2 August 1991 Ruling 911841 F - Situs of Corporation "Off" Indian Reserve

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.

Subject:    24(1)

This is in reply to your memorandum of July 4, 1991 with attachments from the Victoria District relating to  24(1) Co".

24(1)

and you further ask if it is sufficient to determine that the "situs" of the corporation is "off" the reserve or are we obligated to determine that the situs of the corporation is elsewhere and provide evidence to substantiate the alternate location.

Our Comments

                            (23)                      was not   

     In the absence of proof that there is another company office in which the bulk of the company's business is carried on and day to day management activities are taking place we would have a difficult time demonstrating that the office on the reserve is not the place where management and control take place.

We are not unsympathetic to your concerns in this matter as we have now seen a number of similar cases.  However, as we have stated in most of these situations, the determination of whether or not a payment of salary, wages or other remuneration is taxable in the hands of a particular status Indian is a question of fact.

During the course of an audit of a Status Indian two issues, among other things, must be resolved.  One is the situs of the employer/debtor.  The "principal place of business" or "head office" must be in fact be on the reserve, that is, it must not only be resident on the reserve but must be a recognized place of business on the reserve.  The other is the situs of the debt.  In this respect salary and wages are considered to be "contract debts".  Salary and wages to be tax exempt must be paid by an employer/debtor from a situs it has on the reserve.  The Courts have established the principle that in determining the situs of a contract debt, the residence of the debtor is often, in the absence of other factors, interpreted as meaning the place where the debtor may be sued, that is, the place where the means of satisfying the debt can be enforced.  It should be noted, however, that a corporation may very well have two or more residences or locations where it could be sued in satisfaction of a debt owing.

24(1)

     will be tax exempt pursuant to paragraph 81(1)(a) of the Income Tax Act unless other evidence can be produced to indicate an alternate site where management and control is exercised and/or Director's meetings are held on a regular basis.

We are returning your file.

B.W. DathDirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch