Aboriginal Taxation: Reasonableness Of Bonuses

Bell v. The Queen 2016 TCC 175 is a Tax Court of Canada decision regarding whether employment bonuses paid to a status Indian by a corporation situated on a reserve were exempt from tax. The Court held that the bonuses were not sufficiently connected to the reserve because they were unreasonable in relation to the employment duties performed.

The case is particularly interesting because it appears to have been quite narrowly decided, and while the specific decision was unfavourable to the taxpayer, it provides insight into how status Indians in similar situations might structure their affairs. 

Background

The taxpayer, a status Indian, owned 51% of a corporation ("Reel Steel") that maintained its office and storage facilities on a reserve in British Columbia, but completed all of its work off the reserve. Reel Steel was a construction company that specialized in placing rebar. The taxpayer was the sole director, the President, and an employee of Reel Steel who