Principal Issues: The taxpayer asks that his pension income from an employment situated off-reserve, but in his opinion is located in the territory XXXXXXXXXX, be exempted under XXXXXXXXXX.
Position: Taxpayer’s pension income is taxable.
Reasons: There is no indication that the taxpayer earned his pension income on a reserve.
12 February 2019
XXXXXXXXXX
Dear Sir,
The Honorable Diane Lebouthillier, Minister of National Revenue, asked me to respond to the email she received from the office of the Right Honorable Justin Trudeau, Prime Minister of Canada, regarding the taxation of your pension income, in which you referred to XXXXXXXXXX. I thank you for your understanding of my tardy response.
Paragraph 81(1)(a) of the Income Tax Act and section 87 of the Indian Act provide for a tax exemption for personal property referred to in that section. The courts have ruled that, with respect to section 87 of the Act, employment income is personal property. In the context of that section, an Indian within the meaning of the Act must have earned income on a reserve in order for the exemption in question to apply to that income.
If employment income is exempt from tax under section 87 of the Act, other income related to that employment income will be. For example, registered pension plan benefits and retiring allowances are exempt from tax if the employment income that gave entitlement to those amounts was exempt.
In accordance with the principles established in Williams v. The Queen, the Canada Revenue Agency has identified certain connecting factors in determining whether an Indian within the meaning of the Act has earned employment income on a reserve. To this end, the Agency has published Guidelines that you can consult at canada.ca/en/agency-revenue/services/aboriginal/exoneration-revenu-accord-on-indian-law.html. Although these Guidelines apply to the majority of employment situations, they may not apply in unusual or exceptional circumstances. All relevant facts must be considered in determining whether sufficient connecting factors link income to a reserve.
In your situation, neither the residence of your employer nor the place where you performed your employment duties are on a reserve. There is no indication that you earned your pension income on a reserve, according to the Guidelines. Consequently, your pension income is taxable.
I hope that this information will be of assistance.
Best regards,
The Deputy Commissioner of the Legislative Policy and Regulatory Affairs Branch of the Canada Revenue Agency,
Geoff Trueman
Isabelle Landry
2018-074106