Faculty and staff at UBC regularly work with members of various First Nations communities to provide consultation services, land acknowledgements, linguistic advising, or services related to other areas of cultural experience and expertise.
When these activities are conducted on a reserve by status Indian individuals (see FAQ below for explanation on the use of this term), they are exempt from Canadian income tax as per Federal law (Indian Act (R.S.C., 1985, c. I-5)) and CRA guidance (Code 144).
While such income is exempt, there is still a requirement to report the payment on a T4A, if total payments during the calendar year exceed $500. The box number used on the form will designate the receipt as taxable or exempt.
Processing Payments
UBC community members use the Workday system to conduct various financial processes that lead to payment for these services. At the end of the tax year, the income values for these activities are captured through the non-Payroll-related T4A reporting process (conducted by Accounts Payable).
Based on feedback from community partners, the Indigenous Research Support Initiative has worked with UBC’s Tax Manager and the Integrated Service Centre to create a “spend category” in the Workday system that will allow for the accurate recording and processing of these payments, which should lead to a better, more streamlined experience for service providers to receive payment, and a lower recycle rate on non-Payroll-related T4A forms.
This "spend category" is titled “Status Indian (on reserve)”.
Using the Status Indian (on reserve) spend category
Examples of when this spend category might be used:
- Submitting a request to pay a Supplier (Supplier Invoice Request)
- Creating an Expense Report to provide an expense reimbursement or to reconcile an advance
- Creating a Requisition for a PO (this should be extremely rare but could be possible if a service agreement/contract was created and someone was billing UBC for services provided on and off Reserve)
Some example scenarios where it may be appropriate or not appropriate to use the new spend category:
Example #1
UBC Department of Anthropology engages Ms. Roberts to lead an opening ceremony over Zoom. Ms. Roberts is status Indian (as defined by the Indian Act), and will lead the ceremony virtually from her home on a reserve. UBC pays Ms. Roberts a $200 honorarium for leading the ceremony.
This income is exempt and payment should be recorded against the new spend category: “Status Indian (on reserve)”.
Example #2
UBCO engages Ms. Roberts (who is status Indian) to lead an opening ceremony at the new downtown Kelowna campus. Ms. Roberts will lead the ceremony in person at the downtown Kelowna campus, which is not on reserve land. UBC pays Ms. Roberts a $200 honorarium for leading the ceremony.
This income is not exempt since it is not performed on a reserve. Payment should not be recorded against the new spend category: “Status Indian (on reserve)”. Instead, please record to spend categories such as ‘Token of appreciation’, or other category as appropriate.
Example #3
UBC Faculty of Arts engages Mr. Ouellet to provide linguistic advisory services. Mr. Ouellet is Métis and does not have Indian status (see FAQ #2), as defined in the Indian Act. He will provide the advisory services virtually from his home on a reserve. UBC pays Mr. Ouellet $800 for the linguistic advice.
This income is not exempt since Mr. Ouellet does not have status under the Indian Act. Payment should not be recorded against the new spend category: “Status Indian (on reserve)”. Instead, please record to spend categories such as ‘Token of appreciation’, or other category as appropriate.
Business Process
This spend category will most commonly be used for events such as opening ceremonies and speaking engagements, where payments to individuals are often in the form of cash, cheque or e-transfer. In these instances, it is rare that UBC is provided a supplier invoice. Supplier invoices may, however, be issued for other types of engagements, such as consulting services.
The business process (BP) and approval flow for each of these scenarios is outlined in the attached BP. A key part of the BP is completing the "Honorarium & Fee For Services Form", which should be included with your expense report supporting documents in Workday. Expenditures against this spend category cannot be approved unless this form (or other equally robust supporting documentation) is received and reviewed by Central Finance, and the Expense Partner where applicable.
FAQs
There is currently no ability in Workday to track on/off reserve payments to individual contractors (not employees) with Indian status. This is significant because income earned by status Indian individuals on a reserve is exempt from income tax. While such income is exempt, there is still a requirement to report the amount on a T4A, and thus we must be able to track such payments.
We often issue incorrect T4As to status Indian individuals showing taxable income when it should have been exempt. This is an inconvenience to our service providers, as well as creating extra administrative work in terms of issuing amended T4As, and resubmitting information to the CRA.
A new spend category to capture these payments is seen as an effective solution.
The spend category is called “Status Indian (on reserve)” because the tax exemption extends only to those individuals who are registered, or entitled to be registered, as an Indian (i.e., have “status”) under the Indian Act, R.S.C., 1985, c. I-5. It is imperative to gather facts concerning status in a sensitive and culturally appropriate manner, through the correct channels. Please reach out to IRSI if you are unsure how to proceed.
This definition is not inclusive of all Indigenous peoples in Canada (including Inuit and Métis) – please visit Indigenous Services Canada for more information on eligibility. We strongly recommend that you also consult UBC’s Indigenous Peoples Language Guidelines (page 9) for further context.
After receiving feedback from the community regarding the challenges of tracking payments to status Indian individuals for services performed on a reserve, UBC Finance, IRSI (Indigenous Research Support Initiative) and the ISC (Integrated Service Centre) discussed a new spend category as viable solution. The spend category was presented to finance leaders, as well as HR leadership. To capture the interests and needs of our Indigenous partners, Finance and the ISC were in constant dialogue with IRSI throughout the development process. If you would like to speak to someone about the consultation process, please contact IRSI.
This spend category is intended to capture payments to individuals who are not faculty or staff. Should you have any questions on how to treat payments to faculty or staff for performing activities or services on a reserve, please consult UBC’s Director, Treasury, Holly Shepherd for assistance.
Please contact UBC’s Director, Treasury, Holly Shepherd.