Archived - Explanatory Notes
Archived information is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.
- Income Tax Act
- Canada Acting to Improve the Regime for Donations of Medicines to the Developing World (News Release 2008-038)
Income Tax Act
Rules governing international medical charities
Section 110.1 of the Act provides for the deductibility, in computing the income of a corporation, of charitable donations and certain other gifts. New subsection 110.1(9) of the Act applies for the purpose of an "eligible medical gift" made by a corporation on or after July 1, 2008 and described in subsection 110.1(8) of the Act, in respect of an opinion made by the Minister for International Cooperation that the donee meets conditions prescribed by regulation.
Paragraph 110.1(9)(a) is introduced concurrently with the introduction of the conditions prescribed by new section 3505 of the Income Tax Regulations. Paragraph 110.1(9)(a) clarifies that nothing in paragraph 110.1(8)(b) modifies the application to a registered charity of those prescribed conditions. In particular, those prescribed conditions make reference to the requirements of the inter-agency Guidelines for Drug Donations issued by the World Health Organization ("WHO Guidelines"). The WHO Guidelines specify that donated drugs generally should have a remaining shelf-life of 12 months upon arrival in a recipient country. The application of those prescribed conditions is not modified by the reference to a six-month period in paragraph 110.1(8)(b) of the Act, which is an absolute period applicable to any eligible medical gift under subsection 110.1(8).
New paragraph 110.1(9)(b) allows that Minister to designate a period of time for which such an opinion will be valid, and to revoke an opinion previously given in respect of a registered charity if the registered charity no longer meets the prescribed conditions or any person has made any misrepresentation that is attributable to neglect, carelessness or wilful default for the purpose of obtaining that Minister’s opinion.
New paragraph 110.1(9)(c) provides that the revocation of an opinion is effective as of the time that notice in writing is issued to the registered charity.
Information may be communicated
Subsection 149.1(15) of the Act authorizes the Minister of National Revenue to communicate certain information in respect of charities, such as the prescribed information that is required to be contained in the information return for a taxation year that is mandated under subsection 149.1(14).
New paragraph 149.1(15)(d) of the Act is added concurrently with the introduction of prescribed conditions, referred to in paragraph 110.1(8)(e) of the Act, in respect of a registered charity that receives gifts of medicines for which a deduction is available to a corporation under paragraph 110.1(1)(a.1) of the Act. Upon Royal Assent, new paragraph 149.1(15)(d) provides authority to the Minister of National Revenue or the Minister for International Cooperation to make available to the public a list of registered charities in respect of which an opinion has been formed under paragraph 110.1(8)(e) or revoked under subsection 110.1(9) of the Act.
Income Tax Regulations
New section 3505 of the Income Tax Regulations sets out conditions prescribed for the purpose of paragraph 110.1(8)(e) of the Act. That paragraph generally provides that, for the purpose of an "eligible medical gift" described in subsection 110.1(8) of the Act, the gift must be made to a donee that is a registered charity that, in the opinion of the Minister for International Cooperation, meets these prescribed conditions.
New subsection 3505(1) of the Regulations sets out the following general conditions:
- The donee must have applied to that Minister for a determination that the prescribed conditions have been met.
- Medicines received by the donee for use outside Canada must either be delivered outside Canada by the donee for use in its charitable activities or transferred to another registered charity that meets the prescribed conditions. As such, if the original donee of a gift of medicines does not use those medicines in the course of its own charitable activities, a further donation of those medicines to another registered charity that meets the requirements of this section will not jeopardize the status of the original donee. The same applies if the medicines are further donated by that other registered charity.
- In the course of delivering medicines outside of Canada, the donee must act in a manner consistent with the principles and objectives of the inter-agency Guidelines for Drug Donations issued by the World Health Organization (the "WHO Guidelines").
- The donee must have sufficient expertise in delivering medicines for use in charitable activities carried on outside Canada.
- The donee must have sufficient expertise to design, implement and monitor an international development assistance program and an international humanitarian assistance program (if the donee carries on such a program).
New subsections 3505(2) and (3) of the Regulations provide for minimum criteria in respect of the conditions in subsection 3505(1). Subsection 3505(2) requires that the donee’s directors, trustees, officers or like officials approve a policy and procedural framework, under which the donee is required to act in a manner consistent with the WHO Guidelines, and that those officials declared that the donee is acting in compliance with that policy and procedural framework.
Subsection 3505(3) generally requires that the donee’s programs, for the delivery of medicines, international development assistance and international humanitarian assistance,
- address the specific and differentiated needs, interests and vulnerabilities of affected women and men, girls and boys, and
- incorporate, in the design of projects, consideration for environmental effects of those projects.
Subsection 3505(3) also requires, in the case of a program for international development assistance or international humanitarian assistance, that the donee have policies and practices with respect to monitoring, design and implementation of the program. Furthermore, in the application of the program to situations of international humanitarian crisis (resulting from either natural disaster or complex emergency), the donee must meet the requirements for eligibility to receive funding from the Humanitarian Assistance Programme of the Canadian International Development Agency, unless the donee has declared that it will not deliver medicines in such situations.
New subsection 3505(4) provides that the Minister for International Cooperation may rely on any information or evidence in making a determination under subsection 3505(1), and may require the donee to provide any other information or evidence that that Minister considers relevant and sufficient for the purpose of section 3505.
These amendments apply in respect of an application made by a donee for the purpose of the application of paragraph 110.1(8)(e) of the Act in respect of a gift made on or after July 1, 2008.