Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 171598
Business Number: […]
Dear [Client]:
Subject: GST/HST INTERPRETATION
Relief of GST on property or services supplied to band-empowered entities
Thank you for your [correspondence] of July 10, 2015, concerning the application of the Goods and Services Tax (“GST”)/Harmonized Sales Tax (“HST”) to supplies of information technology (“IT”) services and property made by […] (“the Corporation”) to […] (“the Client”).
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (“ETA”) unless otherwise specified.
STATEMENT OF FACTS
The information below has been taken from your […][correspondence], and from Indigenous and Northern Affairs Canada’s website.
* The Client is situated on a reserve as defined in the Indian Act.
* The Corporation performs IT services on the reserve as well as supplies property (e.g., battery cartridges) to the Client.
* […] the Client was not eligible for relief of the provincial sales tax.
* Enclosed with your letter of [mm/dd/yyyy] was an invoice by the Corporation made out to the Client showing that the Corporation charged the GST on services and property it supplied.
* The Client is claiming that they are eligible for relief of the GST and are not paying any tax invoiced by the Corporation.
* The […] Tribal Council (“TC”) has provided the Corporation with a certificate indicating that their head office is on a reserve and that the services and property in question are acquired for band management activities.
* The Client is a separate legal entity from the TC.
* The Client is the recipient of the Corporation’s supplies of IT services and property, not the TC.
* The Client stated […] that it has the same board of directors as the TC, and that it is owned and controlled by the TC.
RULING REQUESTED
You have asked for a ruling on whether the Corporation is required to charge GST to its Client.
INTERPRETATION GIVEN
Unfortunately, we are unable to provide you with a ruling in accordance with GST/HST Memorandum 1.4 Excise and GST/HST Rulings and Interpretations Service. A GST/HST ruling is a written statement that the Canada Revenue Agency (“CRA”) provides to a client that sets out the CRA’s position on how the relevant provisions of the ETA apply to a clearly defined fact situation of the client. The CRA will issue a ruling only when the person requesting the ruling has provided all the relevant facts of a transaction or series of transactions.
In this case we are unable to issue a written ruling as the information necessary to provide a ruling has not been provided. We are unable to determine whether the Corporation’s Client is eligible for relief of the GST. Therefore, for your assistance, we are providing the following interpretation.
Under the ETA, supplies are either exempt supplies or taxable supplies. Exempt supplies are listed in Schedule V and are supplies for which there is no requirement to collect or report the GST/HST. Zero-rated supplies are listed in Schedule VI and are taxed at the rate of 0%.
Generally, persons making a taxable supply must collect the GST/HST pursuant to subsection 221(1). In accordance with section 165 every recipient of a taxable supply made in Canada is required to pay GST at the rate of 5%, or HST at the appropriate rate (as stated above) depending on the place of supply, calculated on the value of the consideration for the supply except where the supply is a zero-rated supply.
Relief of tax available to Indians and bands
Section 87 of the Indian Act exempts personal property of an Indian or band situated on a reserve. That is, the property must be situated on a reserve in order for tax relief to apply.
The CRA’s administrative policy described in GST/HST Technical Information Bulletin B-039, GST/HST Administrative Policy – Application of the GST/HST to Indians (“TIB B-039”), is consistent with the relieving provisions of section 87 of the Indian Act affecting the personal property of an Indian or a band situated on a reserve.
Please note that TIB B-039 does not apply to taxes imposed by First Nations that are administered by the CRA, such as the First Nation Tax or the First Nations Goods and Services Tax. As well, TIB B-039 does not apply to First Nations that have a final and/or self-government agreement that includes a provision that tax relief under section 87 of the Indian Act no longer applies.
The CRA’s administrative policy also extends tax relief to band-empowered entities (“BEE”) that are situated on a reserve. A BEE is considered to be situated on a reserve when the entity maintains a presence on a reserve. A BEE that does not meet the condition of being situated on a reserve is not entitled to relief of the tax under TIB B-039.
A “band-empowered entity”, as defined in TIB B-039, “is a corporation, board, council, association, society, or other organization that is owned or controlled by a band, a tribal council, or a group of bands other than a tribal council”.
