10 March 1998 Ministerial Letter 9707478 - INDIAN TAX EXEMPTION - GENERAL ENQUIRY

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.

March 3, 1998

XXXXXXXXXX

Dear XXXXXXXXXX:

The Minister of National Revenue, the Honourable Herb Dhaliwal, has asked me to reply to your letter of December 8, 1997. In your letter, you posed several questions pertaining to the status and mode of operation of a corporation by the name of XXXXXXXXXX and some of its directors.

Due to the confidentiality provisions in the Income Tax Act, I am unable to provide you with comments on the tax status of a particular taxpayer. Also, some of your questions deal with internal matters of conduct as well as conflict of interest rules. It is not this Department’s mandate to comment on such issues, which are not related to the administration of the Income Tax Act. However, I am able to provide general comments which may be of assistance to you.

For the purposes of the Indian Act, "Indian moneys" is defined as all moneys collected, received or held by Her Majesty for the use and benefit of Indians or bands. The purpose of this definition is to ensure the release of such moneys will only be made for the purposes listed under section 61 of the Indian Act. For more information on the issue of Indian moneys related to your band, you may wish to reach Mr. Lorne Cochrane, Regional Director General for the Department of Indian Affairs and Northern Development, at (204) 983-2474, or write him at 275 Portage Avenue, Room 1100, Winnipeg MB, R3B 3A3.

All active corporations in Canada are subject to filing requirements in one form or another. The form of the return may vary depending on whether an entity is a non-profit organization, a charitable organization or a for-profit corporation.

Non-profit and charitable organizations are exempt from tax, while for-profit corporations are generally taxable on their profits.

Paragraph 81(1)(a) of the Income Tax 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 determined that employment income is personal property. Therefore, what must be determined is whether the employment income is situated on a reserve. The approach adopted by the Supreme Court of Canada in the case of Williams v. The Queen, 92 DTC 6320, requires the examination of all factors connecting income to a reserve to determine if the income is situated on the reserve.

Based on the guidance provided in Williams 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. With a view to assisting the Indian community, the Department developed the Indian Act Exemption for Employment Income Guidelines (the "Guidelines"), incorporating the various connecting factors that describe the employment situations covered by the Indian Act. These Guidelines also apply to directors’ fees. I have attached a copy of these Guidelines for your information.

I trust that my comments will be of assistance.

		Yours sincerely,

		Denis Lefebvre
		Assistant Deputy Minister
		Policy and Legislation Branch

Attachment

February 5, 1998
Philipe-A. Sarrazin
957-2058