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.
Whether a particular individual's employment income is taxable.
The employee is employed by a non-Indian organization that is not situated on reserve and does not have any activities on reserve. The employee is permitted to perform some employment-related duties on reserve.
MINISTER/DEPUTY MINISTER'S OFFICE 96-04057M
ADM'S OFFICE 96-03890M
RETURN TO 15TH FLOOR, ALBION TOWER
August 28, 1996
The Honourable Jane Stewart, Minister of National Revenue, has asked me to reply to your letter of May 27, 1996, regarding your claim for exemption from taxation. Representations were also made on your behalf by XXXXXXXXXX on May 21, 1996. I apologize for the delay of my response.
Under the Canadian self-assessing tax system, it is the responsibility of every person to estimate the amount of taxes owing. Such a system requires claims to be reviewed to determine their appropriateness and the officers from the Saskatoon Tax Services office have been undertaking such a review. I appreciate your perspective that it has taken an unduly long time to sort out your particular tax situation. However, I hope you can appreciate the challenge facing the Department in ensuring that the provisions of the Indian Act in conjunction with the Income Tax Act are applied fairly and uniformly.
Senior departmental officials have reviewed your case and determined that your employment income from XXXXXXXXXX is not and has not been connected to a reserve; therefore, none of your income from this source is exempt from taxation. It was noted that your employer is situated off reserve, it is not an Indian organization, and it does not serve primarily Indian individuals. There is no requirement that any of your work activities be performed on reserve. This is not a contradiction of statements made by XXXXXXXXXX that you completed 50 per cent of your work at your residence on reserve during the XXXXXXXXXX but it indicates that the location where that portion of your work was done carries significantly less weight as a factor than it would have if your employer required you to work on reserve. It is also noted that the location of your employer's income generating activity is situated off reserve.
As you are aware, paragraph 81(1)(a) of the Income Tax Act and section 87 of the Indian Act exempt the personal property of an Indian situated on a reserve from taxation. The courts have previously concluded that the reference to personal property in section 87 includes income. In the 1992 case of Glenn Williams v. Her Majesty the Queen, the Supreme Court of Canada reconsidered the approach to use in determining whether income should be considered to be situated on a reserve and thus tax exempt. The proper approach is to evaluate the various connecting factors which tie the property to one location or another. The Court also indicated that the ultimate question is to determine to what extent each connecting factor is relevant in determining whether taxing the particular kind of property in a particular manner would erode the entitlement of an Indian to personal property situated on a reserve.
The Indian Act Exemption for Employment Income guidelines were issued by this department to provide a degree of certainty for Indians working under an employment contract. I would mention that these are guidelines and there may be circumstances where the income may not be taxable even though it does not fall within one of the guidelines, and there may be circumstances where the income may be taxable even though it appears to fall within one of the guidelines.
A number of examples were published with the guidelines to demonstrate how they apply to individual cases; however, none deals with the situation where a XXXXXXXXXX situated off reserve. While the guideline's themselves do not make any specific reference to the location where an employee is required to work, all of the examples contemplate situations where the employee is working at a location determined by the employer. Thus, officers of the Saskatoon Tax Services office determined they needed to know where you were required to work, and a reasonable source for this information is your employer. This information was needed to help determine all of the potentially relevant facts before rendering a final decision. Although the location of your residence may be a factor to consider, residency on reserve is insufficient alone to determine that employment income should be considered to be connected to the reserve.
In Williams, Justice Gonthier stated that one must consider and weigh all of the connecting factors. He also stated that the residence of the debtor remains an important factor and, in some cases, may be the exclusive factor. He also noted the proposition by Justice La Forest in Mitchell v. Peguis Indian Band, that the purpose of the Indian Act is not to remedy the economically disadvantaged position of Indians by ensuring that Indians may acquire, hold, and deal with property in the commercial mainstream on different terms than their fellow citizens. In the recent case of Arnold Recalma v. Her Majesty the Queen, the investment income of the taxpayer was not personal property situated on a reserve since the income was earned in the economic mainstream.
I trust that my comments have addressed your concerns.
Pierre Gravelle, Q.C.
August 2, 1996
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