14 April 2000 External T.I. 1999-0005475 - TAXATION OF OUTPOST CAMPS

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: Would income earned on an outpost camp be taxable?

Position: Generally yes.

Reasons: In our view, part 5, Article 7 of the Agreement indicates that Inuit do not have to pay a fee, rent or property tax to use or occupy the outpost camp, it would not provide an income tax exemption on income derived from the use of outpost camp.

		1999-000547
XXXXXXXXXX 	Karen Power, CA
(613) 957-8953
April 14, 2000

Dear XXXXXXXXXX:

Re: Taxation of Outpost Camps

We are writing in reply to your correspondence of October 6, 1999, wherein you requested our comments on whether the profits from "flint-stone" harvesting would be exempt from income tax. We apologize for the delay in our response.

It is your understanding that the Nunavut Land Claims Agreement (the "Agreement") provides that Inuit Camps and their organizations are exempt from tax. It is your view that if an individual chooses to legally incorporate his "flint-stone" harvest business, profits from that corporation should be exempt from taxation. Although it is unclear, we understand that, you have also incorporated a separate society to pursue certain interests which has entered into a contract to construct a childcare centre within the municipal government's boundaries.

Our Comments

The particular circumstances in your letter on which you have asked for our views appears to be a factual situation involving a specific taxpayer. For a review of the tax status of your business/corporation you should address your local Tax Sevices Office. However, we are prepared to provide the following comments.

The Agreement was ratified by the Inuit of Nunavut in November of 1992. The Agreement provides title to the Nunavut Inuit of 350,000 square-kilometres of land and establishes clear rules of ownership and control over land and resources. Part 5 of Article 7 of the Agreement provides that Inuit occupying or establishing outpost camps shall not be liable to pay any fee, levy, rent or like tax for the purpose of such occupation or establishment, associated with the purposes of wildlife harvesting. An outpost camp is defined to mean a camp occupied by families or other groups of Inuit who occupy the particular location temporarily or a year round basis for the purposes of wildlife harvesting and the associated use and enjoyment of lands.

In our view, while part 5, Article 7 of the Agreement indicates that Inuit do not have to pay a fee, rent or property tax to use or occupy the outpost camp, it would not provide an income tax exemption on income derived from the use of an outpost camp. We are not aware of any other provisions under the Agreement which would exempt the taxation of income earned from a "flint-stones" sole proprietorship or corporation. Therefore, profits from the "flint-stones" harvest will be subject to the general income tax laws, and the business or corporation will be taxable on its income unless otherwise exempt from taxation under another provision of the Income Tax Act (the "Act").

You have indicated that you have also incorporated a society to pursue harvester/campers/organizations interests. Although we do not have sufficient information to make an actual determination, it should be noted that paragraph 149(1)(l) of the Act exempts from taxation the taxable income of "Non-profit organizations". In order for a corporation to be exempt under paragraph 149(1)(l), inter alia, it must be organized as well as operated exclusively for social welfare, civic improvement, pleasure or recreation or for any other purpose except profit and no part of its income may be payable to or otherwise available for the personal benefit of any of its members or shareholders. To establish the purpose for which a corporation was organized, the CCRA will normally look to the instruments by which it was created such as letters patent and articles of incorporation. Whether or not a corporation was operated for such purposes is a question of fact that can only be determined retrospectively based on a review of its operations in the period concerned.

We trust our comments will be of assistance to you.

Yours truly,

Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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