Information for Indians

We want you to be aware of tax benefits and requirements that apply to you as an Indian under the Canadian Indian Act. On these pages, you will find general information on income tax, the goods and services tax/harmonized sales tax (GST/HST) and excise tax. There may be exceptions to the information we have provided here, and we have not dealt with all situations.

Note

We recognize that many First Nations people in Canada prefer not to describe themselves as Indians. However, we use the term Indian because it has a legal meaning in the Indian Act.

Important notice

If you are entitled to be registered as an Indian under Bill C-3 (also known as the Gender Equity in Indian Registration Act), you may qualify for the Indian Act tax exemption for property situated on a reserve starting on January 31, 2011. This is the date that Bill C-3 came into effect.

Only income you earn, or purchases you make on or after January 31, 2011, may be exempt from tax.

If you are entitled to be registered as an Indian because of the creation of the Qalipu Mi'kmaq First Nation Band, then you may qualify for the Indian Act tax exemption for property situated on a reserve starting on September 22, 2011.

Only income you earn, or purchases you make on or after September 22, 2011, may be exempt from tax.

Proof of registration with Aboriginal Affairs and Northern Development Canada (AANDC) is necessary to claim the tax exemption. For general information about Bill C-3, including how to register as an Indian with AANDC, please visit the AANDC Web site.

Overview

As an Indian, you are subject to the same tax rules as other Canadian residents unless your income is eligible for the tax exemption under section 87 of the Indian Act. That exemption applies to the income of an Indian that is earned on a reserve or that is considered to be earned on a reserve, as well as to goods bought on, or delivered to, a reserve.

Benoit legal decision

On June 11, 2003, the Federal Court of Appeal ruled that Treaty 8 does not provide a general tax exemption.

Refer to the Federal Court of Appeal reasons for judgment in the Benoit case.

Mr. Benoit and the Treaty 8 plaintiffs subsequently filed an application for leave to appeal the decision to the Supreme Court of Canada. On April 29, 2004, the Supreme Court of Canada dismissed the application for leave to appeal. The Court of Appeal's decision is now valid and binding.

While it is now clear that Treaty 8 Indians are not entitled to a general tax exemption, if the property of a Treaty 8 Indian is situated on a reserve, it continues to be eligible for the tax exemption under section 87 of the Indian Act.

Self-governing agreements

If you are a member of a First Nations group that has negotiated a self-governing or tax agreement with the Government of Canada, the information on these pages may not apply to you. To find out, contact your First Nations government.

For more information

If you have questions, call us toll free at 1-800-959-8281.

Tax exemption

If you have personal property-including income-situated on a reserve, that property is exempt from tax under section 87 of the Indian Act. Contact your local band office to find out if a tract of land is a reserve for purposes of this exemption. If your band is not certain about the status of the land, contact Indian and Northern Affairs Canada.

Facts

  • A tax exemption for Indian property situated on reserves has existed since before Confederation.
  • The Supreme Court of Canada has stated that this exemption is linked to the protection of reserve land and property.
  • The Court has concluded that the purpose of the exemption is to make sure tax does not erode the use of Indian property on reserves.
  • The Court has indicated that this tax exemption is not intended to remedy the economically disadvantaged position of Aboriginal people in Canada or bring economic benefits to them.

Also, based on Supreme Court decisions, Indian property not situated on a reserve will generally be subject to tax just like property held by other Canadians.

Employment income

Employment income is exempt from income tax under paragraph 81(1)(a) of the Income Tax Act and section 87 of the Indian Act only if the income is situated on a reserve. If your employment income is exempt from tax, you do not have to include that income when you file your personal income tax return. If you live in a province that provides child and family benefits which are based on family income, it may be to your advantage to report your exempt income when you file your personal income tax return in order to maximize your provincial benefit entitlements. To ensure that you retain tax-exempt status in respect of the reported amounts, you should contact us toll free at 1-800-959-8281 for instructions on how to report the amounts.

