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.
ADM'S OFFICE (3) ADM 940479
RETURN TO RULINGS, ROOM 303, MET. BLDG. M 94-03243M
AUTHOR
SUBJECT OR CORPORATE FILE
May 25, 1994
XXXXXXXXXX
Dear XXXXXXXXXX:
I am writing in response to your letter of March 28, 1994, wherein you requested exemption from income tax for treaty Indians employed at XXXXXXXXXX I apologize for the delay in responding.
As you know, when the draft "INDIAN ACT EXEMPTION FOR EMPLOYMENT INCOME DETAILED GUIDELINES" (the "Guidelines") were released, I invited comments concerning them until March 31, 1994. We are presently reviewing the submissions received and your situation will be included in the review. However, I offer the following comments based on the draft Guidelines.
Based on our review of the information provided with your letter concerning the XXXXXXXXXX it appears that a status Indian employed at the XXXXXXXXXX would be working for XCo. or YCo. It would seem that those employed in the gift shop or the restaurant are employed by YCo. and that everyone else would be employed by XCo.
Guidelines 1 and 3 provide exemptions where employment duties are performed on a reserve, however, since the XXXXXXXXXX is not situated on a reserve these Guidelines would not be relevant.
Guideline 2 would apply if both the employee and the employer are resident on a reserve. However, this requires an individual case by case review of each Indian employee's particular situation. Although you have indicated that YCo. has its registered office on a reserve, this fact alone is not sufficient to conclude that it is resident on a reserve. You have not indicated whether XCo. is situated on a reserve.
Guideline 4 requires an organization to meet various criteria in order for its employees to be tax exempt. An employer that is an Indian organization controlled by one or more Indian bands or tribal councils and dedicated exclusively to the social, cultural or economic development of Indians who for the most part live on reserves would fall within this Guideline. The determination of whether these criteria are met would be a question of fact, that can only be determined in the context of an audit. However, given that the XXXXXXXXXX is open to the public as well as non-reserve Indians it may be difficult to satisfy the "exclusively" test. Since each of XCo. and YCo. appear to be operated as non-share corporations they would be controlled by their Board of Directors.
XXXXXXXXXX
Guideline 4 also requires that the employment duties of an Indian must be part of the "non-commercial activities" of the employer, however, the operation of a restaurant and a gift shop by YCo. would appear to be commercial activities. Finally, as in Guideline 2, the employer would have to be resident on a reserve.
The Department considers that an employer is resident on a reserve if the reserve is the place where the central management and control over the business is actually located. The central management and control of an organization is normally considered to be exercised by the group that performs the function of a Board of Directors of the organization. However, it may be that the real management and control of an organization is exercised by some other person or group. Generally, management and control is exercised at the principal place of business but it is recognized that this function may be legitimately exercised in a place other than the principal administrative office of the organization. It is a question of fact where the central management and control is exercised. As already mentioned, we do not have enough information to determine whether the employer is resident on a reserve.
As requested, I would be pleased to meet with a representative of your Board of Directors to discuss this matter and you can contact my secretary to arrange a meeting at 1-613-957-2044. Of course, a conclusion as to whether the employment income of a status Indian employed at the XXXXXXXXXX would be exempt from tax under the draft Guidelines would ultimately be made by your District Office. If you would like to submit additional information concerning the XXXXXXXXXX that may impact on the determination of any of the above mentioned facts, I suggest that you contact XXXXXXXXXX
Upon considering the representations that we have received the Guidelines will be finalized, and at that time, we will send you a copy of the final Guidelines.
Yours sincerely, Denis Lefebvre Assistant Deputy Minister Legislative & Intergovernmental Affairs Branch
Bill Kerr
957-2139
May 13, 1994
940823
May 13, 1994