12 September 1997 Internal T.I. 9721247 - INDIAN EMPLOYEE NOT REQUIRED TO WORK ON RESERVE

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:

Where an Indian employee is not required by the employer to work on reserve, will the Guidelines apply to enable a full or partial exemption if the employee chooses to perform some employment tasks on reserve.

Position:

No.

Reasons:

The Guidelines contemplate the location(s) at which an employee is required to perform duties. In the present case, the employer is located off reserve and that is where the employer provides services to its clients.

			September 12, 1997

	SUDBURY T.S.O.	HEADQUARTERS
	T1 Client Services			J.D. Brooks
	Enquiries and Adjustments					957-2103

Attention: J. King
972124

XXXXXXXXXX

This is in reply to your query of July 31, 1997 in which you forwarded information pertaining to a taxpayer named XXXXXXXXXX. You question the propriety of XXXXXXXXXX claim of a tax exemption of XXXXXXXXXX% of her employment income on the basis that XXXXXXXXXX% of such income is connected to an Indian reserve.

Our understanding of the facts is as follows:

XXXXXXXXXX is a status Indian who lives on reserve. She is employed by XXXXXXXXXX Her employer is not resident on reserve but it is estimated that she performs XXXXXXXXXX% of her employment duties on reserve. XXXXXXXXXX

Our Comments

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 Guidelines, incorporating the various connecting factors that describe the employment situations covered by the Indian Act.

Guidelines 1 and 3, as well as the proration rule, of the Indian Act Exemption for Employment Income Guidelines provide for full or partial tax exemption of an Indian's employment income if the employment duties are performed on reserve. While the Guidelines themselves do not make any specific reference to the location where an employee is required to work, all of the examples published with the Guidelines contemplate situations where the employee is working at a location determined by the employer. That is, for purposes of the Guidelines that take into consideration the location where the duties of employment are performed, in our view, the most relevant locations are the locations at which the employee is required to perform the duties.

In the present case, the employer permits XXXXXXXXXX to perform a portion of their employment duties away from the employer's location. XXXXXXXXXX lives on a reserve and has chosen to do some of her work at her residence; however, there is no requirement to work on reserve. It is our view that her employment income is more connected to a location off reserve than it is to a location on reserve since her employment income is derived from a non-Indian organization that is situated off reserve.

XXXXXXXXXX It is not an Indian organization nor is it controlled by Indian bands or tribal councils that have reserves. In addition, the employer is not resident on reserve.

It is our view that none of XXXXXXXXXX employment income from XXXXXXXXXX is exempt from taxation.

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