2022-0925491E5 Eligibility for the administrative position

Principal Issues: Would a First Nations employee, who requested and voluntarily moved to a new position off-reserve due to their personal risk of exposure to COVID-19 at their previous on-reserve workplace, qualify for the administrative position provided under the Guidance?

Position: No.

Reasons: The employee could have continued to work on-reserve, but chose to work from their home office off-reserve because of their personal situation.

Author: Mahendran, Ananthy
Section: ITA - 81(1)(a); Indian Act - 87

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                                                                                  Ananthy Mahendran

May 20, 2022

Dear XXXXXXXXXX:

Re: Guidance on the application of the Indian Act Exemption for Employment Income Guidelines to issues raised by the COVID-19 crisis

This is in reply to your email of January 28, 2022, requesting clarification as to whether 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 a First Nations employee who requested to work off-reserve due to their personal risk of exposure to COVID-19 at their on-reserve workplace.

Prior to the COVID-19 pandemic, the First Nations employee worked 50% on a reserve and their employment income was 50% exempt from tax under the proration rule contained in Guideline 1 of the Indian Act Exemption for Employment Income Guidelines (the “Guidelines”). To accommodate the employee’s request, the employer reassigned the employee to a new position that allowed the employee to work 100% from their home office located off-reserve. In particular, you asked whether the Guidance would apply to the employment income earned by the employee in their new off-reserve position.

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC70-6R12, Advance Income Tax Rulings and Technical Interpretations.

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 COVID-19 workplace restrictions. As highlighted in paragraph 5 of the Guidance, the COVID-19 workplace restrictions for purposes of the Guidance are workplace closures and a reduction in the number of in-office workers to promote physical distancing and teleworking across an organization.

The Guidance was created for employees who had been working on a reserve prior to the pandemic and were eligible for a tax exemption under Guideline 1, 2 or 3 of the Guidelines, but who would lose their exemption because they are no longer performing any duties of employment on-reserve because of COVID-19 workplace restrictions. This is further 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 before the imposition of COVID-19 workplace restrictions and changed solely because of those restrictions, the CRA will continue to apply the guidelines as if the individual was still working at their regular workplace on a reserve.” [Our emphasis].

Generally, an employee will be eligible to apply the administrative position set out in the Guidance, where the employee meets the following requirements:

* The employee must have usually performed part of their duties of employment on a reserve before the COVID-19 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.

In the situation you described, the employee’s pre-COVID-19 workplace on-reserve continued to be accessible and the employee could have performed their work from that location throughout the pandemic period. The employee requested to work off-reserve because of their personal situation and the employer reassigned the employee to another position, which allowed the employee to work from a home office off-reserve. Consequently, it is our view that the employee was not forced to work off-reserve solely because of COVID-19 workplace restrictions and therefore, they are not eligible to apply the administrative position outlined in the Guidance. This means that the Guidelines likely will not apply to exempt from taxation any of the income earned by the employee off-reserve.

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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