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:
Indian Act Tax Exemption for employment income: where the Cree School Board contracts with a college to provide support services for Cree students, is the college’s employee exempt on this employment income?
Position: no
Reasons:
Employer is the college and none of the guidelines are met.
XXXXXXXXXX 5-972834
D. Duff
Attention: XXXXXXXXXX
March 16, 1998
Dear XXXXXXXXXX:
Re: Indian Act Exemption for Employment Income
This is in reply to your letter of October 3, 1997 concerning the applicability of the above mentioned exemption to the employment of XXXXXXXXXX. We have also received representations from XXXXXXXXXX on this matter in a letter dated February 25, 1998.
XXXXXXXXXX
His duties include overseeing orientation and registration, developing and implementing an action plan for each student, seeking regular feedback from the teachers, meeting with the Board to provide its members feedback on the students and fulfilling other duties mutually defined by the Board and XXXXXXXXXX. The Board, through the XXXXXXXXXX, can participate in the selection of the candidate for liaison officer but the selection procedures and the hiring is subject to XXXXXXXXXX agreements and policies. The Board is to pay XXXXXXXXXX for the cost of these services, which cost is not to exceed $XXXXXXXXXX.
XXXXXXXXXX sole responsibility is for these students and he is paid by XXXXXXXXXX from funds received from the Board.
We have reviewed the above situation and concluded that it does not meet any of the guidelines in Revenue Canada’s publication “Indian Act Exemption for Employment Income”(copy attached). Accordingly, in our view, XXXXXXXXXX employment income is taxable.
Guidelines 1 and 3, as well as the proration rule, of the Indian Act Exemption for Employment Income Guidelines provide for full or partial tax exemption of an Indian’s employment income if the employment duties are performed on a reserve. Since none of XXXXXXXXXX duties of employment are performed on a reserve, there is no exemption pursuant to guidelines one or three.
Guideline 2 provides for a full exemption of an Indian’s employment income if the employer is resident on a reserve and the Indian lives on a reserve. We have not been provided with information regarding XXXXXXXXXX residence. However, we understand that XXXXXXXXXX is not resident on a reserve, so regardless of XXXXXXXXXX place of residence, guideline 2 does not apply to exempt XXXXXXXXXX employment income as both requirements of this guideline must be met in order to exempt employment income.
Pursuant to guideline four, the employment income earned by an Indian off reserve will be tax-exempt where the employer is an Indian band which has a reserve, a tribal council representing one or more Indian bands which have reserves, or an Indian organization controlled by one or more such bands or tribal councils and dedicated exclusively to the social, cultural or economic development of Indians who for the most part live on reserves, and the employment duties are part of the employer’s non-commercial activities carried on exclusively for the benefit of Indians who for the most part live on reserve. These elements must all be satisfied in order for Guideline 4 to apply. From the information submitted, it is XXXXXXXXXX that is the employer even though the employment results from the agreement with the Board. As noted above, we understand that XXXXXXXXXX is not resident on a reserve. In addition, XXXXXXXXXX is not the type of employer envisaged in guideline 4 as it is not an Indian band, a tribal council or an Indian organization as described above. It is also a question of fact as to whether the students satisfy the requirement of “Indians who for the most part live on reserves”. Accordingly, guideline 4 does not apply to exempt XXXXXXXXXX income.
We trust our comments will be of assistance to you.
Yours truly,
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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