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.
Sudbury District OfficeRulings Directorate Client Assistance Section
Attention: D. L. McInall
RE: Taxation of Indians, Remission Orders
We are writing in response to your round trip memo of January 11, 1993, relating to the taxability of Indians living on and off the reserve who work for a placement agency located on the reserve but where all the duties are performed off the reserve.
The Williams decision confirms that income earned on a reserve is tax exempt. However as a result of the decision, the salary of an Indian will no longer be exempt merely because it is paid by an employer situated on the reserve. The location of the employer is a factor for consideration as is the location of residence of the employee, i.e., living on or off the reserve. However, the only factor which can connect income to a reserve on its own merits will be if the duties are carried out on the reserve. Hence, in situations such as you have described relating to Indian employees working and living off the reserve, these individuals will no longer be exempt. Indians who live on a reserve and who are employed by an employer that is located on a reserve will continue to be exempt, even though the duties are performed off the reserve.
The Department recognizes that some Indian individuals and organizations, who have arranged their affairs on the basis of the previous court interpretations, may be negatively affected by the application of the Williams decision. Consequently the government will introduce a remission order to provide a reasonable period of transition. The remission order, which will be effective until December 31, 1993, will remit tax on salaries and wages received by an Indian, living off the reserve, from an employer situated on a reserve where such salaries and wages would have been tax exempt prior to the Williams decision.
It should be noted that the old remission order did not apply to Indians who were employees of placement agencies located on the reserve. Prior to the Williams decision Indians living both on and off the reserve were considered to be exempt if the employer was situs on the reserve.
You asked if there were any implications under the general anti avoidance rule ("GAAR") relating to the setting up of these placement agencies on the reserve. In our view GAAR has no application. It will be a determination to be made based upon the facts of each particular situation as to whether the alleged employer is in fact the employer and is situs on the reserve.
R. Albert for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
c.c. Rick Owen Client Assistance Directorate
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