April 2020 Charity & NFP Law Update

Terrance S. Carter and Theresa L.M. Man


Direction and Control: Current Regime and Alternatives

For many years, the charitable sector has pointed out that the Canadian regulatory regime has made it extremely difficult for registered charities to engage in international charitable work or work in Canada with non-qualified donees. To do so, charities are required to structure the activities in a cumbersome, contorted manner in order to fit within the Canada Revenue Agency’s (“CRA”) interpretation of the “own activities” test in the Income Tax Act (“ITA”) and the CRA’s policy requiring charities to exercise direction and control over those activities. The Canadian regulatory regime in this regard is unique when compared to other jurisdictions globally in that it is the most onerous and at times impractical to comply with. This difficulty is compounded with uncertainty concerning what charities are required to do in order to comply with these requirements. Although the CRA’s policies differ in some manner in relation to what charities are required to do in order to comply with the requirements and what they are recommended to do, not implementing the recommended mechanisms often lead to problematic outcomes on CRA audits.

This paper was written for and published by The Pemsel Case Foundation, and reviews the current direction and control regime, and explores potential new approaches to regulatory oversight in this area by proposing changes to the legislation and the CRA’s polices. For the balance of this paper, please see Direction and Control: Current Regime and Alternatives.


Read the April 2020 Charity & NFP Law Update

Direction and Control: Current Regime and Alternatives
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