In 1992, the Supreme Court of Canada decided that all factors connecting income to a reserve must be examined in determining whether or not the income is situated on the reserve. To determine whether employment income is situated on a reserve, the courts follow the approach described in the decision called Glenn Williams v. Canada.

The Indian Act Exemption for Employment Income Guidelines will help you determine whether your employment income is considered to be situated on a reserve. The guidelines are an administrative tool and only deal with the most common employment situations. In some situations, unusual factors result in employment income being treated differently than the way the guidelines describe. In such cases, any factors connecting the income to a reserve must be analysed in accordance with the various court decisions to determine if the tax-exemption applies. If you need help, call us toll free at 1-800-959-8281.

Expenses such as union dues and registered pension plan contributions are deducted from the specific source of employment income that they relate to. The net amount of this employment income will be exempt from taxes if the employment income is considered to be situated on a reserve. Any expenses that relate to employment income that is tax-exempt cannot be claimed as deductions against other taxable sources of employment income.

Note

A number of court decisions have dealt with tax-planning arrangements using section 87 of the Indian Act. Please follow this link for a discussion of “employee leasing” arrangements.

Employment-related income

Employment Insurance benefits, Canada Pension Plan payments, Quebec Pension Plan payments, registered pension plan benefits, retiring allowances, and wage-loss replacement plan benefits you receive are treated in the same way as the employment income that gave rise to the particular income. In other words, if your employment income is exempt from income tax under section 87 of the Indian Act, your employment-related income will also be exempt. If part of your employment income is exempt, any employment-related income arising from that exempt income will also be exempt from income tax.

Business income

Your business income is generally exempt from tax if the actual income-earning activities of the business take place on a reserve. If your business is operated entirely on a reserve, your business income is connected to a reserve and is exempt under section 87 of the Indian Act. If your business activities are mostly carried on off a reserve, your business income is taxable because the exemption under section 87 does not apply.

Determining whether your business income is taxable is based on the factors that connect income to a reserve. The courts have indicated that the most significant connecting factor is the location where your business carries on its revenue-generating activities. If your actual income-earning activities take place on a reserve, the location of your customers is also an important factor. Other connecting factors, which are less important, are listed below.

Connecting factors

  • whether or not you live on a reserve
  • whether you maintain an office on a reserve or take business orders from a location on a reserve
  • whether your books and records are kept on a reserve
  • whether your administrative, clerical, or accounting activities take place on a reserve

Example 1

John is a self-employed Indian logger who lives on a reserve. He cuts timber on land off the reserve and sells it off the reserve. John's income from this business is considered to be taxable, because his income-earning activities and customers are off the reserve.

Example 2

Delia is an Indian who owns a retail store on a reserve. The store sells goods to both Indian and non-Indian customers. Since Delia's business activities take place on a reserve, her income from this business is tax-exempt.

Note

All of the connecting factors have to be considered when determining whether or not business income is connected to a reserve. If you need help, call us toll free at 1-800-959-5525.

Prorating business income and expenses

If some of your revenue-generating activities take place on a reserve and the rest off a reserve, the tax exemption under section 87 of the Indian Act may be prorated. Part of your income will therefore be taxable, and part will be exempt from tax. In such a case, your business expenses will generally be allocated to the taxable part of your income in the same ratio, unless another allocation can be shown to be more reasonable.

Example

Arnold is an Indian who works as a self-employed plumber. Arnold lives off a reserve, and operates out of an office that is located off a reserve. He earns 60% of his revenue from providing plumbing services for customers who live on a nearby reserve. As a result, 60% of Arnold's plumbing income is tax-exempt, since the income-earning activities take place on a reserve. Arnold can deduct 40% of his business expenses from the 40% of his plumbing income that is subject to tax, unless the facts indicate that it would be more reasonable to allocate his revenue and expenses differently.

