Indigenous Business Tax + Resources FAQs
At Ask-Her® Tax, we recognize that navigating taxes, business structure, financing and CRA requirements can feel especially complex for Indigenous business owners. The relationship between the Indian Act and CRA requirements can raise questions around incorporation, GST/HST, tax-exempt income, funding, financing and filing obligations. This FAQ provides clear, plain-language guidance to help Indigenous entrepreneurs better understand how these rules and resources may apply to their business.
Tax Basics + Filing
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No. In the eyes of the CRA, a corporation is a separate legal person and does not have "Indian Status," even if it is 100% owned by a Status Indian. This means the corporation must file a T2 Corporate Income Tax Return and pay corporate taxes on its profits. The Section 87 tax exemption only applies to individuals and Bands, not to corporations.
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You generally need to register for GST/HST when your worldwide revenues from taxable supplies exceed $30,000 in a single calendar quarter or over four consecutive calendar quarters.
When calculating this threshold, qualifying on-reserve sales made to registered Indians, Indian bands and band-empowered entities are still included, even when GST/HST was not charged because the sale qualified for tax relief.
Different rules can apply in certain situations, so your specific business activities should be reviewed when determining when registration is required.
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Possibly. Employment income paid to a person who is registered or entitled to be registered under the Indian Act may qualify for the Section 87 tax exemption when the income is considered situated on a reserve.
CRA considers several factors, including where the employment duties are performed, where the employer is resident and where the employee lives.
If at least 90% of the employment duties are performed on a reserve, the employment income will generally be fully exempt. If less than 90% of the duties are performed on a reserve, a portion of the income may still be exempt, or another CRA employment guideline may result in the full income being exempt.
Because every employment arrangement is different, the specific facts should be reviewed before treating salary as tax-exempt.
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Because a Partnership is not a separate legal person, the income "flows through" to the partners. If you are a Status Indian and the business income is situated on a reserve, you may be able to claim the tax exemption on your share of the profits. This is a common reason why some Indigenous entrepreneurs choose Limited Partnerships (LPs) over Corporations.
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Having only income that is exempt under Section 87 of the Indian Act does not necessarily mean that you owe income tax.
However, CRA encourages individuals to file a tax return every year, even when their income is tax-exempt. Filing helps CRA determine eligibility for benefits and credits and keeps your tax information up to date.
Tax-exempt income should generally be reported using Form T90, Income Exempt From Tax Under the Indian Act, rather than being included as taxable income on your return.
Other circumstances may also require you to file a return, so your individual situation should be reviewed.
Business Structure + Tax Exemptions
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CRA uses a “connecting factors” test to determine whether business income is situated on a reserve and may qualify for the Section 87 tax exemption.
The most significant factors generally include where the income-earning activities of the business take place, the nature of the business, where management and business decisions are made, and where customers are located.
Other factors, such as where you live, maintain an office or keep your books and records, may also be considered but can carry less weight.
There is no single formula that applies to every business. If business activities take place both on and off a reserve, part of the income may be exempt while another portion may be taxable.
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Your business structure can make a significant difference in how the Section 87 tax exemption may apply.
For a sole proprietorship or self-employed business, income may qualify for the exemption when the connecting factors show that the income is situated on a reserve.
For a partnership, your share of the partnership income generally retains its source and nature, and similar connecting factors are considered when determining whether that income may be exempt.
A corporation is different. A corporation is a separate taxpayer, and Section 87 of the Indian Act does not apply to a corporation simply because it is owned or controlled by a person who is registered or entitled to be registered under the Indian Act.
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There is no single business structure that is right for every Indigenous entrepreneur.
A sole proprietorship is generally the simplest structure and may allow qualifying business income to benefit directly from the Section 87 exemption when the appropriate connections to a reserve exist.
A partnership may be appropriate when two or more people operate a business together. Each partner receives an allocated share of the partnership income, and the tax treatment of that income depends on the applicable connecting factors.
A corporation can offer benefits such as limited liability, easier ownership changes and additional options for growth and reinvestment. However, a corporation is a separate taxpayer and does not receive the Section 87 exemption simply because its shareholders are Indigenous.
