Vol. 149, No. 12 — June 17, 2015

Registration

SI/2015-45 June 17, 2015

FINANCIAL ADMINISTRATION ACT

Remission Order in Respect of a Transfer of a Sahtu Dene and Metis Settlement Corporation’s Assets under a Self-Government Agreement

P.C. 2015-637 May 28, 2015

His Excellency the Governor General in Council, considering that it is in the public interest to do so, on the recommendation of the Minister of Finance, pursuant to section 23 (see footnote a) of the Financial Administration Act (see footnote b), makes the annexed Remission Order in Respect of a Transfer of a Sahtu Dene and Metis Settlement Corporation’s Assets under a Self-Government Agreement.

REMISSION ORDER IN RESPECT OF A TRANSFER OF A SAHTU DENE AND METIS SETTLEMENT CORPORATION’S ASSETS UNDER A SELF-GOVERNMENT AGREEMENT

INTERPRETATION

Definitions

1. (1) The following definitions apply in this Order.

“Act”
« Loi »

“Act” means the Income Tax Act.

“Sahtu Dene and Metis Comprehensive Land Claim Agreement”
« Entente sur la revendication territoriale globale des Dénés et Métis du Sahtu »

“Sahtu Dene and Metis Comprehensive Land Claim Agreement” means the Comprehensive Land Claim Agreement entered into by Her Majesty the Queen in right of Canada and the Sahtu Dene and Metis, as represented by the Sahtu Tribal Council, signed on September 6, 1993, as amended from time to time.

“Sahtu Dene and Metis First Nation Government”
« gouvernement de la première nation des Dénés et Métis du Sahtu »

“Sahtu Dene and Metis First Nation Government” has the meaning assigned by 2.1 of Appendix B of the Sahtu Dene and Metis Comprehensive Land Claim Agreement.

“self-government agreement”
« entente sur l’autonomie gouvernementale »

“self-government agreement” has the meaning assigned by 2.1 of Appendix B of the Sahtu Dene and Metis Comprehensive Land Claim Agreement.

“settlement corporation”
« société de gestion des indemnité »

“settlement corporation” has the meaning assigned by 11.3.1 of the Sahtu Dene and Metis Comprehensive Land Claim Agreement.

Application of meanings in Act

(2) Any word or expression used in this Order and not defined in subsection (1) has the same meaning as in the Act.

REMISSION

Remission

2. Remission is granted of

CONDITIONS

Conditions

3. Remission is granted of an amount under this Order to a person on condition that

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

To make the annexed Remission Order in Respect of a Transfer of a Sahtu Dene and Metis Settlement Corporation’s Assets under a Self-Government Agreement.

Objective

The objective of the Order is to enable a settlement corporation within the meaning of the Sahtu Dene and Metis Comprehensive Land Claim Agreement to cease to exist and all of its assets to be transferred to a Sahtu Dene and Metis First Nation Government under the self-government agreement that creates the Sahtu Dene and Metis First Nation Government, without tax implications.

Background

Canada and the Sahtu Dene and Metis entered into the Sahtu Dene and Metis Comprehensive Land Claim Agreement in 1993. Under the Sahtu Dene and Metis Comprehensive Land Claim Agreement, the Sahtu Dene and Metis received title to lands, financial payments, confirmation of harvesting rights, and guaranteed participation in specified land and resource management regimes. The Sahtu Dene and Metis Comprehensive Land Claim Agreement provides for rights to be exercised by and responsibilities to be performed by organizations referred to as “designated Sahtu organizations.”

Under the Sahtu Dene and Metis Comprehensive Land Claim Agreement, a “settlement corporation” is a corporation that, among other things, is a designated Sahtu organization, has received no contributions of capital other than financial payments under the Sahtu Dene and Metis Comprehensive Land Claim Agreement, devotes all or substantially all of its resources to making permitted investments and carrying out permitted activities, has filed an election with the Minister of National Revenue to be a “settlement corporation” and has not had its status as a “settlement corporation” terminated.

