20 January 1994 External T.I. 9329925 F - Indians - Pension Income, Retiring Allowances, RRSP 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.

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Attention:  XXXXXXXXXX

Dear Sir:

RE:  Tax-exempt Income of Status Indians

We are writing in reply to your letter of October 12, 1993 wherein you requested our comments regarding the effect of the Supreme Court of Canada decision in the Glenn Williams v. R. case on various types of income received by Indians.

Our Comments:

Pension Income

Pension income (including CPP and QPP) will be exempt from tax if the employment income that gave rise to the pension income was itself exempt. The Indian Act Exemption for Employment Income Detailed Guidelines (the "Guidelines"), a copy of which is attached, set out the situations in which employment income will qualify for the Indian tax exemption. Employment income which so qualifies will give rise to tax- exempt pension benefits.

Retiring Allowances

As with pension income, retiring allowances received by an Indian will be exempt from tax if the employment income that gave rise to the retiring allowance was itself exempt according to the Guidelines.

RRSP Income

The Department's position with respect to RRSP income is under review as a result of the Williams case. Our current position, which may be subject to change once the review is completed, is that RRSP or RRIF income is taxable unless it is paid to an Indian by a financial institution whose principal place of business (i.e., its head office) is located on a reserve, in which case it will be exempt.

Training Allowances

Training Allowances received by a Status Indian will be tax exempt if:

-     the Indian qualified for the training allowance through employment, the income from which was tax exempt; or

-     the training allowance is paid by a government and the Indian either lives on a reserve or takes the training on a reserve.Business Income

There are presently two cases before the Courts (Pete, 91 DTC 204 and Charleson, 91 DTC 844) regarding the tax status of business income earned by Indians. The Department's position, which is set out in Interpretation Bulletin IT-62, will be maintained pending the resolution of these cases. Thus, business income of an Indian will be tax exempt if the permanent establishment of the business is located on a reserve. In determining the location of the permanent establishment of a business, the following factors will be considered:

-     the location where the business activities are carried out, viz., where employees report for work, where transactions with customers are arranged, and where the inventory is located;

-     the location of the head office; and

-     the location of the books and records.

We trust that these comments will be of assistance.

Yours truly,

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

cc.     Rick Owen