28 April 1998 Internal T.I. 9810836 - 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:

How a work interchange program with the federal government impacts on an Indian's exemption from tax for employment income.

Position:

Its existence has no direct effect.

Reasons:

The Indian employee continues to be employed by the person who employed him before his services were contracted for under the interchange program.

			April 28, 1998

	John Fennelly	HEADQUARTERS
	Program Management & Operations Section	 J.D. Brooks
	Small & Medium Business Enterprises Division	    957-2103
	Audit Directorate
	Headquarters
 			981083

Indians Working Under Interchange Programs

This is in reply to your request for our views on the income tax implications of an Indian becoming involved in a work interchange program of the federal government.

It is our understanding that, under the government's interchange programs, the interchange arrangement does not affect the employer-employee relationship that existed prior to the interchange. Rather, the employee's services are contracted to another person for a specified time. Thus, if an Indian employed by a third party were to enter into an interchange arrangement with the federal government, that Indian would continue to be employed by the third party. Similarly, if an Indian employed by the federal government were to enter into an interchange arrangement with a third party, that Indian would continue to be employed by the federal government.

The Indian Act Exemption for Employment Income Guidelines would be applied in the normal manner to determine whether the Indian's employment is exempt. That is, the existence of the contract itself would not impact on the decision.

In recent years, we have considered only two factual situations involving a federal government employee working under an interchange contract for an Indian organization. One individual was employed by the Department of Indian Affairs and Northern Development and the other by Correctional Service Canada. In the one case, we expressed the view that the Indian's employment income would be exempt if that Indian was required under the terms of the contract to work on reserve. In the other case, we expressed the view that the Indian's employment income was not exempt even though that Indian was under contract to perform services for an organization described in Guideline 4.

Roberta Albert, CA
Manager
Business, Property & Employment Income Section I
Business and Publications Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch

.../cont'd