The best structure should consider taxation, liability, financing, ownership and your long-term plans for the business.
Compensation + CPP
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If your employment income is exempt from income tax under the Indian Act, it is generally excluded from pensionable employment for Canada Pension Plan purposes.
However, an employer may elect to provide CPP coverage for eligible employees, and an employee may also be able to elect to participate when certain conditions are met.
For self-employment on a reserve, exempt self-employment income is generally excluded from contributory earnings, although a self-employed individual may choose to participate in CPP if the applicable requirements are met.
Because CPP participation can affect future retirement and disability benefits, it is worth reviewing the long-term impact before making a decision.
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They may be tax-exempt, but not simply because the shareholder has Indian Status.
CRA states that dividends received from a corporation that operates only on a reserve may qualify for the Section 87 exemption when the corporation’s head office, management and principal income-generating activities are situated on a reserve.
If the corporation has significant activities or connections off-reserve, the tax treatment may be different.
The specific facts should be reviewed before treating dividend income as exempt.
Financing + Indigenous Business Funding
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Section 89 of the Indian Act provides important protections for certain property situated on a reserve. In general, reserve property belonging to an Indian or a band cannot be mortgaged, pledged or seized by a non-Indian lender in the same way as conventional off-reserve property.
While these protections are important, they can also make conventional financing more complicated because a lender may not be able to use certain on-reserve assets as traditional collateral.
This does not mean financing is unavailable. Indigenous Financial Institutions and lenders experienced in Indigenous business financing may use different security arrangements, guarantees or lending criteria to help overcome these barriers.
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Organizations traditionally known as Aboriginal Financial Institutions, and now commonly referred to as Indigenous Financial Institutions (IFIs), provide financing specifically for First Nations, Métis and Inuit entrepreneurs and businesses.
Depending on the institution, program and applicant, support may include business loans, start-up financing, non-repayable contributions, business planning assistance, training and ongoing advisory support.
Eligibility, contribution amounts and financing terms vary by program and region, so the best starting point is usually the Indigenous Financial Institution serving your area. NACCA represents a network of more than 50 IFIs across Canada.
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Item descriptionA lack of conventional collateral does not necessarily mean you cannot finance your business.
Indigenous entrepreneurs may have access to Indigenous Financial Institutions that are specifically designed to address financing gaps that can make borrowing through a traditional bank more difficult. Depending on the lender and the business, financing may consider factors such as cash flow, business viability, equipment, contracts, guarantees or other forms of security rather than relying entirely on real estate.
A strong business plan, realistic financial projections, good records and a clear explanation of how the funds will be used can also strengthen an application.
Exploring an IFI alongside conventional lenders can often provide more options.
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Funding opportunities vary significantly by First Nation and region.
Some First Nations have their own economic development corporations, community trusts, entrepreneurship programs, business development funds or lending initiatives. Additional support may be available through Tribal Councils, Indigenous Financial Institutions and provincial or regional Indigenous economic development programs.
Because these programs can change and may have specific membership, residency, ownership or project requirements, it is important to check directly with your Nation’s administration or economic development office and the Indigenous Financial Institution serving your region.
There may also be opportunities to combine community funding with loans or non-repayable contributions from other Indigenous entrepreneurship programs.
Every situation is unique, so if your question is not answered here, we would be happy to talk with you directly and help you find the clarity you need.
Our Location
We're located in the scenic countryside of Mountain View County, on Treaty 7 lands, just outside of Olds, AB. This beautiful setting inspires us to connect with our clients on a personal level, creating an environment where conversations about finances feel open and approachable.
However, we do understand that visiting in person isn’t always convenient, which is why we proudly serve clients across Alberta through phone consultations as well.
Office Location & Mailing Address
Ask-Her® Tax + Bookkeeping Inc.
2102 Township Road 332
Mountain View County, AB. T4H 4H8
Operating Hours
Monday: 9am - 3pm
Tuesday: 9am - 3pm
Wednesday: 9am - 3pm
Thursday: 9am - 3pm
Friday: Closed
Saturday: Closed
Sunday: Closed
Contact Info.
shelilia@askhertax.ca