Under chapter 11 of the Sahtu Dene and Metis Comprehensive Land Claim Agreement, a settlement corporation is exempt from federal and territorial income tax except as provided in that chapter. Under chapter 11, a settlement corporation is liable to pay federal and territorial income tax in certain circumstances. For example, it is liable to pay federal and territorial tax on any income it derives from a property that is not a permitted investment or acquired in the course of carrying on a permitted activity. It is also liable to pay federal and territorial tax in respect of any payment it makes that is not a permitted investment or made in the course of carrying on a permitted activity. In addition, if the settlement corporation commences to be wound-up, it is liable to pay federal and territorial income tax on the amount distributed on the winding-up, less the aggregate of the amount disbursed or expended in the course of the winding-up on its permitted activities, all amounts that may reasonably be considered to be original contributed capital and that are transferred to a designated settlement corporation or to another settlement corporation, and all other amounts transferred to another settlement corporation.

The Sahtu Dene and Metis Comprehensive Land Claim Agreement also provides for the negotiation of self-government agreements between Canada and the Government of the Northwest Territories and each of the five Sahtu Dene and Metis communities (Colville Lake, Déline, Fort Good Hope, Norman Wells and Tulita).

On February 18, 2015, Canada, the Government of the Northwest Territories and the Sahtu Dene and Metis of Déline signed the Déline Final Self-Government Agreement. The Déline Final Self-Government Agreement provides that, on the effective date of that agreement, the Déline Financial Corporation (a settlement corporation) will cease to exist and all of its claims, rights, titles, interests, assets, obligations and liabilities will vest in the Déline Got’ine Government (the government to be created by the Déline Final Self-Government Agreement).

The Déline Final Self-Government Agreement provides that a transfer of assets to the Déline Got’ine Government under the Déline Final Self-Government Agreement is not taxable. However, due to the conflict rules in the Sahtu Dene and Metis Comprehensive Land Claim Agreement, in the case of a conflict, the provisions of the Sahtu Dene and Metis Comprehensive Land Claim Agreement in respect of the taxation of settlement corporations would prevail over the provision of the Déline Final Self-Government Agreement providing that no transfer of assets to the Déline Got’ine Government under the Déline Final Self- Government Agreement is taxable.

The purpose of the Order is to ensure that the proposed transfer of assets by the Déline Financial Corporation to the Déline Got’ine Government under the Déline Final Self-Government Agreement, and any similar transfer of assets by a settlement corporation to a Sahtu Dene and Metis First Nation Government under a Sahtu Dene and Metis self-government agreement with another Sahtu Dene and Metis community, will not result in an obligation to pay income tax. The rationale for relieving the tax in these circumstances is two-fold. First, the tax provisions of the Sahtu Dene and Metis Comprehensive Land Claim Agreement were not intended to apply to a transfer under a self-government agreement. Second, it is in the public interest to enable the parties to determine the government structure on efficiency and other grounds, rather than tax considerations.

Implications

The Order remits the income tax payable, and any related penalties and interest, in respect of a settlement corporation ceasing to exist and all of its assets vesting in a Sahtu Dene and Metis First Nation Government under a self-government agreement. As a result, the Order permits the parties to a self-government negotiation to determine the most appropriate government structure based on efficiency and other grounds, rather than based on tax considerations. The cost of the Order is estimated to be nil because it is not expected that the parties to a self-government agreement would agree on the merger of a settlement corporation and a new government body created by the self-government agreement in the absence of the Order.

Consultation

The Government of the Northwest Territories and the Sahtu Secretariat Incorporated, which represents the Sahtu Dene and Metis, were consulted in relation to the proposal.

Departmental contact

For more information, please contact

Sara Gill
Senior Tax Policy Officer
Tax Policy Branch
Department of Finance
Telephone: 613-369-3808