20 May 1997 External T.I. 9706595 - INDIAN ACT EXEMPTION

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 fact that residence of employer of Indian employee is located "near" reserve qualifies for Guideline # 2 of RevCan publication "Indian Act exemption".

Position:

No.

Reasons:

Employee must be resident of reserve and employer must be resident of reserve.

		970659
XXXXXXXXXX			S. Tevlin	

Attention: XXXXXXXXXX

May 20, 1997

Dear Sirs:

Re: Indian Act Tax Exemption

We are writing in response to your letter dated February 27, 1997 wherein you requested our opinion with respect to the taxation of an Indian employee living on a reserve and whose employment duties are performed off the reserve.

In this regard we offer the following general comments.

As you have noted in your letter, guideline #2 of Revenue Canada's publication "Indian Act Exemption for employment income" (the "Guidelines"), dated June 1994, states, "all of the income of an Indian from employment income will usually be exempt from income tax when the employee lives on a reserve and the employer is resident on a reserve".

The determination of where the employer is resident is a question of fact, to be determined upon a review of all pertinent information. With respect to the fact that the location of employment in your example is "just barely off the reserve", we refer you to the case of Her Majesty The Queen v. Elizabeth Ann Poker and F. Marianne Folster, 94 DTC 6658, wherein the court found one of the taxpayers to be taxable on employment income since the place of employment was not located on a reserve.

Ms. Folster was employed as an administrator at the Norway House Indian Hospital which is located adjacent to, but not within, the geographical boundaries of the reserve. Since the Norway House Indian Hospital is not located on a reserve, so that neither the location of employment duties nor the residence of the employer was on a reserve, the Court found that her employment income was not connected to a reserve. The location of her residence alone was insufficient to establish a connection.

The Court's identification of the residence of the debtor, the location of the employment, and the residence of the employee as being relevant factors in determining whether employment income is connected to a reserve is consistent with the Guidelines.

We trust our comments will be of assistance to you.

The foregoing comments are given in accordance with the practice referred to in paragraph 22 of Information Circular 70-6R3 and are not binding on Revenue Canada, Taxation.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch