23 May 1995 External T.I. 9501705 - EMPLOYMENT INCOME - INDIANS

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.

Principal Issues:

Whether status Indian employees of a corporation are exempt from income tax.

Position TAKEN:

none of the employees are exempt.

Reasons FOR POSITION TAKEN:

None of guidelines 1 to 4 would apply to this situation

		950170
XXXXXXXXXX	B. Kerr

Attention: XXXXXXXXXX

May 23, 1995

Dear Madam:

Re: Status Indian Employees of a Corporation

This is in reply to your letter of January 20, 1995, wherein you requested our views on whether the employment income of certain status Indians employed by a corporation would be exempt from Part I tax. We also acknowledge our telephone conversation (XXXXXXXXXX/Brooks) during which you provided additional information. We apologize for the delay in responding.

There are two shareholders of the corporation, however the corporation is not controlled by an Indian band or tribal council. You have concluded that the corporation is resident on a reserve since its head office is located on reserve and it is managed from the reserve. The bank account of the corporation is on reserve and its employees are paid from that bank account.

The status Indian employees live in the city of XXXXXXXXXX so that they can maintain their employment. They work off reserve transporting reserve residents who have come to the city for medical treatment between the locations where they are staying and the location of their medical appointments.

You also cited various cases in support of your request for us to extend the scope of the "Indian Act Exemption for Employment Income Guidelines" (the "Guidelines"), that describe the employment situations covered by the Indian Act, in order to cover your situation. The Guidelines were released by the Department in final form on June 29, 1994.

Our Comments

Section 87 of the Indian Act exempts from taxation the personal property of an Indian situated on a reserve. The term "Indian" is defined in the Indian Act to be a person who is registered or entitled to be registered as an Indian under that Act.

The Guidelines are a fair and liberal interpretation of the Indian Act exemption as it applies to employment income. However, guideline 1 and 3 would not apply since none of the employment income is earned on reserve. Guideline 2 would not apply since the Indian employee does not live on a reserve. Guideline 4 does not apply since the employer is not an Indian organization controlled by an Indian Band or tribal council. Accordingly, in our view, the employment income of the status Indian employees of the corporation is not exempt from income tax.

In addition, it is also a question of fact as to whether an employer is resident on a reserve. This is one of the conditions that has to be met in order for Guideline 2 or 4 to apply. As stated on page 10 of the Guidelines the term "employer is resident on a reserve" means that the reserve is the place where the central management and control over the employer organization is actually located. Based on the information provided, we are unable to conclusively determine whether the condition that the employer is resident on a reserve is in fact satisfied.

With respect to your query on the Poker (94 DTC 6658) case, the Department will apply this decision to identical fact situations.

We trust that these comments will be of assistance.

Yours truly,

R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch