5 July 1995 External T.I. 9516005 - GUIDELINE 2 - EMPLOYMENT INCOME OF STATUS 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 the
XXXXXXXXXX

would be exempt on their employment income under Guideline 2 of the Indian Act Exemption for Employment Income Guidelines, based on the example of Mr. I under Guideline 2.

Position TAKEN:

Guideline 2 will exempt all the income of an Indian from an employment, regardless of the location of the employment duties, when the employer is resident on a reserve and the Indian lives on a reserve. "On a reserve", by definition includes
XXXXXXXXXX

A review of the minutes of board of directors meetings and resolutions or by-laws passed thereat would be required to conclusively resolve whether XXXXXXXXXX is resident on a reserve. This would best be resolved by a Tax Services Office.

XXXXXXXXXX will not, in our view, be considered to live on a reserve for purposes of the Guidelines. Accordingly, they will not be exempt on their employment income under Guideline 2.

Reasons FOR POSITION TAKEN:

It is a question of fact as to whether an "employer is resident on a reserve". We have not been provided with sufficient information in order to determine if XXXXXXXXXX is resident on a reserve.

With respect to the term "Indian lives on a reserve" used in the Guidelines, this term means the Indian lives on the reserve in a domestic establishment that is his or her principal place of residence and that is the centre of his or her daily routine. The fact that an Indian is absent from a reserve for short periods of time because of either the type of employment duties being performed, the distance between the reserve and the location of those duties, or both, does not necessarily mean that the Indian has taken up residence off reserve, such as in the example of Mr. I under Guideline 2. However, it remains a question of fact whether, in those circumstances, the Indian continues to live on a reserve. The longer the period of absence from the reserve, the more likely it is that the domestic establishment maintained on the reserve is not part of the daily routine of the employee. In particular, where employment duties are all located off reserve and returns are made to the domestic establishment on the reserve only for days off and vacations, the domestic establishment on the reserve would not be the centre of the employees daily routine.

M. Azzi
XXXXXXXXXX        5-951600

Attention: XXXXXXXXXX

July 5, 1995

Dear Sir:

Re: XXXXXXXXXX

This is in reply to your letter of May 18, 1995, wherein you requested that, in light of additional information, we revise our decision of December 29, 1994 (file #943120 and #943181) regarding XXXXXXXXXX.

In your view, these employees who "reside" on XXXXXXXXXX would be exempt on their employment income under Guideline 2 of the Indian Act Exemption for Employment Income Guidelines, based on the example of Mr. I under Guideline 2.

The following is our understanding of the facts as revised by your May 18, 1995 letter:

XXXXXXXXXX

Our Comments

Guideline 2 will exempt all the income of an Indian from an employment, regardless of the location of the employment duties, when the employer is resident on a reserve and the Indian lives on a reserve. "On a reserve", by definition includes
XXXXXXXXXX

As indicated in our letter of December 29, 1994, it is a question of fact as to whether an "employer is resident on a reserve". As stated in the Guidelines, an employer is resident on a reserve if "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." Where an organization, which would otherwise not be considered to be resident on reserve, is asserting that it satisfies the definition because it holds its board of directors meetings on reserve, it should generally be considered to satisfy the definition where management and control over the organization is legitimately exercised during those meetings. In addition, in our view, the fact that the board of directors meetings are held on different reserves would not, in and by itself, cause an organization to not be considered resident on reserve.

We have not been provided with sufficient information in order to determine if XXXXXXXXXX which as we understand the situation is the employer, is resident on a reserve. A review of the minutes of board of directors meetings and resolutions or by-laws passed thereat would be required to conclusively resolve this question of fact. This would best be resolved by a Tax Services Office.

With respect to the term "Indian lives on a reserve" used in the Guidelines, as indicated in our December 29, 1994 letter, this term means the Indian lives on the reserve in a domestic establishment that is his or her principal place of residence and that is the centre of his or her daily routine. As in the example of Mr. I under Guideline 2, the fact that an Indian is absent from a reserve for short periods of time because of either the type of employment duties being performed, the distance between the reserve and the location of those duties, or both, does not necessarily mean that the Indian has taken up residence off reserve. However, it remains a question of fact whether, in those circumstances, the Indian continues to live on a reserve. The longer the period of absence from the reserve, the more likely it is that the domestic establishment maintained on the reserve is not part of the daily routine of the employee. In particular, where employment duties are all located off reserve and returns are made to the domestic establishment on the reserve only for days off and vacations, the domestic establishment on the reserve would not be the centre of the employees daily routine. As this is the case for XXXXXXXXXX they will not, in our view, be considered to live on a reserve for purposes of the Guidelines. Accordingly, they will not be exempt on their employment income under Guideline 2.

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