6 February 2003 GST/HST Interpretation 39667 - Construction Services Provided on Reserve and Partly Off Reserve

Dear XXXXX:

Thank you for your letter which was forwarded to us from the XXXXX. XXXXX has been contracted to construct a XXXXX on reserve land. XXXXX[.]

Interpretation Requested

XXXXX XXXXX has contracted with XXXXX to build a XXXXX on reserve land. However, not all the land on which the XXXXX is being built on is currently reserve land. Originally the property was set up for residential development XXXXX not converted to reserve status. With the change in the use of the property from multiple residential development to the building of a XXXXX it is now necessary to consolidate the land into a single parcel XXXXX to reserve status. However, the process for granting reserve status is somewhat time consuming and the construction of the XXXXX is expected to be completed prior to the land receiving reserve status.

In regards to the provincial tax you have already received written approval from the province. The province considers XXXXX insignificant in regards to the overall construction of the XXXXX. The provincial tax relief follows the same principle as the GST as they also require the entity to be a band-empowered entity and the services to be for real property on reserve.

Given that XXXXX is building the XXXXX on land that is for the most part on reserve could the administrative tax relief provided in Technical Information Bulletin (TIB) B-039R, GST Administrative Policy: Application of GST to Indians (TIB B-039R), be extended to include that portion of the services that occur on land not yet reserve land?

Interpretation Given

TIB B-039R, provides that services acquired on or off-reserve by an Indian band or band-empowered entity for band management or for real property on reserve are not subject to GST.

A band-empowered entity 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. This policy is applicable to those band-empowered entities situated on a reserve. A band-empowered entity is considered to be situated on reserve when the entity maintains a presence on reserve.

An entity is considered to be owned by a band, a 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) 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.

An entity is considered to be controlled by the band, tribal council or group of bands if:

The band, tribal council, group of bands or individual members of the band, tribal council or groups 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.

The information provided so far is not enough for CCRA to make a determination as to whether XXXXX qualifies as a band-empowered entity.

Once it has been determined that XXXXX is a band-empowered entity situated on reserve it is necessary to determine if the service can be tax relieved. Services acquired on or off-reserve by an Indian band or band-empowered entity for band management or for real property on reserve are not subject to GST. Despite the 'or' this phrase is to be read as one. Therefore, where services are acquired for band management activities but do not relate to real property on reserve the services are not eligible for tax relief.

However, where services are performed both on and off-reserve for a single consideration, and all or substantially all the services are for real property on-reserve, the services for real property off-reserve would be considered part of the supply of the services for real property on-reserve. Consequently, tax would not apply on the above construction services acquired by a band-empowered entity provided the other conditions under TIB B-039R are met.

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, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9264.

Yours truly,

Cindy Christmas
Aboriginal Affairs Unit
Public Service Bodies & Government Division
Excise and GST/HST Rulings Directorate