17 September 2003 External T.I. 2003-0036055 - SELF-EMPLOYED INDIAN FISHERS TAXATION

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Taxation of Status Indian Fishing Income

Position: Question of Fact

Reasons:

Clarification of Memorandum provided to XXXXXXXXXX TSO to confirm that the position therein is limited to the specific facts..

2003-003605
XXXXXXXXXX Renée Shields
(613) 948-5273
September 17, 2003

Dear XXXXXXXXXX:

Re: Taxation of Fishing Income Earned by a Status Indian

This letter is to follow up on our letter of June 26, 2003 with which we enclosed a Memorandum dated June 11, 2003 from the Income Tax Rulings Directorate to the XXXXXXXXXX Tax Services Office regarding income that you earn as a status Indian fisher (the "Memorandum").

Canada Customs and Revenue Agency ("CCRA") officials in Headquarters and in the various regions and tax services offices strive to apply the Income Tax Act consistently and fairly to all Canadians. Where the factual situations of taxpayers differ, or where positions are adopted based on inaccurate or incomplete facts, it is certainly likely that different tax treatment will result. We are taking this opportunity to clarify the application of the positions expressed in the Memorandum in order to alleviate any misconceptions that may have resulted from its misinterpretation.

In the determination of whether any particular stream of income earned by a status Indian is tax exempt, a connecting factors test must result in the conclusion that the income is situated on reserve. Certain very specific facts led to the CCRA's XXXXXXXXXX position that income earned by members of the XXXXXXXXXX band who fish using band-owned licenses is tax exempt. Similarly, the opinion expressed in the Memorandum that a certain portion of fishing income earned by you would be tax exempt is limited to income earned within very specific factual parameters. Specifically:

? That you are a member of the XXXXXXXXXX band (XXXXXXXXXX).

? That you are resident on the XXXXXXXXXX reserve (the "Reserve").

? That you only employ Indian fishers who are band members.

? That you keep your records on the Reserve.

? That your catch is sold to the XXXXXXXXXX processing plant via a Reserve-resident company, owned and operated by band members and which employs Reserve-resident band members.

If any of the foregoing factors did not exist, the CCRA's position regarding the taxation of the fishing income would be affected. For example, as stated in the Memorandum, fishing income earned from the sale of your catch to an off-Reserve company or customer would affect the connecting factors test with the result that such income would be taxable.

We note that one of the most significant connecting factors is that the income-generating activity take place on reserve. XXXXXXXXXX In the absence of a similar determination applicable to another band, it is unlikely that a member of any other band fishing off-reserve would be able to satisfy a connecting factors test to support a tax exemption.

We trust that with this explanation you now appreciate that the position expressed in the Memorandum has very limited application as necessitated by the specific circumstances involved and the facts provided to us for consideration.

Yours truly,

Mickey Sarazin, C.A.

for Director
Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch