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: Yukon First Nations treaty; various issues on effect on 1998 income.
Position: various
Reasons:
September 3, 1998
Northern B.C. - Yukon HEADQUARTERS
Tax Services Office D. Duff
Ken Slawson
A/Director
Attention: Perry Slump
981990
Yukon First Nations
This is in reply to the e-mail, dated July 31, 1998, from Mr. Slump requesting various positions regarding the agreement with the Yukon First Nations.
As questions 1 and 2 related to CPP and EI, they are being dealt with by the responsible area.
3. It is the Department's position that exempt income is not considered earned income for RRSP purposes, however after February 14, 1998, it is no longer exempt. What is our position now?
The exemption in section 87 of the Indian Act applied to the Yukon Indians until February 14, 1998. After that date to the end of 1998, a remission order will remit amounts payable under the Income Tax Act to the extent that they would not have been payable if the section 87 exemption applied to the end of 1998. However, the remission order was intended to extent the exemption to the end of the year so the Department will process it as if the income is still exempt (see question 4 below). Consequently, no amount will be included in earned income for 1998. If an individual wants to have earned income reported for 1998 the Department will consider how this will be done but at this point there is no position on it.
4. First Nations people with exempt income are instructed to report their exempt income at the applicable line on their tax return and take a corresponding deduction for the exempt income at line 232 indicating "status Indian exempt income". If, after February 14, the income is no longer exempt it must be taxable. (The remission order is in place however.) How will this affect assessment of the 1998 tax returns, and how are we going to instruct the Yukon First Nations to complete their 1998 tax returns during this transition period?
The following was prepared by the Assessment and Collections Branch, Individual Returns and Payments Processing Directorate, Processing Division, Special Processing Section.
The intent of the remission order is to extend the exemption pursuant to section 87 of the Indian Act to the end of 1998. Therefore, filing for 1998 will be the same as filing for 1987. Report the income on the applicable line and take the deduction at line 232.
5. Will the total union and pension contributions for 1998 be allowed as a deduction or should they be prorated in accordance with the income that was exempt?
In computing a taxpayer's income from employment, paragraphs 8(1)(i) and (m) provide for the deduction of the employee's union dues and contributions to a registered pension plan respectively. Consequently, it is our position that where employment income is partially exempt and partially non-exempt, the income should be prorated net of these deductions. Only the union dues and pension contributions applicable to the non-exempt portion should be deducted from that portion.
6. Social assistance payments received from the bands are not required to be reported on a First Nations personal tax return, and the band is not required to issue T5007 slips. Now that the exemption is gone, will a First Nations individual be required to report these payments (the same as Provincial payments) and take a corresponding deduction at line 250? (Can have implications for GST and CCTB) Will the bands be required to start issuing information slips? This applies to years after 1998 as well.
The following was prepared by Assessment and Collections Branch, Business Returns and Payments Processing Directorate, Business Returns and Processing Division, Information Returns Section.
Social assistance payments from the bands are not reportable on form T5007 if the payments were made to Status Indians living on a reserve. There will be no change in reporting for 1998. However, after 1998 these Status Indians will no longer qualify for the exemption, and the payments will be reportable.
When completing their T1 returns for years after 1998, these recipients will report the
T5007 box 11 amounts at line 145 on their T1 returns and claim a corresponding deduction at line 250.
Roberta Albert, C.A.
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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