11 September 1995 Internal T.I. 9521847 - INDIANS RECEIVING CPP PAYMENTS

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.

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.

Principal Issues:

Whether CPP payments received by an Indian may be exempt from tax.

Position TAKEN:

For years prior to 1992, they are taxable.

For years after 1991, they will be exempt to the extent that the payments were derived from tax-exempt income.

Reasons FOR POSITION TAKEN:

The Remission Orders do not provide exemption for CPP.

							September 8, 1995

W. Stockhecke				HEADQUARTERS
	Director					J.D. Brooks
	Thunder Bay				957-2103
	Tax Services Office

	Attention:  Bonnie MacKay
	Client Assistance
							952184

Indians In Receipt of CPP Benefits

This memorandum is in reply to your enquiry of August 15, 1995 as to the tax exemption available to a status Indian in receipt of Canada Pension Plan payments ("CPP payments") that were derived from exempt income. In the situation you presented, some of the CPP payments were received prior to 1992.

The Indian Act Exemption for Employment Income Guidelines (the "Guidelines") state the Department's position for CPP payments and other employment-related income that is received after 1991. The receipt of Unemployment Insurance benefits, retiring allowances, CPP payments, QPP payments, registered pension plan benefits or wage loss replacement plan benefits will usually be exempt from income tax when received as a result of employment income that was exempt from tax. If a portion of the employment income was exempt, then a similar portion of these amounts will be exempt.

For years prior to 1993, certain income tax was remitted pursuant to Remission Orders. Subsequent to the 1983 Nowegijick case, an Order in Council (P.C. 1985-2446 dated August 7, 1985) was made to remit income tax for the years 1983 through 1985 in respect of employment income of an Indian that was attributable to the Indian's duties performed on a reserve. This Order was subsequently amended by P.C. 1988-787, 1991-264 and 1992-938 to extend the remission up to 1992 and to enlarge its scope to apply in respect of certain lump sum pension receipts, certain retiring allowances and certain training allowances.

Subsequent to the Williams case in 1992 which dealt with Unemployment Insurance benefits, a new Order in Council (P.C. 1993-523 dated March 16, 1993) was made to remit income tax on employment income received by Indians in 1992 and 1993 (extended in a limited manner to 1994 by P.C. 1994-799) from employers residing on reserves or certain Indian settlements; and to remit income tax assessed for the years 1985 through 1991 on certain Unemployment Insurance benefits. Other types of employment-related income, including CPP payments, were not covered by the Remission Order.

In summary, CPP payments received by an Indian after 1991 will be exempt to the extent that the payments were derived from tax-exempt income. However, CPP payments received by an Indian in a year prior to 1992 remain taxable.

R. Albert
for Director
Business and General Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch