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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Is the fishing business income earned on a river which forms part of a reserve exempt from tax?
Position: Yes
Reasons: Where INAC has confirmed that a particular body of water forms part of a reserve, any fishing business income earned by a status Indian from that particular body of water will be connected to a location on reserve and would be exempt from taxation.
February 6, 2002
Winnipeg Tax Services Office HEADQUARTERS
Client Services Division Karen Power, CA
Norm Berard (613) 957-8953
Resource Officer
2002-012082
Indian Fishing Income
This is in reply to your letter of January 28, 2002, wherein you request our views on the tax treatment of fishing business income of status Indian fishermen. Specifically, you have asked whether fishing business income earned on a body of water which forms part of a reserve would be exempt from taxation.
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 a reserve. The courts have previously determined that, for purposes of section 87 of the Indian Act, the reference to personal property includes income. In Williams (92 DTC 6320), the Supreme Court of Canada reconsidered the approach to use in determining whether income is situated on a 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.
Henry Southwind (98 DTC 6084) is the leading case dealing with the business income of an Indian proprietor. The case concerns income earned from logging, where a Status Indian lived on reserve and said that he had an office on reserve. However, all his income earning activities were carried out off reserve and his sole customer was off reserve. The Tax Court decided that his income from his logging activity was taxable and the taxpayer appealed this decision. The Federal Court of Appeal confirmed the Tax Court's decision.
In our view, in the case of a fishing business, the location where the fishing is done is a connecting factor of major importance. Generally, fishing is done off reserve. Therefore, if all of the fishing is done off reserve, the fishing business income earned by a status Indian would be more connected to a location off reserve than to a location on reserve and, consequently, it would not be exempt from taxation.
There are however, situations in which a body of water that runs through a reserve forms part of the reserve. Confirmation of whether a particular body of water is part of a reserve may be obtained by contacting officials with the Land Research and Title Clarification Division of the Department of Indian and Northern Affairs Canada ("INAC").
Where INAC has confirmed that a particular body of water forms part of a reserve, any fishing business income earned by a status Indian from that particular body of water will be connected to a location on reserve and would be exempt from taxation. Consequently, any fishing business income generated from the XXXXXXXXXX, which INAC has confirmed form part of the XXXXXXXXXX Indian Reserve, would in our view, be exempt from taxation by virtue of paragraph 81(1)(a) of the Act and section 87 of the Indian Act.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the CCRA's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a severed copy using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at (613) 957-0682. The severed copy will be sent to you for delivery to the client.
We trust our comments will be of assistance.
Mickey Sarazin, CA
Aboriginal Affairs Section
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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