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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 128263
Business Number: [...]
December 23, 2010
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Request for GST/HST relief for the [...] First Nation Trust
Thank you for your letter of March 30, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a trust established by an Indian band. You specifically asked whether the Canada Revenue Agency (CRA) would expand its definition of a band-empowered entity to include trusts. You provided a copy of the [...] and the [...] document for us to examine.
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.
Interpretation Given
As the trust document is very similar to a number of trust documents that we have considered in our current review of our position on trusts, we are issuing a general statement concerning First Nation trusts.
A trust is usually established by a band in order to acquire land under a specific claims process. It is common practice for a First Nation to establish a trust to purchase and hold lands with monies paid by the government under a specific claims agreement. At issue is whether the tax relief applies on the acquisition of this land.
There is no inherent right for an Indian band to acquire land relieved of tax. A treaty right, the Indian Act, or a statutory instrument such as a remission order, is normally required as authority for relief of the tax. As well, a trust is not exempt from taxation pursuant to section 87 of the Indian Act.
However, certain First Nations may be entitled to tax relief or a refund of tax paid when acquiring land in accordance with their self-government agreement and the ancillary implementation legislation. The issue of tax relief for land acquisitions is negotiated as part of the settlement process and the tax is relieved only if an undertaking is made in the specific claims agreement to support a remission order.
The CRA's Technical Information Bulletin B-039 (TIB B-039), entitled GST Administrative Policy Application of GST to Indians, summarizes the tax treatment of purchases by Indians, Indian bands and band-empowered entities. It 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 a band-empowered entity for purpose of TIB 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 band-empowered entity beyond what was originally envisaged in the announcement made by Finance Canada. As well, that announcement did not intend to extend tax relief to Indian band trusts acquiring land as a result of a specific claims agreement. This is reflected in TIB B-039 which states, "a trust is considered a separate person from its beneficiaries. Consequently, a trust is not an Indian or an Indian band and is not eligible for relief under this bulletin. In addition, a trust does not qualify as a band-empowered entity as it cannot meet the 'owned or controlled' criteria".
Although we understand the nature of the situation described in your letter, the CRA takes the position that a trust cannot qualify as a band-empowered entity. This position is consistent with jurisprudence and with the treatment of trusts for income tax purposes. Therefore, a trust is not entitled to the administrative tax relief provided under TIB B-039. As a result, supplies of property and/or services provided on or off a reserve to a trust are subject to the normal GST/HST rules.
Consequently, unless there is a Treaty Land Entitlement remission order applicable to the acquisition of land by the Indian band trust, the supply will be subject to GST/HST.
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 CRA 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 613-954-7957. 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,
Dave Caron, Manager
Aboriginal Affairs Unit
Public Services Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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