| 19(1) | File No. 5-8750 |
| G. Thornley | |
| (613) 957-2101 | |
| November 24, 1989 |
Dear Sirs:
Re: Indian Fishermen
This is in reply to your letter of September 26, 1989 requesting a technical interpretation of paragraph 81(1)(a) of the Income Tax Act (the "Act") as it applies to 24(1).
Our Comments
The personal property of an Indian situated on a reserve is exempt from taxation and no Indian is subject to taxation in respect of any such property pursuant to paragraph 81(1)(a) of the Act and section 83 of the Indian Act.
While the exemption in the Indian Act refers to `property' and the tax imposed under the Act is a tax calculated on the income of a person rather than a tax in respect of his property, it is considered that the intention of the Indian Act is not to tax Indians on income earned on a reserve.
Thus in our view, income of a self-employed Indian whose place of business is in his home on the reserve is not taxable. In this respect, however, it is a question of fact whether a fisherman's principal place of business is his home or his boat.
In deciding a fisherman's principal place of business, the following criteria may be considered:
- location of the office (where is the business carried on),
- where books and records are kept,
- where transactions with customers and suppliers are arranged,
- where employees report to work,
- where inventory and supplies are located , and
- where the tools of the trade are kept.
Although such a determination can only be made after an examination of all the facts and consideration of the above criteria it would appear based on the limited information provided that the Indian in your fact situation had his principal place of business in his home.
Taxable capital gains and `excess' income, as that term is defined in subsection 14(1) of the Act, are includable in income. Therefore both would also be exempt when included in income by a self- employed Indian in the circumstances of your example.
We trust the foregoing comments will be of assistance to you. However, our comments are an expression of our opinion and do not constitute an advance income tax ruling. Accordingly, they are not binding on the Department.
Yours truly,
for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch