Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: We were provided with some limited information about a corporation and its employees. Some of the employees are Indians. A number of queries were raised.
Position: General comments and some CCRA publications were provided.
Reasons: Limited information was provided.
XXXXXXXXXX 2001-007258
M. Eisner, CA
May 22, 2001
Dear XXXXXXXXXX:
Re: A Non-Profit Corporation and Indian Taxation
This is in reply to your letter of March 1, 2001 concerning the above-noted subject.
You have indicated that a non-profit corporation (the "Corporation") is located on an Indian reserve. Most of your concerns relate to employees of the Corporation. In that regard, you have asked about employees who may work both on and off the reserve and about status Indians and non-status Indians who are directors and receive per diems. You have also asked for comments concerning the liability of directors in respect of the Corporation and the income tax implications of such a Corporation located on an Indian reserve.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R4 dated January 29, 2001. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. We would also note that we were not provided with sufficient information to provide definite answers to the enquiries raised in your letter, as these issues require a review of all relevant facts of each particular situation/individual. However, we are prepared to provide the following general comments and reference material, which may be of assistance to you.
Paragraph 81(1)(a) of the Income Tax Act (the "Act") and section 87 of the Indian Act provide a tax exemption for an Indian's personal property situated on reserve. The courts have previously determined that, for purposes of section 87 of the Indian Act, the reference to personal property includes employment income. In the Williams case (92 DTC 6320), the Supreme Court of Canada reconsidered the approach to use in determining whether income is situated on reserve. The proper approach in determining the situs of personal property is to evaluate the various connecting factors, which tie the property to one location or another.
Based on the guidance provided by Williams and after receiving representations from interested Indian groups and individuals, the Canada Customs and Revenue Agency ("CCRA") identified a number of connecting factors that can be used to determine whether employment income is situated on reserve. With a view to assisting the Indian community, the CCRA developed the Indian Act Exemption for Employment Income Guidelines (the "Guidelines"), incorporating the various connecting factors that describe employment situations covered by the Indian Act. A copy of the Guidelines has been enclosed to assist you in determining whether the employment income of the Corporation's employees qualifies for the exemption. This is done on a case-by-case basis.
Director's fees are generally required to be included in the recipient's office or employment income under paragraph 6(1)(c) of the Act. We have enclosed a copy of Interpretation Bulletin IT-377R "Director's, Executive, and Juror's Fees" which provides additional information on the tax treatment of such fees. Whether such fees qualify for the Indian Act exemption depends on whether the recipient falls within the Guidelines.
A corporation is not exempt from taxation by virtue of the Indian Act, as a corporation does not qualify as an Indian as defined in the Indian Act. However, a consideration would be whether a corporation qualifies as a non-profit organization as described in paragraph 149(1)(l) of the Act. We have enclosed a copy of Interpretation Bulletin IT-496 "Non-Profit Organizations" (and the related Special Release), which discusses the tax relief provided to such organizations.
Finally, as regards directors' liability, we have enclosed a copy of Information Circular 89-2R. This circular outlines the consequences which directors may face, when the corporation, of which they are a director, fails to deduct, withhold, remit, or pay certain amounts of money held in trust for the Crown.
We trust that our comments are of assistance to you. If you require further assistance, you may contact your local Tax Services Office.
Yours truly,
Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings
Policy and Legislation Branch
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