29 June 1994 4M0089A - INDIANS - EMPLOYMENT INCOME - 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 Department.

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

June 29, 1994

RE: APPLICATION OF THE INDIAN ACT TAX EXEMPTION

I am writing further to my letter of December 15, 1993, concerning the Indian Act tax exemption. In that letter, I enclosed draft guidelines developed by this department concerning the Supreme Court of Canada's decision in Glenn Williams v. The Queen, 92 DTC 6320 and asked for further comments by March 31, 1994.

We have now had the opportunity to review the additional comments that were sent to us. For your information, I am enclosing a copy of the finalized version of the guidelines which incorporates some of the suggested changes that we received.

As discussed in my last letter, these guidelines do not relate to a change in tax policy. They deal with the administration of the tax exemption set out in the Indian Act following this Supreme Court decision. In developing these guidelines, the Department had to bear in mind that we are guided by decisions of the courts in administering and interpreting the provisions of the Income Tax Act. The approach laid down by the Supreme Court in Williams requires the examination of all factors connecting income to a reserve to determine if the income was located there and thus is tax exempt.

Also, as mentioned in the December 15, 1993 letter, there may be other circumstances which are not covered by these guidelines and they will have to be dealt with on a case by case basis.

The attached guidelines provide that the tax exemption will apply in the following employment situations:

1)Where substantially all the duties are performed on a reserve;

2)Where some or all of the duties are performed off reserve but the Indian lives on a reserve and the employer is resident on a reserve;

3)Where more than half the duties are performed on a reserve and either the Indian lives on a reserve or the employer is resident there; and

4)Where some or all of the duties are performed off a reserve for an employer that is resident on a reserve, the duties are part of the non-commercial activities of the employer and the employer is an Indian band, tribal council or other organization described in paragraph b) ii) of Guideline 4.

In each of these cases, sufficient connection exists to a reserve to locate the income there and grant the tax exemption.

I would also like to remind you that the Government extended the transition period to December 31, 1994, to allow those who may be negatively affected sufficient time to become aware of the implications of the guidelines and to rearrange their affairs if necessary. This extended transition period only applies to arrangements already in place at December 31, 1993.

I am requesting your assistance in helping us ensure that your members are made aware of these guidelines. Further information and additional copies of the guidelines may be obtained by writing or calling the nearest District Taxation Office or Taxation Centre. A list of these offices is attached for your information.

In closing, I wish to thank all of you who provided us with your comments.

Yours sincerely,
Denis Lefebvre
Assistant Deputy Minister
Legislative and Intergovernmental
Affairs Branch

Attachments

Gord Murray
June 20, 1994
957-2079