If you live in Canada, you might have heard of First Nations, but do you know how they relate to taxes? First Nations is a term used to describe the indigenous people of Canada. They have a unique relationship with the Canadian government, which also affects how they pay taxes.
In this blog post, we will explore everything you need to know about First Nations and taxes, including their tax exemptions and what types of taxes they pay.
Tax Exemptions for First Nations
One of the unique features of First Nations is that they have certain tax exemptions. These exemptions are based on their historical treaties with the Canadian government. They are also recognized in Section 87 of the Indian Act, which provides tax exemptions for certain types of income earned on reserves.
First Nations people who live and work on reserves are generally exempt from paying federal and provincial income taxes on income earned on the reserve. This includes income from employment, self-employment, and investments. However, income earned off-reserve is still subject to income tax.
It’s important to note that not all First Nations people are eligible for tax exemptions. To be eligible, you must be registered as an Indian under the Indian Act and live on a reserve. In addition, not all types of income are exempt from taxes. For example, income from non-Indigenous sources such as rental income or capital gains from investments is not tax-exempt.
Types of Taxes First Nations Pay
While First Nations people living on reserves are exempt from some taxes, they are still required to pay other taxes. These taxes include:
- Goods and Services Tax/Harmonized Sales Tax (GST/HST) – First Nations people living on reserve are required to pay GST/HST on goods and services they purchase off-reserve.
- Property Tax – First Nations people living on reserve are exempt from paying property tax on reserve land. However, they are required to pay property tax on any off-reserve properties they own.
- Employment Insurance (EI) – First Nations people working on reserve are exempt from paying EI premiums. However, they are still eligible for EI benefits.
- Canada Pension Plan (CPP) – First Nations people working on reserve are required to contribute to the CPP. However, they are exempt from contributing to the Quebec Pension Plan (QPP).
Conclusion
In conclusion, First Nations people have a unique relationship with the Canadian government when it comes to taxes. They are exempt from some taxes, but not all. Income earned on reserves is generally tax-exempt, but income earned off-reserve is still subject to income tax. It’s important to note that not all First Nations people are eligible for tax exemptions, and not all types of income are tax-exempt.
If you have any questions about First Nations and taxes, it’s best to consult with a tax professional who has experience working with First Nations clients. They can help you navigate the complex tax rules and ensure that you are in compliance with all applicable tax laws.