8 June 1995 External T.I. 9514315 - STATUS 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.

Principal Issues:

Whether an organization's status Indian employees living on-reserve but working off-reserve are exempt from income tax.

Position TAKEN:

Depends on all the facts of each particular case in order to determine whether Guidelines 1, 2 or 3 would apply.

Reasons FOR POSITION TAKEN:

Not Applicable

		951431
XXXXXXXXXX	B. Kerr

Attention: XXXXXXXXXX

June 8, 1995

Dear Madam:

Re: Status Indian Employees Working Off Reserve

This is in reply to your letter of May 15, 1995, sent to the Thunder Bay Tax Services Office wherein you requested whether the status Indian employees of your organization that would be working at an off-reserve location would be subject to income tax.

We understand that your office is currently on reserve land. However, you need to expand and are therefore considering temporarily renting additional office space at an off-reserve location. All status Indian employees that would work at the off-reserve location live on reserve, and all clients served are status Indians. The funding for the organization comes from the provincial government. You state that your main office would remain on reserve and the majority of your employees would continue to work at the main office.

Our Comments

You have not provided sufficient information for us to determine whether the status Indian employees of your organization that will be working off-reserve would be exempt from income tax. However, we can provide the following general comments.

With a view to assisting the Indian community, the Department has developed "Indian Act Exemption for Employment Income Guidelines" (the "Guidelines"), that describe the employment situations covered by the Indian Act. The Guidelines were released in final form on June 29, 1994, a copy of which, we understand, was previously sent to you.

All employment income earned by a status Indian on a reserve is exempt. Where a portion of the employment income is earned on reserve Guideline 1 or 3 may apply, depending on the circumstances, to determine whether the off reserve portion is also exempt. Where all of the employment income is earned off reserve, Guideline 2 or 4 may apply, depending on the circumstances, to determine whether the income is exempt.

Guideline 1 would apply to exempt all of the income of an Indian if at least 90% of the employment duties are performed on a reserve. When less than 90% of the duties are performed on a reserve and none of the other guidelines apply, only the portion that is performed on a reserve is exempt. Guideline 3 would apply to exempt all of the income of an Indian if more than 50% of the employment duties are performed on a reserve and the employer is resident on a reserve or the Indian lives on a reserve. Since you have not indicated whether any portion of the employment duties are performed on a reserve or how long the duties will be performed at the off-reserve location, we cannot determine if Guidelines 1 or 3 would apply.

Guideline 2 could apply to exempt the employment income of employees who live on reserve provided that the employer is in fact resident on a reserve. However, the determination of the residence of an employer is a question of fact. 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. The central management and control of an organization is usually considered to be exercised by the group that performs the function of a board of directors of the organization. However, it may be that the real management and control of an organization is exercised by some other person or group. Generally, management and control is exercised at the principal place of business but it is recognized that this function may be legitimately exercised in a place other than the principal administrative office of the organization. However, we have not been provided with information to resolve this question of fact.

Since all the status Indian employees of your organization would live on reserve and may fit under one of the other guidelines, it is not necessary to consider Guideline 4.

Should you wish to submit further information or would like further clarification on the application of the Guidelines to the employment income of the employees of your organization, we suggest that you continue your discussions with the Thunder Bay Tax Services Office.

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

C.C. Ruth Kirby
Thunder Bay Tax Services Office