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.
Principal Issues:
Whether status indian employees of an Indian organization are exempt from income tax.
Position TAKEN:
Depends on the facts of each case. Not enough information given to determine whether Guideline 4 would apply.
Reasons FOR POSITION TAKEN:
950424
XXXXXXXXXX B. Kerr
May 16, 1995
Dear Sir:
Re: XXXXXXXXXX
This is in response to your letter of February 6, 1995, in reply to our letter of January 13, 1995 to the Centre (file #942932), wherein you are requesting that the Department grant exemption from income tax on behalf of the status Indian employees of the Centre.
Notwithstanding your letter, and as was stated in our previous letter, we have not been provided with sufficient information to determine whether the status Indian employees of the Centre would be exempt from income tax. In particular, additional information relating to the Board of Director's meetings and the population served by the organization for the purpose of determining the residence of the employer and whether the exclusively test has been met would be required. These determinations are questions of fact, which are best resolved by a Tax Services Office. We suggest that you contact XXXXXXXXXX to arrange the resolution of these questions. However, we can offer, in addition to those already provided in our previous letter, the following general comments which we hope will be of assistance to you.
In order for the exemption from tax for employment income to apply to status Indian employees that do not work nor reside on a reserve, Guideline 4 of the "Indian Act Exemption for Employment Income Guidelines" would have to apply. As you know Guideline 4 requires that:
"The employer is resident on a reserve; and the employer is: an Indian band which has a reserve, or 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, if the organization is dedicated exclusively to the social, cultural, educational, or economic development of Indians who for the most part live on reserves; and the duties of the employment are in connection with the employer's non-commercial activities carried on exclusively for the benefit of Indians who for the most part live on reserves"
With respect to the term "employer is resident on a reserve", satisfaction of this element is always of some concern where the head office of an organization is located on a reserve but its main place of business is located off reserve.
The intention of the word "exclusively" is to restrict Guideline 4 to those organizations which are dedicated only to the social, cultural, educational or economic development of Indians living on reserve. It would not be sufficient to have these being only part of an organization's objectives. Guideline 4 is a generous interpretation of the direction provided by the Courts in Williams, (92 DTC 6320), so it is appropriate to restrict its application to situations that fit squarely within it.
One of the requirements of Guideline 4 is that an organization must be dedicated exclusively to the development of Indians "who for the most part live on reserves". That is, almost all of the Indians in the population served by the organization must live on reserve. Guideline 4 recognizes that there will be situations where an Indian works for an organization which is dedicated exclusively to the development of Indians on reserves, and the work may require the Indian to live away from the reserve. Although the employee's residence would not be a factor which connects the Indian's employment to the reserve, it is appropriate, under the circumstances laid out in Guideline 4, to recognize a connection since the employee is working for the benefit of Indians on reserve. However, if the population served by the organization was not comprised almost entirely of Indians who live on reserve, this latter connection would not exist.
The term "Indian lives on a reserve" as used in the Guidelines means the Indian lives on the reserve in a domestic establishment that is his or her principal place of residence and that is the centre of his or her daily routine.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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