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.
Principal Issues: Would a newly hired First Nations employee who currently works off- reserve because of current workplace restrictions related COVID, qualify for the administrative position provided under the Guidance?
Position: No.
Reasons: The employee must have usually performed the duties of employment on a reserve before the workplace restrictions. In the case at hand, the newly hired employee has not performed any duties of employment at the on-reserve establishment of the employer.
January 24, 2022
Manager Business and Employment Division
Policy and Legislative Section Income Tax Rulings Directorate
Business Compliance Directorate Ananthy Mahendran
Collections and Verification Branch
Attention: Brigitte Richer 2021-091793
SUBJECT: Eligibility for the application of the administrative position outlined in the COVID guidance
We have completed our review of your draft reply, dated November 18, 2021, to the XXXXXXXXXX, which asked if the “Guidance on the Application of the Indian Act Exemption for Employment Income Guidelines to issues raised by the COVID-19 crisis” (the “Guidance”) would apply to exempt the employment income of a First Nations employee hired after the imposition of COVID-19 workplace restrictions. The newly hired employee currently works off-reserve because of COVID-19 workplace restrictions, but they will begin working on-reserve as soon as the restrictions are lifted.
The purpose of Canada Revenue Agency’s administrative approach, as outlined in the Guidance, is to help taxpayers whose existing employment situations were changed because of the COVID-19 crisis. The administrative approach is not an interpretive position or an intention to establish any broader policy.
In particular, the first example was created for employees who had been working on a reserve prior to the pandemic and were eligible for the exemption under Guideline 1 or Guideline 3 of the Indian Act Exemption for Employment Income Guidelines (the “Guidelines”). This position is confirmed in paragraph 2 of the Guidance which states that “where an individual’s regular place of employment (full time or part time) was located on a reserve and changed solely because of the COVID-19 workplace restrictions, the CRA will continue to apply the guidelines as if the individual was still reporting to their regular workplace on a reserve.” [Our emphasis].
In order for an employee to be eligible to apply the administrative position set out in example 1, the employee must meet the following requirements:
- The employee must have usually performed the duties of employment on a reserve before the workplace restrictions.
- The employee’s regular place of employment was located on-reserve before the COVID-19 workplace restrictions and must have changed solely because of those restrictions.
- The employee must work at the on-reserve location as soon as the restrictions are lifted.
It is our view that the Guidance only applies to an employee if the employee worked on a reserve prior to the imposition of COVID-19 workplace restrictions, and their employment income would have been exempt from tax under the Guidelines had they continued to work on a reserve. The fact that a newly hired employee is working from a home office off-reserve because of COVID-19 workplace restrictions will not make them eligible to apply the administrative position outlined in the Guidance.
Unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library. After a 90-day waiting period, a severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. You may request an extension of this 90-day period. The severing process removes all content that is not subject to disclosure.
We trust these comments will be of assistance to you.
Yours truly,
Ms. Nerill Thomas-Wilkinson, CPA, CA
Manager
Non-Profit Organizations and Indigenous Issues Section
Business and Employment Income Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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