Partnership

If you are a member of a partnership, your partnership income will be taxed in the same way as any other business income. For purposes of section 87 of the Indian Act, the key factor will be the location of the partnership's income-earning activities.

Under the Income Tax Act, partnership income is first calculated as if the partnership were a separate person. Your share of the partnership income from each source will be allocated to you, and will retain its characteristics as to source and nature.

If all the partnership's income-earning activities are carried out on a reserve, all your income from the partnership will be exempt from tax. If one-half of the partnership's income-earning activities are carried out on a reserve, one-half of your share of the partnership income will be exempt.

Fishing [Revised 2014-01-13]

If you carry on a commercial fishing business, your income from that business is generally treated the same as any other business income. Determining whether your business income is exempt from tax is based on the factors that connect income to a reserve.

In determining whether your commercial fishing business income is connected to a reserve, factors that may connect your business income to a reserve are (i) the location of your fishing activities – catching, preparing and transporting the fish and (ii) the location of your selling activities - including the location of your customers, and the location of the sale of the fish. Your income from a commercial fishing business is generally exempt from tax if the actual fishing activities of your business take place within the geographic boundaries of a reserve. If your fishing activities take place mainly off-reserve and your customers are located off-reserve, your fishing income may not qualify for the exemption under section 87 of the Indian Act. However, other connecting factors, described below, may apply to exempt your fishing income from tax.

On March 20, 2012, the Federal Court of Appeal (FCA) released its decisions in the cases of Ron Ballantyne v. Her Majesty the Queen and Her Majesty the Queen v. Ronald Robertson and Roger Saunders (leave to appeal to the Supreme Court of Canada denied October 25, 2012). In both cases, the FCA found that the fishing income earned by the taxpayers was situated on a reserve and exempt from tax.

The CRA will apply these decisions in similar situations, where the connections between the reserve and the fishing income are bona fide and there is no artificial manipulation of the connecting factors, to exempt all of your fishing income from tax for the 2012 and following tax years.

A similar situation means that all of the following conditions are met:

  • Your fishing activities in waters near or abutting the reserve have a significant historical and continuing important economic connection to the reserve; and
  • You are a member of a cooperative of band members or a member of a band that owns and operates an organization located on the reserve that has a predominant role in your fishing and selling activities and an important role in the general economic life of the reserve.

Where the above conditions are not met and your fishing and selling activities take place off-reserve, your income from fishing will likely be taxable. Where these activities take place both on- and off-reserve, the tax exemption provided for under section 87 of the Indian Act may be prorated. Some of the revenue-generating activities may include preparing the fish for market (e.g., filleting, shelling, icing, canning, freezing, smoking, salting, cooking, and pickling). If this type of processing takes place on a reserve, part of your business income may be exempt, depending on the extent and complexity of the processing done.

The allocation of income between off-reserve fishing activities and on-reserve fish-processing activities is determined on a case-by-case basis and should be reasonable in the circumstances. Since your main revenue-generating activities are catching and selling the fish, the exemption, if any, would usually apply only to that portion of your fishing income that specifically relates to the value-added processing activities that are conducted on a reserve. Your business expenses are generally allocated in the same proportion as your revenues, unless another allocation is more reasonable in the circumstances.

Example 1

Grant is a self-employed Indian who lives on a reserve. The fishing activities of the reserve’s Band members in ocean waters near the reserve have a significant historical role in the life of the reserve. Grant is a member of a cooperative of Band members that has a predominant role in the fishing activities on the reserve. Although he sells his catch to off-reserve customers, it is through the cooperative, whose on-reserve activities play a predominant role in the fishing activities of the Band members of the reserve. He keeps his boat and equipment on the reserve. He earns his income from fishing in the ocean waters near the reserve. Therefore, Grant’s fishing income is exempt because he meets all of the above conditions.

