27 March 2002 GST/HST Interpretation 6428 - Application of GST/HST to Indian Trusts

Dear XXXXX:

This refers to your previous letter, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a trust scenario concerning an Indian band. As the scenario is a generalized one and is not in reference to a particular supply, we provide an interpretation rather than a ruling. We apologize for the delay in providing you with our response.

Our understanding of the scenario is as follows. An inter vivos trust is established where the settlor is the Chief of a band, or a member of the band's council; the trustees are the Chief and the band council; and the beneficiary is the Indian band.

Interpretation Requested

You have two questions, as follows.

1. Will the tax relief described in Technical Information Bulletin (TIB) B-039R, entitled GST Administrative Policy - Application of GST to Indians, apply to a trust structured as described above, under the definition in the TIB for a band-empowered entity?

2. Will the tax relief described in TIB B-039R apply to a partnership where one of the partners is a band-empowered entity?

Interpretation Given

1. A trust is not a band-empowered entity. The relief described in TIB B-039R does not apply to a trust.

2. As the relief described in TIB B-039R does not apply to a trust, a trust does not have the ability to act as the Indian entity for purposes of the partnership tax relief described in the TIB. However, the partnership tax relief described XXXXX does apply to a partnership where a band-empowered entity, as defined in the TIB, is a partner and the conditions of the TIB are satisfied. The relief described on page 10 applies to partnerships where an Indian, Indian band, tribal council or band-empowered entity is a partner making a purchase on behalf of the partnership.

Explanation

As you know, the administrative policy of Canada Customs and Revenue Agency (CCRA) for the application of GST/HST to Indians and bands is described in TIB B-039R, which is based on the tax relief provided in section 87 of the Indian Act. The Indian Act confers tax relief upon Indian bands and Indian individuals only. Case law has confirmed that a corporation is not considered to be an Indian individual even if it is owned and controlled by an Indian individual or band. We have taken the same position with respect to trusts: a trust is not an Indian individual or band. Therefore a trust is not eligible for tax relief as an Indian or a band.

CCRA takes the following position concerning Indian trusts as being band-empowered entities.

TIB-B039R 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 Finance announcement provided that "band-empowered schools, hospitals and social services entities on-reserve will purchase on the same tax-free basis as an Indian band." That announcement did not intend to extend tax relief to Indian band trusts.

The definition of a band-empowered entity for purpose of TIB-039R includes a corporation, board, council, association, society or other organization. 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 Finance press release. As a result, the CCRA takes the position that a trust cannot qualify as a band-empowered entity.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, they do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact Dave Caron, Manager of the Aboriginal Affairs Unit (613) 954-7957, or myself at (613) 957-1175.

Yours truly,

Dwight Kostjuk
Rulings Officer
Aboriginal Affairs Unit
Public Service Bodies & Governments Division
Excise and GST/HST Rulings Directorate