1 March 1994 Internal T.I. 9304617 - TAXATION OF INDIAN EMPLOYMENT INCOME

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.

            March 1, 1994

      SURREY TAXATION CENTRE 95     Head Office
M. Howes    Rulings Directorate
      Taxpayer Services 334-14      J. Humphrey
            957-8953
            930461

XXXXXXXXXX

This is in reply to your Round Trip Memorandum of February 2, 1993 requesting a determination of the tax status of the above-named taxpayer who is a status Indian employed by the
XXXXXXXXXX

for the 1987 through 1991 taxation years.

The Institute is an Indian-owned operation, the head office of which, according to the taxpayer's employer, is situated on a reserve. The taxpayer, however, works as a XXXXXXXXXX in a building situated off the reserve. Her only regular physical contact with the Institute on the reserve is when she picks up salary cheques for herself and her work section. She does not reside on the reserve but lives with her husband in the town of XXXXXXXXXX

For years prior to 1993, (1983 to December 31, 1992) status Indians who were employed by firms resident on a reserve were considered, pursuant to the decision in the Nowegijick case (83 DTC 5041), exempt from taxation whether their employment activities were performed on or off the reserve. If on the facts the residence of the employer is on a reserve, then the taxpayer's income would be exempt. To determine if an "employer is resident on a reserve", the Department must ascertain where the central management exercises control of the organization. As a general rule, residence is the place where the central management exercises control of the organization. Central management and control of a corporation is normally the place where the directors of the corporation meet and exercise control.

Such an exemption will continue until December 31, 1994 under a remission order to allow those status Indians affected by changes occasioned by the decision in the Glenn Williams case (92 DTC 6320) to re-arrange their affairs.

As a result of the Williams case, the Department developed guidelines for use in determining whether the employment income of an Indian is exempt. These guidelines were distributed to all district offices by Mr. R. Roy of the Taxation Programs Branch on December 20, 1993.

Applying the guidelines to this taxpayer's employment income from the Institute for years after 1994, it will be exempt under Guideline 4 if both the duties she performs are connected to the reserves served by the Institute and the employer is in fact resident on a reserve. While her employment duties appear to be connected to the reserves served by the Institute, it remains a question of fact whether an organization resides on a reserve.

You are in a better position to obtain the additional information required to determine whether the employer was and is resident on a reserve such that the income for a period is exempt.

For your information, we enclose a copy of a letter from the organization (and our response) which would seem to suggest that the "mind and body" has, to this point, been off-reserve.

We trust these comments will be of assistance.

Roberta Albert
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch

c.c. Rick Owen