Canadians like to think of themselves as both
internationally-minded people and as coming from a tradition of
humanitarian action. However, few stop to ask why global charities
are never headquartered in Canada. There is no major international
charity with affiliated entities around the world that is
headquartered in Canada. This is not because Canada would not be a
good site for such a headquarters entity but rather because the
Canadian tax system makes the sensible running of an international
charity headquarters impossible. Perversely, Canada's strict
rules, which are designed and applied so as to prevent Canadian
funds from being used outside Canada, have the effect of reducing
economic activity in Canada.
We have been approached more than once by existing international
charities considering locating the international headquarters in
Canada because Canada has better geopolitical optics for some kinds
of charitable endeavours than some of the other international
headquarters jurisdictions like the U.S. or the U.K. We also advise
successful Canadian charities with international aspirations on how
they might structure themselves. Our advice is usually the same:
"Canada is an inhospitable regulatory environment for global
operations– here are the names of some charity lawyers in
more appropriate jurisdictions."
If a global charity had a Canadian headquarters entity, it would
almost certainly need to have the entity be a Canadian registered
charity. However, as a Canadian registered charity, the
headquarters entity would be subject to the Canadian system that
makes the transfer by gift of funds to a foreign charity illegal.
While this restriction can be complied with in the context of a
Canadian charity funding specific projects through various
mechanisms like joint venture agreements, agency agreements or
service contracts that deem the funding of a foreign charity's
activity to be the Canadian charity's own charitable activity
rather than a gift to the foreign charity, none of these mechanisms
are flexible enough to allow a Canadian charity to serve as a
Any sophisticated international charity network needs to be able
to transfer funds and other property such as intellectual property
among its constituent entities and through its international
headquarters entity. Global charities usually also perform back
office functions for constituent charities, often without charge. A
Canadian charity doing any of these usual and sensible things risks
revocation of charitable registration, accompanied by the penalty
tax of 100 percent of assets.
This is why, even though Canadians have been part of the
founding groups of a number of global charities and there are
Canadians in the senior leadership of others, global headquarters
are virtually never located in Canada. If global charities were
allowed to have Canadian headquarters, one would expect that this
would lead to increased economic activity in Canada.
A version of this article appears in Canadian Not-for-Profit
News, January 2015, Volume 23, No.1.
The content of this article is intended to provide a general
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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