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:
Whether business income earned off-reserve is tax-exempt where head office of business is on reserve.
Position TAKEN:
Business income taxable.
Reasons FOR POSITION TAKEN:
Business activities are carried on off-reserve and the fact that the head office is on the reserve is not sufficient to connect the income to the reserve.
5-941632
XXXXXXXXXX C. Chouinard
September 26, 1994
Dear XXXXXXXXXX:
We are writing in reply to your letter, which we received on June 23, 1994, wherein you inquire as to the tax status of business income earned by Indians.
We understand you propose to operate a pawn shop business which will be located off the reserve. You indicate, however, that the head office of the business will be situated on the reserve.
Under the Indian Act, the personal property, including income of an Indian, when situated on a reserve, is exempt from taxation. Although the decision in the Williams v. R., 92 DTC 6320 case dealt primarily with the taxation of unemployment insurance benefits received by Indian individuals, it also discussed factors to consider in determining whether income is tax exempt or not. Specifically, the Court ruled that to determine if an Indian's income is situated on a reserve and thus tax exempt, it is necessary to look at all relevant factors connecting the income to a reserve.
In the situation you describe, in our view, the business income generated by the pawn shop would be taxable since the business activities would be carried on off the reserve and the fact that the records and books of the business would be kept on the reserve would not be sufficient to connect the business income to the reserve.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch
cc.Rick Owen
Client Assistance
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