1. Implementing Payroll for Canada
  2. Indian Exempt Status

Indian Exempt Status

Under certain conditions, an employee with an Indian Exempt Status might be eligible for federal and provincial tax exemptions. In this case, capture their exempt status to stop the tax calculations. However, payroll tax is still deducted for Nunavut and Northwest Territories.

Capture the Indian Exempt Status of the employee during the new hire process. You can capture this information using the check box in the Additional Information section under Payment Details of the Hire an Employee, Employment Information page. After an employee is hired, you can also update this information in the Payroll Assignment Details on the Payroll Relationships page. To exempt the employee from federal and provincial taxes, select the Indian Exempt Status check box.

If an employee has multiple assignments and at least one assignment has a status of Indian Exempt Status, the Indian Exempt Status displays as Yes. The status is displayed on the personal calculation card of the employee. The employee is then exempted from federal and provincial tax. You can't update this status on the personal calculation card because it's only a display field.

Exempting a Percentage of Income for Duties Performed on an Indian Reserve

Additionally, you can exempt a portion of the employee's income for duties performed on a reserve.

Use the Percentage of Duties on a Reserve field to capture the percentage of employment duties while working on an Indian reserve. This field also appears in Payroll Assignment Details on the Payroll Relationships page, where the Indian Exempt Status field is located. This field is only applicable if the Indian Exempt Status field is checked, and applies to all earnings associated with the payroll assignment in question.

To summarize the functionality:

  • If no percentage is entered, all wages are considered as Indian exempt wages.

  • If a percentage is entered, only that percentage of earnings are Indian exempt, and taxes are calculated only on the remaining earnings.

Note: Tips and considerations of this feature:
  • If multiple assignments exist for the employee, you can configure different percentages based on the assignment. Note that an employee may have assignments which are Indian Exempt and some which are not.

Year-End Reporting of Indian Exempt Wages

For proper reporting at year-end, you must create a separate element to pay Indian Exempt Status. This enables you to create the necessary balance feeds to the year-end reports.

If you are pointing a particular element result to a year-end box for Indian Exempt Status, you cannot use the same element for non-Indian exempt employees. For example, you could not point an element to T4 Other Information Code 94 (Indian RPP contributions) and use this same element for non-Indian exempt employees.

Year-End Reporting of Indian Exempt Wages

For proper reporting at year-end, you must create a separate element to pay Indian Exempt Status. This enables you to create the necessary balance feeds to the year-end reports. If you are pointing a particular element result to a year-end box for Indian Exempt Status, you cannot use the same element for non-Indian exempt employees. For example, you could not point an element to T4 Other Information Code 94 (Indian RPP contributions) and use this same element for non-Indian exempt employees.

For more information on year-end reporting and adjusting balances in this case, please see the End-of-Year Processing guide located at the Information Center: Fusion Human Capital Management – Canada (Doc ID 2102586.2), CA – Payroll tab.