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.
MINISTER/DM'S OFFICE 95-07318M
ADM'S OFFICE
RETURN TO 15TH FLOOR, ALBION TOWER
RULINGS DIRECTORATE
December 4, 1995
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable David Anderson, Minister of National Revenue, has asked me to reply to your letter of October 3, 1995, concerning the taxation of employment income of Status Indians.
You indicate that you are a Status Indian residing in Ottawa and that, at times, you attend meetings on various reserves as part of your employment duties with the XXXXXXXXXX. You ask whether your employment income would therefore be exempt from tax.
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 determined that employment income is personal property. Therefore, what must be determined is whether the employment income is situated on a reserve. The Supreme Court of Canada in the case of Williams v. The Queen, 92 DTC 6320, has directed that all factors connecting income to a reserve must be examined to determine if the income is located on the reserve.
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, incorporating the various connecting factors that describe the employment situations covered by the Indian Act. I have enclosed a copy of the guidelines for your information.
Based on the information provided in your letter, Guidelines 2, 3 and 4 cannot apply to exempt your employment income from taxation, since you do not live on a reserve and your employer is not resident on a reserve or a person described in Guideline 4. Also, as it does not appear that at least 90 per cent of your employment duties are performed on a reserve, Guideline 1 cannot apply to exempt all of your employment income from taxation. However, the Proration Rule to Guideline 1 can apply to exempt the portion of your employment income that relates to your employment duties performed on a reserve. Please note that, in calculating the time spent performing employment duties on a reserve, travel time to and from the reserve is not included. If
you would like additional information on the application of the Proration Rule, may I suggest you contact Mrs. Marie-Josée Martel, Assistant Director, Client Services, at the Ottawa Tax Services office, 360 Lisgar Street, Ottawa, Ontario K1A 0L9. Mrs. Martel's telephone number is 598-2033. She has been informed of our correspondence and will be pleased to assist you.
It should also be noted that the term "on a reserve" is defined on page 10 of the guidelines as "on a reserve as defined for purposes of the Indian Act, including any settlements deemed to be reserves for purposes of the Indian Settlements Remission Order, and any other areas given similar treatment under federal legislation (for example, Category I-A lands under the Cree-Naskapi (of Quebec) Act)."
I trust that my comments explain the issue you have raised.
Yours sincerely,
Pierre Gravelle, Q.C.
Attachment
C.C. Mrs. Marie-Josée Martel
Assistant Director
Client Services
Ottawa Tax Services office
360 Lisgar Street
Ottawa, Ontario
K1A 0L9
M. Azzi
957-8972
October 31, 1995