Example 2

Mike is a self-employed Indian fisher who does not live on-reserve. Mike fishes in waters near a reserve. Each season Mike leases his fishing license from an Indian organization that has an office on a reserve. Mike catches and prepares his fish off-reserve and stores his boat, equipment and supplies at his home off-reserve. Mike also sells his catch directly to off-reserve customers. Therefore, Mike’s fishing income is taxable because his fishing and selling activities take place off-reserve and he does not meet all of the above conditions.

Note

We will treat the income of an employee of your commercial fishing business according to the Indian Act Exemption for Employment Income Guidelines.

Farming

If you earn farming income, your income from that business is treated the same as any other business income. If your farming activities take place on a reserve, your farming income is generally tax-exempt. If your farming activities take place mainly off a reserve, you have to pay tax on your farming income.

If you are a grain, vegetable, or fruit farmer, the location of the land where your crops are grown or harvested is the most important factor in connecting your income to a reserve. If you are a cattle rancher, the location of your rangeland is the most important connecting factor. If you are involved in other types of farming, the location of your farmland may vary in importance, depending on the nature of your business and the facts of your case. For instance, if your income is from a dairy operation, the location of your milking activities is likely more important than the location of your pastures or hayfields.

If some of your revenue-generating activities from farming take place on a reserve and the rest off a reserve, the exemption may be prorated. Part of your income will therefore be taxable, and part will be exempt from tax. In such a case, your business expenses will generally be allocated to the taxable part of your income in the same ratio, unless another allocation is more reasonable.

Note

We treat the income of an employee of your farming business according to the Indian Act Exemption for Employment Income Guidelines.

Interest and investment income [Revised 2011-12-22]

If your investment income is situated on a reserve, it is exempt from tax under section 87 of the Indian Act.

On July 22, 2011, the Supreme Court of Canada (SCC) released its decisions in the cases of Estate of Rolland Bastien v. Her Majesty the Queen and Alexandre Dubé v. Her Majesty the Queen. In both cases, the SCC found that the interest income earned by the taxpayers was situated on a reserve and exempt from tax.

The CRA will apply these decisions in similar situations to exempt an Indian's interest income from tax for the 2011 and following tax years.

A similar situation means that all of the following conditions are met:

  1. you earn interest income from a savings or chequing account, or from a term deposit or guaranteed investment certificate (GIC);
  2. you opened the savings or chequing account, or obtained the term deposit or GIC, at a financial institution (including a bank branch) located on a reserve;
  3. the financial institution is required to pay the interest income to you at a location of the financial institution on a reserve; and
  4. if your investment is a term deposit or GIC, then the interest rate is fixed or can be calculated at the time you obtain the investment.

The CRA will continue to review other situations based on the facts of each case.

Dividend income

If you are a shareholder of a corporation that operates only on a reserve, any dividends you receive from the corporation will be eligible for the tax exemption under section 87 of the Indian Act. This applies when the head office, management, and principal income-generating activities of the corporation that pays your dividends are situated on a reserve.

Rental income and other income from property

If you earn income on a reserve from your reserve property, your income will be exempt under section 87 of the Indian Act. For example, if you rent out a home located on a reserve, your rental income will be exempt from tax. Generally, your income from rental property will not be taxed if the physical location of the property is on a reserve.

If you own moveable property that you store on a reserve and you rent it to someone off the reserve for use off the reserve, your rental income will be considered to be off-reserve and will be taxable. Generally, we only consider rental income to be exempt when it comes from renting out rights to occupy or use real property located on a reserve. In any other case, we would have to review all of the connecting factors.

Royalty income

The source of royalty income corresponds to the location where the underlying right is exploited or can be enforced. If you receive royalty income from an on-reserve source, your royalty income is exempt from tax.

Other income

Registered retirement savings plan (RRSP) income

If you earn exempt income only and you have contributed to an RRSP, you cannot deduct your contributions on your tax return. By the same token, any withdrawals of your original RRSP contributions will not be taxable. However, since your exempt income did not create any RRSP contribution room, you will have to pay a penalty under Part X.1 of the Income Tax Act for your non-deductible contributions to your RRSP. Any investment earnings you withdraw from the RRSP will be taxed in the same way as interest and investment income.

