A status Indian performs his duties for an off-reserve employer (e.g., the federal government) more than 50% of the time from his reserve home pursuant to a telecommuting agreement. CRA stated:
Guideline 3 exempts from tax all income earned by an Employee from employment when more than 50% of the duties of an employment are performed on a reserve, and the employer is resident on a reserve, or the Indian lives on a reserve. …
Although an arrangement can be entered into voluntarily, once an employer and Employee have entered into a formal hybrid work arrangement, the Employee would be deemed to be required to perform duties from the location agreed to in the arrangement. The formal hybrid working arrangement need not be in writing, provided that the details of the arrangement are agreed and clearly understood … .
If an Employee is not required to do so, but performs the Employee’s duties on a reserve for reasons of convenience, the Employee will not be considered to have performed the Employee’s duties on a reserve for the purposes of the Guidelines. Furthermore, the Guidelines are not applicable where it is reasonable to consider that one of the principal reasons for the existence of an agreement mandating work at home on a reserve is to establish a connecting factor between the employment income and the reserve.
CRA also indicated that this analysis would not be affected by any impact that the activities of the employer had on the Canadian aboriginal community.