Canada: Additional tax relief for First Nations, indigenous individuals (COVID-19)

Canada: Additional tax relief for First Nations

The Canada Revenue Agency (CRA) released guidance to address issues that may arise as a result of coronavirus (COVID-19) pandemic-related workplace or territorial restrictions for First Nations or indigenous taxpayers (that is, restrictions that may temporarily cause employees or employers to work or reside off-reserve).


Related content

The administrative guidance applies from 16 March to 31 December 2020, and may be extended if necessary.

The CRA announced it will generally continue to apply its existing guidelines to determine whether the employment income of certain individuals who live or work on a reserve, or whose employers reside on a reserve, is exempt from income tax.


In general, the employment income of indigenous persons is exempt from income tax if the income is “situated on a reserve.” Under administrative guidelines for determining whether employment income is situated on a reserve, and therefore exempt from tax, certain conditions must be satisfied (such as a percentage of employment duties are performed on a reserve). An employee is considered to live on a reserve if the principal place of residence and the center of the daily routine is on a reserve. An employer that has an established office on a reserve is generally considered to reside on a reserve only if its central management and control is located on a reserve throughout the year. One of the key factors in this determination is the location where the meetings of the board of director take place (although this is not the only factor).

COVID-19 exceptions

The CRA stated it will allow the following exceptions when an employee or employer temporarily works or resides off-reserve because of COVID-19 workplace or territorial travel restrictions.

  • If an employee usually performs all or part of the job on a reserve, but has temporarily been working off-reserve only because of the workplace restrictions, this will not necessarily affect the person’s exemption status.
  • If an employee who normally lives on-reserve is staying in off-reserve housing only because of territorial travel restrictions, the employee will still be considered to be a resident on the reserve if the individual returns home as soon as the restrictions are lifted.
  • If an employer that has established a head office with central control on a reserve but has had to move off-reserve because of workplace restrictions, the employer generally will be considered to be a resident of the reserve.

The CRA noted that determining employer residency involves multiple factors and will be determined on a case-by-case basis.

Read a December 2020 report prepared by the KPMG member firm in Canada

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Want to do business with KPMG?


loading image Request for proposal