10 May 1993 Income Tax Severed Letter 9311497 - Treaty Indian

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.

                                                 May 10, 1993

  Regina District Office             Business and General
  Neil Kimelman                        Division
  Chief of Client Assistance         B. Kerr
                                     (613) 957-2139
  Attention:  Roberta Gaygarth
              Enquiries            

                                     931149

Treaty Indian—Employment Income—Exempt/Non-Exempt

This is in reply to your round trip memorandum requesting a determination of the taxability of the employment income of a Treaty Indian.

As indicated in the December 30, 1992 memorandum from the Taxation Programs Branch, employment income for duties performed entirely off a reserve is tax exempt if the employer resides on a reserve and the status Indian lives on a reserve. Where the employer is sited off the reserve and the employment duties are performed entirely off a reserve but the Indian lives on a reserve it will be necessary to find other connecting factors to the reserve before the income can be considered exempt. Where the employment duties are performed partially on a reserve and partially off a reserve it will be necessary to determine the approximate pro-rata allocations to each location. In calculating the time spent performing the employment duties on a reserve, travel time to and from the reserve is not included. Where 90% or more of the employment duties are performed on a reserve, or where 33% or more of the employment duties are performed on a reserve and either the employer is located on a reserve or the Indian lives on a reserve, then all of the employment income, including that earned for the duties performed off a reserve, is tax exempt. Where 90% or more of the employment duties are performed off a reserve, then all of the employment income may be taxable if there are no other connecting factors to the reserve. In any other case, employment income for duties performed partially on a reserve and partially off a reserve would have to be prorated to determine the tax exempt part.

In the present situation the potential employer, "Health & Welfare Canada, Medical Services—Indian Health", is situated off a reserve and the Indian lives off a reserve. The position would involve working with Indian Bands and the Indian would be performing approximately 33.33% of his duties on a reserve. Therefore, in our view, 33.33% of the employment income would be exempt from taxation under paragraph 81(1)(a) of the Income Tax Act (the "Act") and 66.67% of the employment income would be taxable under subsection 5(1) of the Act.

We trust the foregoing will be of assistance to you in this and similar situations involving connecting a status Indian's employment income to a reserve.

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