6 September 1990 Ministerial Correspondence 901934 F - Indian Teachers Employed on Designated Lands

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.

SUBJECT:  Indian Teachers Employed on "Designated or Surrendered Lands"

This is in reply to your memorandum dated August 15, 1990 concerning the tax status of Indian teachers employed on surrendered or designated lands.

We provide the following comments regarding your questions.

1.     "Reserve" is defined in subsection 2(1) of the Indian Act to mean a tract of land, the legal title to which is vested in Her Majesty, that has been set apart by Her Majesty for the use and benefit of a band, and for purposes of section 87 of the Indian Act includes designated land.

2.     Indian teachers teaching at schools situated on designated lands could qualify for remission of tax under the "Indian Remission Order". However it is a question of fact whether the two schools are located on designated lands.  "Designated lands" is defined in subsection 2(1) of the Indian Act to mean "a tract of land or any interest therein the legal title to which remains vested in Her Majesty and in which the band for whose use and benefit it was set apart as a reserve has, otherwise than absolutely, released or surrendered its rights or interests, whether before or after the coming into force of this definition".  Please note that the release or transfer by the band must be "otherwise than absolutely".  If the release or surrender by the band is absolute such land or any interest therein would not qualify as designated lands.  The copy of the order in council, which was submitted, transferred, otherwise than absolutely, (Her Majesty retained reversionary its certain lands or interest therein from Her Majesty to  24(1). To establish that the schools are in fact situated on, designated lands the teachers or their solicitor should provide some documentary evidence or proof that the band, otherwise than absolutely, released or surrendered the lands or interest therein.

3.     As regards your memorandum of March 7,1990 we have previously taken the position that:

     "By virtue of paragraph 81(1)(a) of the Income Tax Act and section 87 of the Indian Act the personal property of an Indian or band situated on a reserve is exempt from taxation.  Since the courts have determined that salary or a right to salary is property the relevant issue is whether the personal property of an Indian (i.e. his salary) is situated on a reserve.  This issue was considered by the Federal Court-Trial Division in The Queen v. The National Indian Brotherhood 78 DTC 6488.  The court held that the right to a salary, being a simple contract debt, has as its situs the residence of the debtor or the place where the debtor is found.  Thus, it was concluded in the National Indian Brotherhood case:

     'As the salaries in question of the individual Indians until paid were simple contract debts owed by a  corporation not resident on a reserve, it is my view that they were not situated on a reserve with the meaning of subsection 87(1).'

     In obiter, the Supreme Court of Canada, in the case of Nowegijick v. The Queen 83 DTC 5041 cited this judgement with approval.  Accordingly, it is the residence of the employer which determines whether a salary is "situated on the reserve".

Numerous court cases have established that the residence of a corporate employer (i.e. school board) is the place where the employer exercises control and management in the present situation it would probably be off the reserve.

However the Indian Remission Order, as currently drafted provides for the remission of income tax payable in respect of employment income earned by status Indians working on a reserve.  We agree with your view that an Indian working at a school located on "surrendered land" would not qualify for the remission of tax as he would not be considered to be performing duties on a reserve.

"Surrendered lands" is defined in subsection 2(1) of the Indian Act to mean a reserve or part of a reserve or any interest therein, the legal  been released or surrendered by the band for whose use and benefit it was set apart.

24(1)

We trust this will be of assistance to you.

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch