26 March 2003 GST/HST Interpretation 44355 - Availability of a Rebate to an Indian Band under Section 259 of the Excise Tax Act

Dear XXXXX:

Thank you for your e-mail XXXXX in which you questioned whether an Indian band that is a qualifying non-profit organization (NPO) is entitled to claim a rebate under section 259 of the Excise Tax Act (ETA) where it has not claimed a rebate for an amount paid as or on account of tax under section 261 of the ETA within the two-year time limit. The expenses in question were for the acquisition of off-reserve transportation, accommodation, meals and entertainment.

Interpretation Requested

The Indian band is entitled to claim a rebate under section 259 of the ETA where it has not claimed a rebate for an amount paid as or on account of tax under section 261 of the ETA on off-reserve expenses for transportation, accommodation, meals and entertainment.

Interpretation Given

Based on the information provided, where the Indian band has not claimed a rebate for an amount paid as or on account of tax under section 261 of the ETA on off-reserve expenses for transportation, accommodation, meals and entertainment, it would be entitled to claim a rebate of 50% of any "non-creditable tax charged" on these purchases under section 259 of the ETA provided that:

•   it is a qualifying NPO and

•   the expenses are in respect of allowances and reimbursements paid to a band official that is an "employee", as defined in subsection 123(1) of the ETA.

Explanation

Under Technical Information Bulletin B-039R (B-039R) entitled "GST Administrative Policy: Application of GST to Indians", Indian bands and band-empowered entities (BEE) are required to pay GST/HST on their off-reserve purchases of transportation, entertainment, accommodation, and meals (TEAM). Tax paid on these purchases is recoverable through the use of section 261 of the ETA if the purchases are for band management activities or for real property on reserve. Administratively, GST/HST paid on these purchases is treated as an amount paid as tax in error and is claimed through filing a Code 8 rebate claim.

Where an Indian band or BEE pays an allowance to a band official or reimburses a band official for off-reserve purchases of TEAM acquired for band management activities or for real property on reserve, the band or BEE would qualify for a rebate as if GST/HST is included in the allowance or reimbursement paid. Again, these payments are treated as including amounts as tax paid in error and may be claimed under section 261 of the ETA. The recovery of amounts as tax under section 261 of the ETA by an Indian band or BEE on allowances and reimbursements paid to band officials is administrative and does not rely on the requirements set out under sections 174 and 175 of the ETA.

In order to claim a rebate of "non-creditable tax charged" under section 259 of the ETA, however, the requirements of that provision must be met (e.g., a claimant must be a qualifying NPO).

If an Indian band or BEE is a qualifying NPO it would be entitled to claim a rebate of 50% of any "non-creditable tax charged" on its off-reserve purchases of TEAM.

The term "non-creditable tax charge[d]", as defined in subsection 259(1) of the ETA, includes tax deemed under section 174 of the ETA to have been paid in respect of an allowance, as well as tax deemed to have been paid under section 175 of the ETA in respect of a reimbursement paid by the claimant.

Sections 174 and 175 of the ETA deal with allowances and reimbursements paid by employers to employees, by partnerships to partners, by charities to volunteers and by public institutions to volunteers.

The definition of "employee" in subsection 123(1) of the ETA "includes an officer". ["]"Officer" means a person who holds an office ..." "Office" is also defined in subsection 123(1) of the ETA as having "... the same meaning assigned by subsection 248(1) of the Income Tax Act ..." Subsection 248(1) of the Income Tax Act defines "office" as meaning the position of an individual entitling the individual to a fixed or ascertainable stipend or remuneration and includes a judicial office, the office of a minister of the Crown, the office of a member of the Senate or House of Commons of Canada, a member of a legislative assembly or a member of a legislative or executive council and any other office, the incumbent of which is elected by popular vote or is elected or appointed in a representative capacity and also includes the position of a corporation director, and "officer" means a person holding such an office.

Administratively, a "band official" is defined as a person authorized to represent an Indian band or BEE in an official capacity. Band officials are employees, officers, chiefs, members of the band council and authorized band members (which may include elders of a band). The term band official does not include contractors, consultants, or other self-employed persons who are providing services to the band or BEE.

Consequently, for an Indian band or BEE that is a qualifying NPO to recover GST/HST under section 259 of the ETA on allowances or reimbursements paid to a band official for their off-reserve TEAM expenses, that band official must be an "employee" as defined in subsection 123(1) of the ETA. An allowance or reimbursement paid by an Indian band or BEE to a band official that does not meet the definition of "employee" would not qualify for a rebate under section 259 of the ETA. For example, while a band official may be an officer of an Indian band or BEE, a rebate under section 259 of the ETA could not be claimed on allowances or reimbursements paid to that officer if the officer was not an "employee", as defined.

As previously mentioned, section 259 of the ETA restricts rebates to "non-creditable tax charged". The definition of "non-creditable tax charged" does not include an amount paid as tax in error. Specifically, this term includes "tax" and certain amounts deemed as tax. "Tax", as defined in subsection 123(1) of the ETA, means tax payable under Part IX of the ETA. Therefore, if an Indian band or BEE paid an amount as tax in error (e.g., on the off-reserve purchase of property delivered to a reserve) and a claim for a rebate had not been made under section 261 of the ETA within the two-year time limit, a rebate for the amount paid as tax in error could not be claimed under section 259 of the ETA. Amounts paid as tax in error (i.e., Code 1 rebate claim) can only be claimed under section 261 of the ETA.

The foregoing comments represent our general views with respect to the subject matter of your e-mail. 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, 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 me at 954-7952.

Yours truly,

Lynn Fournier Renner
Aboriginal Affairs Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate