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.
April 20, 1994
Surrey Taxation Centre Head Office
541-32 Rulings Directorate
B. Kerr
Attention: H. Sellmeyer (613) 957-8953
932320
XXXXXXXXXX - Status Indian
This is in response to your round trip memorandum of August 10, 1993, wherein you requested that we verify whether the employment income of the above noted taxpayer is earned on a reserve and therefore exempt. We also acknowledge our telephone conversations (Deshan/Kerr) concerning this taxpayer.
We understand that the taxpayer was employed at various periods over the last ten years by XXXXXXXXXX
an employer that is not resident on a reserve. The taxpayer is a status Indian and is a member of the XXXXXXXXXX. He lives off reserve with his spouse and children. He does not own any personal property on a reserve. He claims that he performed all of his employment duties on a reserve. In a letter addressed to "whom it may concern", his employer states that at various times during the years 1986-92 they were engaged in various projects which to the best of their knowledge were on Indian reserved land. The projects identified included the
XXXXXXXXXX
As you may be aware following the decision in the Williams case and as a result of a letter issued by the Department on December 29, 1992, which was followed up with considerable input from the Indian community, the Department has developed "INDIAN ACT EXEMPTION FOR EMPLOYMENT INCOME DETAILED GUIDELINES". These draft guidelines were released on December 15, 1993. A copy of these guidelines was attached to a letter sent by the Taxation Programs Branch to all District Offices, Processing Centres and the International Tax Office on December 20, 1993. The Department now views the Indian Act exemption as applying to employment income as follows:
(1)Employment income of an Indian for duties performed on a reserve will be exempt from income tax.
(2)Employment income of an Indian for duties performed off a reserve will normally be exempt from income tax where
(a) the employer is resident on a reserve, and
(b) the Indian lives on a reserve,
except where it can reasonably be considered that one of the main purposes for the existence of the employment relationship is to establish a connecting factor between the income in question and a reserve.
(3)Employment income of an Indian for duties performed off a reserve will normally be exempt from income tax where
(a)the duties of the employment are principally performed on a reserve, and
(b)the employer is resident on a reserve, or
(c)the Indian lives on a reserve,
except where it can reasonably be considered that one of the main purposes for the existence of the employment relationship is to establish a connecting factor between the income in question and a reserve.
(4)Employment income of an Indian for duties performed off a reserve will normally be exempt from income tax where
(a)the employer is an Indian band which has a reserve, a tribal council representing one or more Indian bands which have reserves, or an Indian organization controlled by one or more such bands or tribal councils and dedicated exclusively to the social, cultural or economic development of Indians who for the most part live on reserves,
(b)the duties of employment are part of the non-commercial activities of the band, council or organization, and
(c)the band, council or organization is resident on a reserve.
PRORATION RULES
Where a portion of the employment income could be viewed as exempt because employment duties related to that portion are performed on a reserve, which falls under the first guideline, and the off reserve portion of the income is not otherwise exempt by virtue of the application of the other guidelines the Department will view the exemption as applying as follows:
(a)In a case where substantially all of the employment duties are performed on a reserve, the exemption applies to the whole of the employment income;
(b)In a case where substantially all of the employment duties are not performed on a reserve, the whole of the employment income will be taxable; and
(c)In any other case, the employment income is to be prorated between the duties performed on a reserve and the duties not performed on a reserve, with the exemption applying to the portion of the income related to the duties performed on the reserve.
In calculating the time spent performing the employment duties on a reserve, travel time to and from the reserve is not included.
In our view if in fact the taxpayer performed all of his employment duties on a reserve then his employment income would fall within guideline 1 and be exempt. If he performed only a portion of his employment duties on a reserve then his employment income would be subject to the proration rules. However, it is a question of fact whether the location of the projects referred to above are on a reserve. We cannot determine from his employer's letter whether the location of these projects were in fact on reserves. We would also need to know whether the taxpayer worked on any other projects during the taxation years in question as this information would be relevant for the purpose of applying the proration rules. The Vancouver District Office would be in a better position to make such determinations and would need to know what reserves these locations are situated on as well as whether the taxpayer performed any other employment duties. However, you should note that we have been advised by Marg Toews of the Vancouver Office of the Department of Indian and Northern Affairs that none of the locations referred to above would be considered on reserve. Accordingly, none of the taxpayer's income would be exempt from income tax.
If you have any other situations that would require a determination of whether a particular location or property in the province of British Columbia is on a reserve you may wish to contact Marg Toews at 1-604-666-6017 or whether a particular area is a reserve you may contact Gord Murray of our Current Amendments and Regulations Division at 1-613-957-2079.
R. Albert
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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