26 August 1998 Internal T.I. 9821446 - YUKON FIRST NATIONS; EFFECT OF NO EXEMPTION.

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: Yukon Indian treaty; effect of no exemption.

Position: various issues

Reasons: na

		August 26, 1998

	Marie-Josee Martel	HEADQUARTERS
	Director	D. Duff
	Programs Division	957-8953
	Client Services Directorate

	Attention: Bruce Stevens
		982144

Yukon First Nations

This is in reply to the e-mail of August 14, 1998, from Neil Mitchell requesting our views on various questions related to the agreement with the Yukon Indians. The questions and our comments are as follows.

1. As this dealt with CPP for self employed Indians, it was forwarded to Ray Cuthbert of the Trust Accounts Division.

2. If a Yukon First Nations individual is self employed and works on reserve or for an Indian band on reserve outside of the Yukon, is the income taxable or exempt?

After 1998, the exemption pursuant to section 87 of the Indian Act is no longer available to a Yukon Indian Person resident in the Yukon with respect to any income, and it will not be available to any Indian with respect to personal property on a reserve in the Yukon. Therefore, if the self-employed individual resides in the Yukon and works on any reserve the income will not be exempt. Also, where an individual resides outside the Yukon and derives income from working on a reserve in the Yukon, such income will not be exempt. The income of a Yukon Indian Person can only be exempt if he or she is residing outside the Yukon and is working on a reserve outside the Yukon.

3. If an individual is self-employed and works on reserve both in and out of the Yukon should the income and deductions be pro-rated? Should CPP payable on self-employed income be prorated as well?

Where an individual has business income such that some of the income is considered exempt and some not exempt, expenses related to the exempt portion should not be deducted against the non-exempt portion. (See the response to question 2 above - Only self-employed Indian individuals residing outside the Yukon working on reserve both in and out of the Yukon would have both taxable and exempt income.)

The CPP issue was forwarded to Ray Cuthbert of the Trust Accounts Division.

4. If a business is located on reserve in Northern B.C. and has customers which are Yukon First Nations, must the business in B.C. pay tax on the income generated from sales to Yukon First Nations people? (For example a store or gas station on reserve)

As stated above, after 1998 the exemption pursuant to section 87 of the Indian Act is no longer available to any Indian with respect to personal property on a reserve in the Yukon. Where an individual residing outside of the Yukon generates business income it would be a question of fact whether the business income is connected to a reserve in the Yukon. Generally when determining whether business income is connected to a reserve, the Department places considerable emphasis on where the business activity is carried out and places a lesser emphasis on the location of the customers. Other factors may also be considered. When a store or gas station is located on a particular reserve it is likely that the Department would consider the income to be connected to that reserve.

5. If a self employed First Nations individual from B.C. lives on reserve and works on reserve or land set aside in the Yukon, is the income taxable or exempt?

After 1998, section 87 of the Indian Act does not apply to any Indian with respect to income connected to a reserve in the Yukon. The income of a First Nations individual from B.C. living and working on a reserve or land set aside in the Yukon will not be exempt.

Roberta Albert, C.A.

for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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