Business Development Indirect Tax Opportunities for Aboriginals. February 2015

Transcription

1 Business Development Indirect Tax Opportunities for Aboriginals February 2015

2 With you today. Heather Weber, Indirect Tax National Leader Angela Chang, Indirect Tax Senior Manager

3 Agenda What Indirect Taxes Are Impact of Indirect Taxes Refund Opportunities Business Planning

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5 What Indirect Taxes Are

6 What is Indirect Tax? GST/HST PST in various provinces (including hotel room tax, liquor tax) Federal Excise Tax Property Transfer Tax Motor Fuel Tax

7 Exemptions Exemptions to Indians or Indian Bands are offered through the Indian Act (section 87) The Indian Act overrides other legislations (e.g. Excise Tax Act, Provincial Sales Tax Act, Motor Fuel Tax Act, etc)

8 Exemptions GST/HST exemptions offered to Indians, Indian Bands, and Band Empowered Entities Provincial tax exemptions offered to Indians and Indian Bands, but not Band Empowered Entities

9 General Rules Aboriginal bands don t generally pay GST/HST on purchases made on reserves for band management activities Certain off-reserve purchases are eligible for a rebate (hotel accommodations, travel, meals, etc.) Ontario provides a point of sale rebate for GST/HST on off-reserve purchases for band management activities.

10 General Rules (cont d) Any commercial activities would be treated like a regular business whether it is located on reserve or not First Nation trusts are treated like regular trusts with no special exemption

11 General Rules (cont d) PST exemptions in BC, Saskatchewan and Manitoba for purchases on reserve Partnerships with First Nation band partners may receive special PST Treatment Property Transfer Tax applies on purchase of land even if land is later added to the reserve. Motor fuel tax exemption available

12 Impact of Indirect Taxes

13 Impact of Indirect Taxes Increased costs Increased complexity Less competitive Reduced funding and resources

14 Impact Increased Cost Increased Cost Bands are entitled to recover some of the GST/HST they pay for activities related to band management. 50% on most off-reserve purchases 100% on travel related costs (hotel, transportation, meals) Where rebates are not applied for, or are filed incorrectly, it becomes a cost to the band and to the members

15 Impact Increased Complexity Different tax implications can arise doing business in a different province. When equipment is moved even on a temporary basis to one of the PST provinces there will be a tax application.

16 Impact Increased Complexity Goods and services provided in a different province may be subject to a different tax rate. Purchases made from outside of a PST province for use in a PST province may require tax to be self assessed.

17 Impact - Less Competitive Aboriginals are involved in all sorts of business ventures. If the indirect taxes are not handled correctly they will have a big impact on the bottom line. The GST/HST applies to most transactions and when it is considered up front the costs can be managed.

18 Example Construction Construction project off reserve a Band is involved in a construction business venture the Band is carrying on commercial activities should be registered for GST to be able to recover the GST paid on all purchases be responsible for collecting tax from its customer and remitting the tax to CRA be responsible for filing regular GST returns

19 Example Construction (cont d) Construction project off reserve purchase gravel and cement for the project and pay PST because delivery is off reserve OR For example in BC a band could ask supplier to deliver gravel and cement on reserve to get PST exemption, but then have to arrange for transportation which would add extra costs.

20 Example Trust Set up a Trust to manage funds Trust is set up on reserve The only beneficiary is the Band and/or its members Trustees are Band members

21 Example Trust (cont d) Set up a Trust to manage funds The Trust is not considered to be a Band Empowered Entity Trust must pay GST/HST on investment management fees, trustee fees, etc No input tax credits, and no rebates of the GST/HST paid

22 Example Not Paying Tax Company operates a business next to a reserve Registered for GST and PST Aboriginal Shareholder acquired all materials and supplies for business personally on a reserve and tax was not paid. Goods were then transferred to the Company. The Company was not charged tax. Reassessments cover more than four years.

23 Example Not Remitting Tax Status Indian person provides consulting services from his home on reserve Charges consulting fee to off-reserve businesses Invoices note GST-included $50,000 consulting fee includes $2,380 of GST GST not remitted to CRA Over a 4-year period, close to $10,000 of GST owing

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25 Refund Opportunities

26 Funding and Resources There are resources and sources of funding available depending on the operations Rebates Municipal Determination Qualified Donee Status

27 Rebates Rebates Where a band qualifies they can claim back a rebate of 50% of all GST/HST paid on band management activities 100% rebate available for travel costs incurred off reserve related to band management activities Tax paid in error rebate for on reserve purchases where tax was paid

28 Rebates Rebate challenges Having a proper system in place to track the tax paid and to support your documentation Code 1 Code 8 Public Service Body Rebate Documentation supporting tax paid Documentation supporting where goods or services are delivered

29 Municipal Determination Municipal Determination for GST purposes only for Bands providing services similar to a municipality such as housing, road maintenance, education, health care, policing, firefighting, etc. rebate of 100% of the GST paid on activities related to the municipal activities

30 Qualified Donee Status Qualified Donee Status an Income Tax application that can be made for certain bands to allow them to continue to issue donation receipts can be important for receiving funding and a donation receipt can be a good incentive for donors

31 Business Opportunities

32 Business Opportunities Various business structures can be used when starting a project to obtain the most beneficial results. With careful planning the impact of the GST and PST can be controlled and not end up being a surprise cost.

33 Structures Structures make a difference A corporation incorporated by a Band is not given any special tax considerations A partnership with a Band as a partner is given special considerations Tax is not the only factor in the structuring decisions

34 Opportunity Example Using a Partnership with a band as a partner allows the Partnership to acquire goods on a reserve exempt of PST.

35 Other Planning Opportunities As Bands are involved in many different ventures it is important to review all of them to ensure that all tax opportunities and issues are reviewed.

36 QUESTIONS?

37 Contact Information Heather Weber Phone: Angela Chang Phone: