How Canadian Charities Operate Outside the Shores Of Canada

While there might be no prizes for guessing that charities in Canada are regulated by — you got it —the Canada Revenue Agency (CRA), it’s easy to let slip of the fact that these same guys at the CRA are responsible for registering charities and enforcing strict compliance with the requirements of the Income Tax and Common Law. 

For one reason or another, a charity might desire to spread its operation beyond the Canadian border. So, if it’s your charity organization we’re writing about, then congratulations! It’s absolutely doable.

The Income Tax Act recognizes the right of Canadian charity operations outside and within Canada. These charity operations, though, may only be carried out via two mediums:

• Charity operations must be carried out through staff or an intermediary. This means that the people selected to work for the charity abroad must be either its bonafide employees or its agents.
  

• It can only give gifts to qualified donees. Qualified donees are organizations that can, under the Income Tax Act of Canada, issue receipts for donations received by them. And usually, foreign charities and NGOs do not fall in this category, and so are not     regarded as qualified donees. So you might wanna strike that one out As a result, Canadian charities cannot transfer funds or assets to them except this transfer or donation is to further the activities of the donor charity. Registered charities are also not qualified donees according to the law.

If you’re trying to spread the tentacles of your Charity operations beyond Canadian borders, then you should gear up for a few hurdles along the way, and a willingness to commit to substantial ongoing efforts. 

Particularly, your charity must pass the public benefit test. This test serves to ensure that the charitable activities performed by your charity must also be seen as charitable in the foreign country. 

The courts have pronounced severally that some activities, though charitable in Canada, may not be charitable when carried out in a different country. For example, it is charitable to increase the effectiveness and efficiency of Canada’s armed forces, but it’s not exactly charitable to support the armed forces of another country.

And because when you’re in Rome, you should behave like Romans, your charity must also be cautious of the enforcement of the local laws of the foreign country and ensure that your charity operations are not contrary to these laws.

A Canadian charity does not necessarily need to set up shop abroad before it can be said to operate abroad. There’re instances of structured arrangements where a Canadian charity can operate abroad, even though resident in Canada. They include:

• When the employees or volunteers of the charity work abroad. This way, there'll be no transfer of funds to any foreign organization. Any transfer that takes place will be regarded as having been done in-house.
• When an agent or agent company works on behalf of the charity abroad. A Canadian charity is allowed to transfer funds or     assets to another qualified donee to serve the charity’s charitable purposes. For instance, a charity might be interested in donating to a cause outside the country but may lack experience in foreign operations to do that. In this case, a legal agreement’ll only be necessary when the donor charity decides to restrict the donation to a particular location, or a specific cause.
• When the charity enters an agreement with a foreign charity and both parties pool resources together in a joint account — to work together, and achieve certain charitable goals. It’s called a Joint Venture Agreement.
• When the charity enters into a co-operation agreement with another individual, group or entity to work together on a project or objective that both parties have agreed upon. This agreement is usually legally binding, and it’s called a Cooperative Participant Agreement.
• When the charity contracts an Independent Contractor or an intermediary. Intermediaries are useful for resources that a charity cannot otherwise provide, like particular skills, experience, or knowledge of a region.

Before the charity works with the intermediary, though, it must ensure that the intermediary can carry out the charity’s operations and that it would use the charity’s resources as directed by the charity.

When a charity transfers resources to its intermediary, it must direct and control the use of those resources, and this must be properly documented so the Canada Revenue Agency (CRA) can verify that all of the resources that have been used to carryout charity operation.

Summarily, it has to show that it has direction and control over the use of these resources.  

Parting thoughts

To learn more about other ways in which a Canadian charity can operate on foreign lands, there’s a directory on foreign activities you might want to surf. 

Meanwhile, before a charity organization begins carrying out its activities outside Canada, the CRA recommends that it considers working with a charity or other qualified donee that has this type of experience.

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