CRA is reviewing whether it will permit critical mineral status to be certified after the related flow-through share agreement is made
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Principal Issues: (1) What is the status of the "prescribed manner and form" for the certification to be provided by a qualified engineer or geoscientist in connection with the critical minerals exploration tax credit? (2) Does the certification need to be completed before the flow-through share agreement is made? (3) Can the CRA provide a process for completing the certification before a prescribed form is released to the public?
Position: (1) The prescribed form will be released to the public in the coming weeks, along with filing instructions, (2) The Draft Legislation is unclear and we have raised this issue with the Department of Finance, (3) See below for instructions for complying with the Draft Legislation before the prescribed form is released to the public.
Principal Issues: Whether the individual’s employment income qualifies for the Indian Act exemption pursuant to section 87 of the Indian Act and paragraph 81(1)(a) of the Income Tax Act.
Position: Proration rule in Guideline 1 will apply to exempt from tax the percentage of duties performed on a reserve.
Reasons: Only work that is actually performed on a reserve should be considered when applying the Guidelines. Consistent with jurisprudence, it is the CRA’s longstanding position that time spent off-reserve preparing for work on a reserve and time spent travelling to and from a reserve is not considered time spent working on a reserve.
81(1)(a), 5, and 6(1)(f) of the Income Tax Act and 87 of the Indian Act
Principal Issues: 1. How to apply the Indian Act tax exemption to the income received by a First Nations employee who is on paid sick leave or paid suspension leave?
2. How are the Indian Act Exemption for Employment Income Guidelines applied where a First Nations employee’s circumstances changes during a taxation year and the employee’s suspension leave straddles two taxation years?
Position: 1. Income replacement benefits received while on paid sick leave (i.e., wage-loss replacement plan benefits) are benefits received from employment (i.e., employment-related income) and are treated in the same way as the employment income (i.e., wages and salary) that gave rise to the particular benefits. Income received while on paid suspension leave will be exempt from income tax under the Indian Act on the basis of whether the income is situated on a reserve (that is, whether Guidelines apply during the period of suspension).
2.Where there is a change in an employee’s circumstances, the percentage of days worked on a reserve will be calculated separately based on the number of days worked in each period before and after the change.
Reasons: 1. Both the CRA webpage entitled “Information on the tax exemption under section 87 of the Indian Act” and the Indian Act Exemption for Employment Income Guidelines confirm that wage-loss replacement plan benefits (i.e., paid sick leave) are treated in the same way as the employment income that gave rise to the particular benefits. Consistent with prior interpretations, income received while on paid suspension leave will be exempt from income tax under the Indian Act on the basis of whether the income is situated on a reserve (that is, whether Guidelines apply during the period of suspension).
2. Prior interpretations - E2016-065965 XXXXXXXXXX.
