17 November 1999 External T.I. 9924825 - INDIAN ACT EXEMP.-PARTTIME TEACHER

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 a status Indian employee of XXXXXXXXXX , located off-reserve, is exempt from income tax.

Position: No.

Reasons:.. The Guidelines contemplate the location(s) at which an employee is required to perform duties. In the present case, the employer is located off reserve and that is where the employer provides services to its clients.

		5-992482
XXXXXXXXXX                                Karen Power, C.A.
(613) 957-8953
November 17, 1999

Dear Sirs:

Re: Indian Act Exemption for Employment Income

We are writing in response to your letter of September 3, 1999, wherein you requested our views on whether your employment income is exempt from tax.

You have indicated that you are a status Indian living on reserve. You are currently employed at XXXXXXXXXX as a part-time XXXXXXXXXX. All of your preparation work, marking, photo copying, etc. takes places at your home office on the reserve. We also acknowledge receipt of a letter from the Program Director at XXXXXXXXXX confirming that the college has not assigned you any office space.

Our Comments

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments.

Paragraph 81(1)(a) of the Income Tax Act and section 87 of the Indian Act provide a tax exemption for an Indian's personal property situated on a reserve. The courts have previously determined that, for purposes of section 87 of the Indian Act, the reference to personal property includes employment income. In Williams (92 DTC 6320), the Supreme Court of Canada reconsidered the approach to use in determining whether income is situated on a reserve. The proper approach in determining the situs of personal property is to evaluate the various connecting factors which tie the property to one location or another.

Based on the guidance provided in Williams and after receiving representations from interested Indian groups and individuals, the Department identified a number of connecting factors that can be used to determine whether employment income is situated on a reserve. With a view to assisting the Indian community, the Department developed the Indian Act Exemption for Employment Income Guidelines (the "Guidelines"), incorporating the various connecting factors that describe the employment situations covered by the Indian Act.

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 reserve. While the Guidelines themselves do not make any specific reference to the location where an employee is required to work, all of the examples published with the Guidelines contemplate situations where the employee is working at a location determined by the employer. That is, for purposes of the Guidelines that take into consideration the location where the duties of employment are performed, in our view, the most relevant locations are the locations at which the employee is required to perform the duties.

In your situation, your employer permits you to perform a portion of your employment duties away from the employer's location. You have chosen to do some of your employment duties at your own residence located on reserve; however, there is no requirement to work on reserve. It is our view that your employment income is more connected to a location off reserve than it is to a location on reserve since your employment income is derived from a non-Indian organization that is situated off reserve.

In our view, none of your employment income from XXXXXXXXXX is exempt from taxation.

We trust our comments will be of assistance to you.

Yours truly,

Roberta Albert, C.A.

for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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