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:
1. Whether any "lands set aside" in the Yukon Territory will be treated as "reserves" within the meaning of the Indian Act.
2. Whether business income of an Indian is exempt by virtue of paragraph 87(b) of the Indian Act.
POSITION:
1. Yes.
2. No, although a portion may be exempt. REASONS:
1. The Income Tax Remission Order (Yukon Territory Lands), passed on February 7, 1995, provides for certain "lands set aside" being deemed to be "reserves" for certain years.
2. The connecting factors of the specific case point to locations off reserve as being the place where income is earned. The revenue-generating activities of the sole proprietor deserve more weight as a connecting factor than the bookkeeping activities. In addition, the location of the customers is significant. Many customers are non-Indian and are located off reserve, and the work for those customers is carried out off reserve.
962763 XXXXXXXXXX J.D. Brooks
September 27, 1996
Dear XXXXXXXXXX
Re: Business Income of Indians
This letter is in reply to your letter of July 26, 1996 in which you requested our opinion concerning the application of the Indian Act to business income. You briefly described the fact situation of a specific registered Indian and requested us to confirm whether his business income would be exempt.
Our Comments
Since we do not have an authorization from the taxpayer to discuss his particular situation with persons other than himself, we are not able to respond directly to your enquiry. However, we offer general comments with respect to the following hypothetical situation which should clarify the taxability of the taxpayer to whom you referred and other taxpayers in a similar situation:
A certain taxpayer is a registered Indian and is a member of an Indian band in the Yukon Territory. The Indian is self-employed in the construction industry and maintains an office for the business on "lands set aside". Many business contracts are with non-Indians and the work for these contracts is performed off "lands set aside".
The exemption from income tax for persons who are registered Indians or are entitled to be so registered is in the Indian Act. Paragraph 87(b) thereof exempts from taxation the personal property of an Indian situated on a reserve. A remission order was passed on February 7, 1995, referred to as the Income Tax Remission Order (Yukon Territory Lands), to address the fact that there are "lands set aside" in the Yukon Territory for the use of Indians that are not actually designated as "reserves". Those lands that were, on February 7, 1995, already set aside by notation in the property records of the Department of Indian Affairs and Northern Development for the use of its Indian and Inuit Affairs Program, are deemed by this Remission Order to be "reserves" for the years 1985 through 1998. Other lands that were or will be set aside, but were not set aside as at February 7, 1995, may be deemed to be reserves for the relevant years. In the following comments, references to "reserves" should be understood to include "lands set aside" that are deemed to be reserves by this Remission Order.
It has been held that, for purposes of paragraph 87(b) of the Indian Act, property includes income. Income will be considered to be on a reserve if it is connected to the reserve, and thus one must consider and weigh all of the factors that serve to connect income to a location that is either on reserve or off reserve.
One significant factor that serves to connect business income to a location on reserve or off reserve is the location of the company's customers. Another significant connecting factor would be the location where the activities are carried out. If all of the contractor's business income was derived from customers located off reserve and all of the construction work was carried on off reserve, the business income would generally not be exempt from taxation. If a portion of the construction activities were carried on on reserve, a similar portion of the business income would generally be exempt. While there will be some activities carried on in the office located on reserve, it is our view that the actual revenue-generating construction activities would be more significant in determining whether the business income is connected to a reserve. Thus, for example, if a bookkeeper were employed by the contractor to maintain the books and records of the business in the on- reserve office but the contractor performed all of the actual construction activities off reserve, the business income would be more connected to a location off reserve than it would be to a location on reserve.
We trust that these comments will be of assistance.
Yours truly,
R. Albert for Director Business and Publications Division Income Tax Rulings and Interpretations Directorate Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1996
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1996
Email this Content