If you earn taxable income and contribute to an RRSP, the normal rules on claiming RRSP deductions apply to you (i.e., contributions will be deductible within the allowable limits based on earned income, and all withdrawals will be taxable).

Old Age Security (OAS) benefits

If you receive OAS payments, including the Guaranteed Income Supplement (GIS), the amounts you receive are not eligible for the tax exemption under section 87 of the Indian Act. Since OAS and GIS payments are not related to any previous employment and are not considered to have any connection to a reserve, the payments are considered to be off-reserve. The fact that you live on a reserve is not significant enough to connect the income to a reserve. Therefore, normal rules apply to these payments.

United States (U.S.) Social Security benefits

If you receive U.S. Social Security benefits, the benefits do not qualify for the exemption under section 87 of the Indian Act, even if you live on a reserve in Canada.

Pension income from the U.S.

If you receive pension income from U.S. sources, your U.S. pension does not qualify for the exemption under section 87 of the Indian Act, even if you live on a reserve in Canada. Your pension income from a U.S. source and the employment that gave rise to the pension are not connected to a reserve in Canada.

Education allowances and scholarships [Updated: 2013-04-08]

The full amount of scholarships, fellowships, or bursaries that are received by you as a student with respect to enrolment in a program that entitles you to claim the education tax credit is not taxable and is not reported as income on your tax return. This applies to all individuals. For more information regarding the education tax credit please see Income Tax Folio S1-F2-C1, Education and Textbook Tax Credits.

If you are not eligible for the education tax credit, your scholarship, bursary or fellowship may still be tax-exempt if it came from Indian and Northern Affairs Canada (INAC) (either directly or through your band) as part of INAC's Post-Secondary Education Program. This means that amounts you received from either INAC's Post-Secondary Student Support Program or its University and College Entrance Preparation Program are treated as tax-exempt. This position is under review but continues to be applied by the CRA. There is currently no requirement to issue T4A slips for these amounts.

In the event that your scholarship, bursary or fellowship income is not exempt under either of the two situations described above, only the part of the post-secondary scholarship, fellowship or bursary that is more than $500 must be reported on your income tax return.

For general tax information relevant to students, see our Students page.

For information with respect to issuing T4As for scholarships, bursaries and fellowships, please see Guide T4130.

Training allowances

Any training allowances you receive under the Employment Insurance Act or a general Government of Canada training program will be taxable, unless the training takes place on a reserve. In this case, the exemption under section 87 of the Indian Act may apply. Since each case is different, call us at
1-800-959-8281 to find out whether you should include your training allowances in your income.

Capital gains

If you disposed of property that was located on a reserve, your gain from the sale or disposition of the property is not taxable. However, if your gain is from the sale or disposition of business assets that were used to generate both exempt and non-exempt income, we consider it reasonable to prorate the exemption accordingly. Even if your gain from the sale or disposition of property may not be taxable, you have to file an income tax return. The Income Tax Act requires all individuals that dispose of capital property to file an income tax return.

Support payments

If you live on a reserve and receive support payments (for you as a spouse or common-law partner, or for a child), the payments will be exempt under section 87 of the Indian Act. If you do not live on a reserve, you may have to include such support payments in your income. For more information, call us toll free at 1-800-959-8281.

Corporations and trusts

Section 87 of the Indian Act does not apply to corporations or trusts, even if they are owned or controlled by an Indian. A corporation or trust is treated as a separate taxpayer. As such, neither would be considered an Indian for purposes of the exemption.

Trust income

Income earned by a trust is taxable. However, the trust can deduct the amounts paid or payable to its beneficiaries in the year in calculating its taxable income. The amount the trust deducts has to be included in the income of the particular beneficiaries who received a payment or who are entitled to receive a payment from the trust.

