Guidelines on Flowing Charitable Funds Overseas

Carl JuneauDirector of Policy and CommunicationsCharities DirectorateCanada Customs and Revenue Agency

Outline

• What rules govern the use of charitable funds abroad?• What are “qualified donees”?• Why are there rules?• How can a charity do charitable work abroad?

– On its own– Through intermediaries

• What are the key elements of an agreement between a charity and an intermediary organization?

– Jointly with others• What principles should drive charities interested in overseas

work?

What rules govern the use of charitable funds abroad?

• A charity interested in overseas work can either be involved itself in the work (includes work through agents, contractors or other intermediaries where the charity still retains responsibility), or it can send funds to “qualified donees”

• Reference: Registered Charities: Operating Outside Canada – RC4106• Web-site address: www.ccra-adrc.gc.ca

What are “qualified donees”?

• Other registered charities (see searchable list on the CCRA web-site)

• The United Nations or an agency thereof• A Prescribed University outside Canada (see schedule VIII of the

Income Tax Regulations)• Information Circular IC 84-3R5, Gifts to Certain Charitable

Organizations Outside Canada – attachment (on the CCRA web-site)

• Other donees listed in s. 118.1 of the Income Tax Act

Why are there rules?

• To safeguard donations from Canadians• To protect the fisc• To make someone responsible in Canada for the

proper use of donated funds

How can a charity do charitable work abroad?

• On its own• Through intermediaries• Jointly with others

How can a charity operate abroad on its own?

• Have employees in the field, i.e., paid or volunteer workers who are answerable directly to the charity and under the charity’s control and supervision

How can a charity operate abroad through intermediaries?

• Use an agent• Use a contractor

What are the key elements of an agreement between a charity and an intermediary

organization?

• …

How can a charity operate abroad jointly with others?

•

What principle should drive charities interested in overseas work?

• Due diligence:– a measure of prudence, activity or persistence as is

properly expected from and as is ordinarily exercised by a reasonable and prudent person, under the particular circumstances.

– not measured by a fixed standard but depends on the relative facts of each case.

• Simply applying due diligence does not entitle the charity to circumvent the rules