2 February 1994 External T.I. 9308405 F - Indian - Employed Off Reserve

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.

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Dear XXXXXXXXXX

RE:  Status Indian on an Indian Reserve

This is in reply to your letter of March 15, 1993 in which you requested information regarding the taxability of income earned by a status Indian on a reserve. You specifically mentioned the situation where a status Indian lives on a reserve and performs 90% of the employment duties off reserve and 10% on reserve. We aplogize for the delay in replying.

Our Comments:

In considering (in Glenn Williams v. The Queen, 92 DTC 6320) whether income is exempt from taxation, the Supreme Court of Canada indicated that it is appropriate to weigh all the factors which link the income of an Indian to a reserve. Following a thorough analysis of this case and due consideration of extensive input from the Indian community, the Department has developed four guidelines dealing with the taxation of employment income of Indians. It has been determined that the exemption will apply to:

(1)     employment income for duties performed on a reserve;

(2)     employment income for duties performed off a reserve where the employer resides on a reserve and the Indian lives on a reserve;

(3)     employment income for duties that are principally performed on a reserve and either the employer is resident on a reserve, or the Indian lives on a reserve; and,

(4)     employment income for duties performed off a reserve where

a)     the Indian is an employee of

i)     an Indian band which has a reserve,

ii)     a tribal council representing one or more Indian bands which have reserves, or

iii)     an Indian organization controlled by one or more such bands or tribal councils

which is dedicated exclusively to the social, cultural or economic development of Indians who for the most part live on reserves;

b)     the duties of employment are part of the non-commercial activities of the band, council or organization; and

c)     the band, council or organization is resident on a reserve.

In other cases, where duties are performed both on and off a reserve, the Department remains of the view that it is appropriate to prorate the exemption. However, if substantially all of the employment duties are performed on a reserve, the exemption will apply to the whole of the employment income. Conversely, if substantially all of the employment duties are performed off a reserve, the whole of the employment income will be taxable if there are no other relevant factors connecting the employment income to a reserve.

In the situation you described, since 90% of the employment duties are performed off reserve and there are no other factors connecting the employment income to a reserve, the whole of the employment income would be subject to tax.

We trust that our comments will be of assistance. We enclose a copy of the guidelines for your information.

Yours truly,

R. Albert for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch

encl.