If a trust has claimed a deduction for amounts that were paid or payable to you, you have to include these amounts in your income, unless the connecting factors indicate that the trust income is located on a reserve. The primary connecting factor is the source of the trust's income, which might be business income and/or investment income depending on the particular trust involved.

Benefit programs

The Canada Child Tax Benefit (CCTB) and the GST/HST credit are two programs delivered under the Income Tax Act. The CCTB is a tax-free monthly payment made to eligible families to help them with the cost of raising children under age 18. In order to receive the CCTB, you have to apply for it and you have to file an income tax and benefit return. The GST/HST credit is a tax-free quarterly payment that helps individuals and families with low and modest incomes offset all or part of the GST or HST that they pay. In order to receive the GST/HST credit, you have to file an income tax and benefit return, and tick the "Yes" box on page one of the return. By applying for the CCTB and GST/HST credit, you may also be eligible to receive related provincial or territorial benefits and credits.

The Universal Child Care Benefit (UCCB) is a taxable benefit designed to assist Canadian families, as they seek to balance work and family life, by supporting their child care choices through direct financial support. The UCCB payment is paid on behalf of children under the age of 6 years in instalments of $100 per month per child. The enrolment for the Universal Child Care Benefit is processed through the Canada Child Benefits Application.

For more information

If you have questions regarding the CCTB or the UCCB, call us toll free at 1-800-387-1193.

If you have questions regarding the GST/HST credit, call us toll free at 1-800-959-1953.

Employer source deductions

Tax deductions at source

For general information, see Payroll. Income tax deductions at source do not apply to income that is exempt under section 87 of the Indian Act. Where it is established that employment income paid to an Indian is exempt from tax, the employee can ask his or her employer to waive the tax deductions at source. Form TD1-IN, Determination of Exemption of an Indian's Employment Income, will help employers determine the appropriate tax treatment for employees. You can get a copy of this form by completing the Online order form. Where employers determine that an Indian's employment income is exempt under section 87 of the Indian Act and they grant the waiver requested by the employee, the employers have to keep a completed copy of Form TD1-IN for each of these employees, in case we ask them to see the forms later.

If you need help, call us toll free at 1-800-959-5525.

Canada Pension Plan (CPP) contributions

Income from employment or self-employment (a business) that is exempt from tax under section 87 of the Indian Act is also exempt from CPP contributions. However, an employer can elect to participate in the CPP. See Form CPT 124, Application for Coverage of Employment of an Indian in Canada under the Canada Pension Plan. If an employer has chosen not to cover the employment under the CPP, an employee can elect to participate in the CPP by filing Form CPT 20, Election to Pay Canada Pension Plan Contributions. For information about the Quebec Pension Plan, contact the Ministère de Revenue de Quebec.

Employment Insurance (EI) premiums

EI premiums are not taxes and are not exempt under section 87 of the Indian Act. Accordingly, tax-exempt salary or wages paid to an Indian employee are subject to EI premiums. As noted earlier, EI benefits received by an Indian are not taxable if the benefits relate to employment that was exempt under section 87.

Reporting exempt income

Employers have to report on a T4 slip employment income that is exempt under section 87 of the Indian Act. On the slip, an employer will enter code "71" in the area called "Other information." However, the employee does not have to report the exempt employment income on his or her income tax and benefit return. Pensionable earnings must be reported in Box 26 of the T4 slip if an employer has elected to cover exempt employment income of an Indian under the Canada Pension Plan.

Excise duties and taxes [Updated: 2012-07-04]

Excise duties and taxes apply to certain products. The manufacturer or distributor, not the consumer, pays these taxes. The CRA administers the legislation which regulates the products to which these taxes apply. The CRA also licenses the manufacturers of these products. Although an amount equal to the tax may be included in the price, the courts have confirmed that Indian individuals are not exempt from such an indirect tax.

