1 December 1994 Ministerial Letter 9426578 - INDIANS - GUIDELINES AND GST

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.

DM'S OFFICE (2)
ADM'S OFFICE (3)

RETURN TO RULINGS, ROOM 303, MET. BLDG.

AUTHOR
SUBJECT OR CORPORATE FILE

December 1, 1994

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable David Anderson, Minister of National Revenue, has asked me to reply to your letter, a copy of which was forwarded to him by the Right Honourable Jean Chrétien, Prime Minister of Canada, on September 27, 1994, concerning the taxation of status Indians living off reserve.

Paragraph 81(1)(a) of the Income Tax Act and section 87 of the Indian Act establish the Indian exemption from taxation. Section 87 of the Indian Act exempts from taxation the personal property of an Indian situated on a reserve. In determining whether the income earned by an Indian is situated on a reserve and thus, exempt from taxation, the approach taken by the Supreme Court of Canada, in the case of Williams v. The Queen, 92 DTC 6320, (1992) 1 C.T.C. 225, must be followed. This approach requires the examination of all factors connecting income to a reserve to determine if the income is located on the reserve. In Williams, the Supreme Court ruled that the proper approach to determining the situs of intangible personal property is to evaluate the various connecting factors which tie the property to one location or another. The Court also indicated that the ultimate question is to determine the extent each connecting factor is relevant in determining whether taxing the particular kind of property in a particular manner would erode the entitlement of an Indian to personal property situated on a reserve.

Using this approach and, after receiving representations from interested Indian groups and individuals, the Department identified a number of connecting factors that can be used to determine whether employment income is situated on a reserve. To assist the Indian community, the Department developed guidelines, incorporating the various relevant connecting factors, that describe the employment situations covered by section 87 of the Indian Act. These Guidelines were the result of extensive consultations as mentioned above and close consultations with all federal departments concerned. The Government is satisfied that significant work has been carried out by departmental officials and that the proposed guidelines apply the Williams decision in a fair and liberal manner consistent with the Supreme Court decision. I am enclosing a copy of the Guidelines, which were released in June, 1994, for your information. You will note that the Guidelines only apply to employment income, since the Department has yet to identify the factors connecting other types of income earned by Indians to a reserve.

You also express concerns regarding the Goods and Services Tax ("GST") and its application to Indians. The treatment of Indian purchases under the GST is consistent with the Indian Act which exempts the personal property of an Indian or a band situated on a reserve. Indians who live off reserve are entitled to this exemption on the same basis as those who live on a reserve. Accordingly, the GST does not apply to purchases of goods made on reserve by Indians or to those off reserve purchases delivered to a reserve by the vendor or the vendor's agent.

I trust that these comments will be of assistance.

			Yours sincerely,

			Pierre Gravelle, Q.C.

C. Chouinard
957-2098
October 31, 1994
4-942657

J. McInnis
GST Policy & Legislation
954-7954
October 31, 1994
Domus 1396