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: 137068
October 10, 2012
Dear [Client]:
Subject: GST/HST INTERPRETATION
Relief of the GST/HST available to Indian bands and trusts involved in land development off a reserve
Thank you for your enquiry concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the development of real property off a reserve.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
You would like to know whether […] [Band A] and […] [Band B] or the trusts set up by those bands are eligible for relief of the GST/HST. Indian bands and trusts will be dealt with separately in our response provided below. As well, you were enquiring as to whether [Band B] could be determined a municipality under paragraph 123(1)(b) of the definition of “municipality” in the ETA for purposes of Part IX of the ETA.
INDIAN BANDS
Section 87 of the Indian Act exempts personal property of an Indian or Indian band situated on a reserve. That is, property must be situated on a reserve in order for tax relief to apply. The CRA’s Technical Information Bulletin B-039 (Bulletin B-039) entitled GST/HST Administrative Policy - Application of the GST/HST to Indians, summarizes the tax treatment of purchases by Indians, Indian bands and band-empowered entities. Bulletin B-039 is consistent with the relieving provisions of section 87 of the Indian Act. Under Bulletin B-039, Indian bands and unincorporated band-empowered entities (BEEs) can acquire property situated on or delivered to a reserve by the vendor or the vendor’s agent relieved of the GST/HST. Incorporated BEEs can acquire property situated on or delivered to a reserve by the vendor or the vendor’s agent relieved of the GST/HST where the property is for band management activities (BMA). It should be noted that BMA excludes commercial activities for which input tax credits would be available.
Bulletin B-039 states that “services acquired on or off reserve by an Indian band or band empowered entities (incorporated or unincorporated) for band management activities or for real property on a reserve are not subject to the GST/HST”. All services acquired for real property off a reserve are subject to the normal GST/HST rules even if acquired for BMA. Please note that transportation services, meals, short term accommodation and entertainment acquired, referred to as eligible travel expenses, off a reserve by a band or a BEE are subject to the GST/HST at the time of acquisition. The band or BEE may be eligible to file a General Rebate application using Code 8 as the reason for claiming a rebate of tax paid on eligible travel expenses incurred by an Indian band or BEE.
TRUSTS
Bulletin B-039 was developed to reflect the intent of the December 13, 1990, press release issued by the Minister of Finance, entitled Guidelines Announced on Indian Purchases and the GST. The announcement by Finance Canada provided that “band-empowered schools, hospitals and social services entities on-reserve will purchase on the same tax-free basis as an Indian band”. Therefore, the definition of band-empowered entity for purposes of Bulletin B-039 includes a corporation, board, council, association, society or other organization.
However, there was no intention to include a trust in that administrative definition as it would expand the term BEE beyond what was originally envisaged in the announcement made by Finance Canada. A trust is a separate person and is not an Indian or an Indian band and the CRA takes the position that a trust cannot qualify as a BEE. This position is consistent with jurisprudence and with the treatment of trusts for income tax purposes. Therefore, a trust is not entitled to tax relief provided under Bulletin B-039. Supplies of property and/or services provided on or off a reserve to a trust are subject to the normal GST/HST rules.
GENERAL INFORMATION
Pursuant to the ETA, Indian bands and trusts are “persons” and the provisions in the ETA apply to them as they do to any other person. For example, the requirements to register, collect and remit GST/HST on taxable supplies made in the course of a commercial activity apply to Indian bands and trusts in the same manner as to other persons. Registrants may claim an input tax credit of the tax incurred on inputs in the course of their commercial activities. Further information can be found in the Guide General Information for GST/HST Registrants.
PUBLIC SERVICE BODY (PSB) REBATE
Where no ITC is available to a non-profit organization (NPO) a PSB rebate may be available where certain conditions are met. Pursuant to subsection 123(1) of the ETA, a “non-profit organization” means a person (other than an individual, an estate, a trust, a charity, a public institution, a municipality or a government) that was organized and is operated solely for a purpose other than profit, no part of the income of which is payable to, or otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder is a club, a society or an association the primary purpose and function of which is the promotion of amateur athletics in Canada.
Subsection 259(3) of the ETA provides for a PSB rebate that may be applied for by a qualifying NPO for 50% of “non-creditable tax charged” on supplies relating to the provision of goods and services. A qualifying NPO means an organization that is, at any time in a fiscal year, an NPO with a percentage of annual government funding that is at least 40% of its total revenue.
“Non-creditable tax charged” is generally tax paid on property or services that is not recoverable by way of an ITC.
“Government funding” includes any payment from a “grantor” (as defined in the regulations) that is intended to assist an NPO in the pursuit of its objectives. Amounts paid by grantors to an NPO as payment for goods or services purchased by the grantor cannot be included as funding for purposes of the calculation of the 40% threshold. However, where a payment is made by a grantor for a GST-exempt supply, for example, a health or educational service provided by the NPO to a third party, the payment will qualify as government funding.
The definition of “grantor” includes federal, provincial or municipal governments, Indian bands, corporations controlled by a government or municipality, one of the main purposes of which is the funding of charitable or non-profit endeavours and trusts, boards, commissions or other bodies created by a government or municipality that have as one of their main purposes, the funding of charitable or non-profit endeavours.
MUNICIPAL DETERMINATION FOR PURPOSES OF THE ETA
The Minister of National Revenue may determine an organization to be a municipality under paragraph 123(1)(b) of the definition of “municipality” in the ETA. An organization may qualify for determination as a municipality if it provides municipal services within a local jurisdiction. Generally, municipal services include fire and police protection, water distribution, sewerage or drainage systems, administration or other control functions, local planning, improvement or development, and library services.
Where an organization is determined to be a municipality it has the benefit of municipal status for all purposes of the ETA. Therefore, as a determined municipality, a number of supplies made by the organization may be exempt under one or more of the provisions set out in Schedule V to the ETA. The organization will be entitled to claim the municipal rebate for GST/HST paid on its purchases to the extent that the organization is not eligible to claim an input tax credit (ITC).
In order for an organization such as an Indian Band to be determined a municipality for GST/HST purposes, it must provide documentation to support its request. For example, the Indian band would have to submit documentation to demonstrate that it is providing municipal services to residents within the geographical area for which it has local jurisdiction.
A description of the documents that are required for determination purposes can be found in the CRA’s Guide entitled GST/HST Information for Municipalities. Additional information can also be found in Technical Information Bulletin B-046 entitled Administrative Guidelines for Municipalities (Bulletin B-046).
All requests for municipal determination should be sent to the attention of the Director, Public Service Bodies and Governments Division, 14th floor, Tower A, Place de Ville, 320 Queen Street, Ottawa, ON K1A 0L5.
The Canada Revenue Agency may consider, on a case-by-case basis, a request for an effective date of municipal determination prior to the date of the application. Retroactive determinations are subject to considerations such as the legislative time limits for claiming rebates and whether determination as a municipality will change the tax status of the applicant’s supplies.
The publications referred to in this letter can be viewed on the CRA’s website at: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/menu-eng.html.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-7954. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
K. Bennett
Aboriginal Affairs & Educational Sectors Unit
Public Service Bodies & Governments Division
Excise and GST/HST Rulings Directorate
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