Federal excise duty applies to alcohol and tobacco products. The Excise Act, 2001 is the legislation that imposes excise duty on spirits, wine and tobacco products while the Excise Act governs beer. For information about licensing and paying excise duty, contact the office in your region listed in Excise Duty Memorandum 1.1.2, Regional Excise Duty Offices.

The Excise Tax Act imposes federal excise tax on motive fuel products, automotive air conditioners and certain fuel-inefficient vehicles and insurance premiums. For more information, including where to send requests for excise tax licences, see ETSL74 Notice to all Excise Tax Licensees and Tax Professionals – Excise Tax Licensing and Related Enquiries.

If an Indian, an Indian band, or a band-empowered entity wants to manufacture or produce goods that are subject to excise duty or tax, it must first apply for the proper licence or registration. Licensees or registrants must file monthly returns and pay the duty or tax that applies. The tax exemption set out in the Indian Act does not exempt an on-reserve manufacturer from paying excise duty or tax on tobacco, fuel and other products.

Example

Marc is an Indian individual who buys cigarettes and gasoline from a gas bar situated on a reserve. Marc's Indian status does not exempt him from paying the excise duty and tax amounts that are included in the retail price of the cigarettes and gas. Therefore, Marc must pay the retail price which includes excise duty and tax amounts. However, Marc will not pay the GST/HST on the cigarettes and gas if he shows his Certificate of Indian Status card to the retailer.

Goods and services tax/Harmonized sales tax (GST/HST) [Updated: 2010-10-13]

Generally, the same rules apply to the HST on goods and services sold in Nova Scotia, New Brunswick, Newfoundland and Labrador, British  Columbia, and Ontario as apply to the 5% GST on goods and services sold in the rest of Canada.

The Government of Ontario has announced that, effective September 1, 2010, point-of-sale relief equal to the 8% provincial part of the HST will be provided on eligible purchases made by qualifying First Nation purchasers. For more information, please see the "Ontario point-of-sale relief" section located below.

For information about First Nations taxes, see our guide called First Nations Tax (FNT).

General guidelines

The GST/HST does not apply to goods bought on a reserve by Indians, Indian bands, and unincorporated band-empowered entities.

Goods bought off a reserve by Indians, Indian bands, and unincorporated band-empowered entities are subject to GST/HST, unless the goods are delivered to a reserve by the vendor or the vendor's agent.

The exemption under section 87 of the Indian Act does not apply when an Indian, an Indian band, or a band-empowered entity buyer takes possession of goods off a reserve and self-delivers the goods to the reserve. However, we may waive the delivery requirement for qualifying remote stores that deal mainly with customers who are Indians, Indian bands, and band-empowered entities.

Incorporated band-empowered entities are not entitled to tax relief on goods bought on a reserve or delivered to a reserve unless the goods are purchased for band management activities.

Services

Generally, the GST/HST does not apply to services provided to Indians if the services are performed totally on a reserve (such as haircuts or small appliance repairs), or if the services are performed off a reserve and relate to real property interests located on a reserve.

Services acquired on or off a reserve by Indian bands or band-empowered entities for band management activities or for real property on a reserve are not subject to GST/HST. Exception: Indian bands or band-empowered entities will pay the tax on off-reserve purchases of transportation, short-term accommodation, meals and entertainment. However, a General Rebate application may be filed to recover the GST/HST paid on these purchases when acquired for band management activities or for real property located on reserve.

GST/HST on goods imported by Indians

The exemption under section 87 of the Indian Act does not apply to goods imported by Indians. We collect GST/HST on goods when they are imported, and as an Indian you have to pay GST/HST on the goods you import unless some other provision exempts them from tax. The goods are subject to GST/HST even when they are delivered to a reserve by the vendor's agent or Canada Post.

Administrative requirements

Buyer

To buy goods or services without paying GST/HST, you have to show the vendor proof that you are registered under the Indian Act (e.g., your Certificate of Indian Status).

