined under subsection (2) in respect of the qualifying period if, in the determination of the amount under paragraph (2)(a), no remuneration were included in respect of the portion of the qualifying period referred to in subparagraph (a)(i), and

    • (b) otherwise, the amount that is determined under subsection (2) in respect of the qualifying period.

Exclusion of Subperiods
  • (6) A reference in this section to a qualifying period of an individual in a calendar year with respect to an employer or to a period of disability of an individual in a calendar year does not include a period that is part of a longer such period.

Complete Period of Reduced Pay
  • (7) In subsection (2), complete period of reduced pay of an individual with respect to an employer means a period that consists of one or more periods each of which is

    • (a) a period of disability of the individual, or

    • (b) an eligible period of reduced pay or temporary absence of the individual with respect to the employer,

    and that is not part of a longer such period.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/92-51, s. 7
  • SOR/95-64, s. 14

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