The following criteria are used to determine whether or not an entity meets the owned or controlled condition in the definition of a BEE:
“An entity is considered to be owned by a band, tribal council or a group of bands other than a tribal council if:
* the band, tribal council or group of bands owns all or substantially all [90 per cent or more] of the shares or holds all or substantially all of the memberships of the entity; or
* the band, tribal council or group of bands holds title to the assets of the entity or controls its disposition, such that in the event of wind up or liquidation, these assets are vested in the band, tribal council or a group of bands.
An entity is considered to be controlled by a band, tribal council or group of bands other than a tribal council if:
* the band, tribal council, group of bands or individual members of the band, tribal council or group of bands, appoint or elect a majority of the members of the governing body of the entity (e.g., directors); and
* the entity is required by legislation, by-laws, or an operating agreement, to submit to the band, tribal council or group of bands, its operating budget and where applicable, its capital budget for review and approval.”
TIB B-039 provides relief of tax to bands and BEEs as follows:
Property:
Tax relief applies to property acquired by a band or an unincorporated BEE where that property is either acquired on a reserve or is delivered to a reserve. An incorporated BEE can acquire property relieved of tax on a reserve or delivered to a reserve if the property is for band management activities (“BMA”). There is no tax relief available to Indians, bands or BEEs (whether incorporated or unincorporated) on property acquired off a reserve that is not delivered to a reserve.
Services:
Tax relief applies to services acquired on or off a reserve by a band or a BEE when those services are acquired for BMA or for real property on a reserve.
“Band management activities” are defined in TIB B-039, to be “activities or programs undertaken by a band or [BEE] that are not commercial activities for which they would otherwise be entitled to claim input tax credits. In determining whether the acquisition of a supply is for band management, the output of the activity or program will be the determining factor, as opposed to the objectives of the activity or program.”
BMA are those activities conducted by bands and BEEs with regard to their normal administration, programs, services and activities that are designed and/or are delivered for the well-being or assistance of band members and are generally similar to those provided by other levels of government. These include, for example, activities related to business development, staff training, social assistance, education, and housing.
The band or BEE must provide a certificate to the supplier attesting to the fact that the property or services acquired by the band or BEE are for BMA or for real property on a reserve. There is no tax relief available to a band or BEE on taxable services acquired by the band or BEE for real property off a reserve.
TIB B-039 provides additional information on tax relief available to Indians, bands and BEEs and can be found on the CRA’s website: http://www.cra-arc.gc.ca/E/pub/gm/b-039/README.html.
Note: If the Corporation makes supplies to its Client electronically, please refer to the CRA’s Technical Information Bulletin B-090, GST/HST and Electronic Commerce, which can be found on the CRA’s website: http://www.cra-arc.gc.ca/E/pub/gm/b-090/b-090-e.html, for information on determining whether the supply is one of a service or intangible personal property (“IPP”). This is relevant as the requirements for making a supply of a service to a BEE under TIB B-039 relieved of GST is different from the requirements for making a supply of property, including IPP.
If the Corporation’s Client meets the conditions required to be a BEE and the services and property they are acquiring are for BMA as defined in TIB B-039, as an incorporated BEE, the Client would be entitled to acquire property on a reserve relieved of the GST where the property is for BMA and all of the conditions of TIB B-039 are met. Property acquired off a reserve that is not delivered to a reserve by the vendor or the vendor's agent would not be relieved of tax. The Client would be entitled to acquire services on or off a reserve relieved of the GST, other than off-reserve purchases of transportation, short-term accommodation, meals and entertainment, where the services are for BMA or for real property on a reserve and all other conditions described in TIB B-039 are met.
One of the conditions in TIB B-039 that must be met is that the BEE is required to provide a certificate to the supplier indicating that the services and property are being acquired for band management activities or for real property on a reserve. The supplier is required to maintain documentary evidence to support the non-collection of the GST, such as the invoice for the services or property or another form of documentation, and the certificate from the BEE, in respect of the supply of services or property provided to the BEE. A certificate provided by a third party rather than the BEE (e.g., in this case by the TC) would not satisfy this requirement.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4280. Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
K. Bennett
Aboriginal Affairs and Educational Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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