For the public benefit
As was pointed out in a recent OECD study,[1] there is a preoccupation among charity and tax regulators worldwide, when providing domestic tax relief in relation to international philanthropy, to oblige sufficient oversight through strong documentation requirements when regulating cross-border activity of domestic public benefit organisations and charities.
This article will briefly review recent changes in Canada (through 2022 legislation and 2023 government guidance) that try to address these documentation requirements and will focus on an aspect that has attracted less attention, namely legitimate asset-protection steps that can be considered by Canadian charities operating internationally.[2] This will likely provide important food for thought when approaching this issue in other jurisdictions.
Changes to the Income Tax Act (the Act),[3] enacted by the 2022 Budget Bill No. 1, effective 22 June 2022 (the Bill), and related guidance from the Canadian charities regulator, the Canada Revenue Agency (the CRA), specifically the CRA’s December 2023 guidance, Registered charities making grants to non-qualified donees (the Guidance), appear to underline for both large and small charities that basic asset protection, also called creditor protection, should be available to them if operating through more than one entity, particularly, it appears, when use is made of new rules relating to qualifying disbursements through grants to non-qualified donees (to non-charities, essentially).
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