Vendor

As a vendor, you have to keep adequate evidence that the sale was made to an Indian and, if applicable, delivered to a reserve. For instance, on the sales invoice you should write the registry number or band name and family number from the Certificate of Indian Status. You should also keep proof of delivery to a reserve, such as a waybill, postal receipt, freight bill, dispatch record, or mileage log.

Refund of GST/HST

When an Indian is incorrectly charged GST/HST, he or she is entitled to a refund under the general rebate program. For example, if you are an Indian and you paid GST/HST on property that you acquired off a reserve and that was delivered to the reserve by the vendor or the vendor's agent, you were incorrectly charged. To apply for a refund of the GST/HST you paid, complete Form GST189. You will have to provide proper documents to support your claim.

Sales to non-Indians

The exemption under section 87 of the Indian Act does not apply to sales or supplies made to non-Indians on a reserve. All businesses operating on reserves have to meet the general registration requirements for GST/HST, and collect and remit GST/HST on the taxable sales they make to any person who is not an Indian.

For more information, see Technical Information Bulletin B-039R, GST Administrative Policy: Application of GST to Indians.

Example 1

Joseph is an Indian who lives in Saskatoon, Saskatchewan. He buys a computer from a dealer located on a reserve in Saskatchewan and takes the computer back to his home in his own automobile. Even though Joseph lives off a reserve, he does not have to pay GST on the computer since he bought it on a reserve. After a sale, the place where the goods are used or consumed is not relevant.

Example 2

Nancy is an Indian who lives on a reserve in Nova Scotia. She buys a washing machine from a dealer located off the reserve, in Halifax. She arranged with the dealer to have the machine delivered to her. She does not have to pay HST because of the delivery rule.

Ontario Point-of-Sale Relief

Where relief of the GST/HST is not provided for under section 87 of the Indian Act or GST/HST Technical Information Bulletin B-039R, relief of the provincial part of the HST may apply as the Government of Ontario has announced that effective September 1, 2010, status Indians, Indian bands and councils of Indian bands are entitled to an exemption from paying the 8% Ontario part of the HST on qualifying property or services at point of sale. For information on qualifying property and services, who is eligible for relief, how to apply for the Ontario-administered refund for the period of July 1, 2010 to August 31, 2010, and the documentary requirements to support amounts credited to status Indian purchasers, contact the Government of Ontario at 1-866-668-8297.

As well, for GST/HST registrant suppliers who provide the Ontario First Nation Point-of-Sale Relief, GST/HST Info Sheet GI‑-106, Ontario First Nations Point-of-Sale Relief -  Reporting Requirements for GST/HST Registrant Suppliers provides additional information concerning the Ontario point-of-sale relief. There is also a videocast of this information accessible at Ontario First Nations Point-of-Sale Relief - Reporting Requirements for GST/HST Registrant Suppliers.

If you need help, call us toll free at 1-800-959-5525.

Glossary

Indian

This is defined in the Indian Act as a person who is registered as an Indian or is entitled to be registered as an Indian. Determining whether a person is entitled to be registered as an Indian is a question of fact. To grant tax benefits to you as an Indian, we need confirmation of your entitlement from Indian and Northern Affairs Canada.

Reserve

This has the meaning assigned by the Indian Act. To find out if a tract of land is a reserve under the Act, contact your band office. If your band does not have the answer, contact Indian and Northern Affairs Canada.

Vendor's agent

This includes any person (i.e., an individual, a partnership, or a corporation) under contract with the vendor to act as the vendor's agent for making deliveries. It is a question of fact and law whether a person is acting as an agent. A vendor must be able to demonstrate that the required contractual arrangement exists between him or her and the person who is delivering the goods.

Providing delivery services may be considered to be a taxable supply in the course of commercial activities in Canada. In this case, the person making deliveries as an agent of the vendor may have to register for GST/HST, as well as to charge, report, and remit the tax.