25 March 2002 Ministerial Correspondence 2002-0124384 - EMPLOYMENT GUIDELINES

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

March 25, 2002

XXXXXXXXXX

Dear XXXXXXXXXX:

I am writing in response to your letter of February 7, 2002, concerning the application of the Indian Act Exemption for Employment Income Guidelines.

Under paragraph 81(1)(a) of the Income Tax Act and section 87 of the Indian Act, an Indian's personal property situated on a reserve is exempted from tax. The courts have previously determined that, for purposes of section 87 of the Indian Act, the reference to personal property includes employment income. In the 1992 case of Williams v. The Queen, the Supreme Court of Canada reconsidered the approach to use in determining whether income is situated on a reserve. The Court stated that the proper approach in determining the situs of personal property is to evaluate the various connecting factors that tie the property to one location or another.

Based on the guidance provided in the Williams case and after receiving representations from interested Indian groups and individuals, the Canada Customs and Revenue Agency (CCRA) identified connecting factors that can be used to determine whether employment income is situated on a reserve. To assist the Indian community, the CCRA developed the Guidelines, incorporating the various connecting factors that describe the employment situations covered by the Indian Act. For employment income earned by a status Indian to be exempt, the income should fall within the Guidelines.

The CCRA's position on the Guidelines is that they are general guidelines of application, such that we do not intend on reviewing them unless a court specifically questions their validity. In determining whether the Indian Act exemption applies, each particular fact situation is reviewed in light of the Guidelines and in conjunction with relevant jurisprudence. Since, in our view, the Guidelines are a reasonable interpretation of the law and since it is the responsibility of the employer to make the proper employment deductions, I suggest that you continue to use the TD1-IN, Determination of Exemption of an Indian's Employment Income, to determine whether the employment income of your employees would be subject to income tax under the Income Tax Act.

I trust that my comments will be of assistance.

							Yours sincerely,

							Bill McCloskey
							Assistant Commissioner
							Policy and Legislation Branch

C. Rystenbil
941-6547
2002-012438