Can a Canadian registered charity carry out capacity-building activities within Canada with a non-qualified donee such as a non-profit without charitable status?  The short answer is perhaps and it has to be done very carefully.

In CRA’s Guidance “Using an Intermediary to Carry out a Charity’s Activities within Canada” it notes:

“Appendix A – Can a charity carry out capacity-building activities within Canada?
A charity can carry out capacity-building activities, as long as it continues to meet all requirements of the Income Tax Act. For example, a charity must, among other requirements, make sure that its activities only further its own charitable purposes, keep direction and control over the use of its resources, meet the public benefit test, and not confer undue private benefit.
For the purposes of this guidance, capacity building is working in partnership with an organization, community, other group of people, or any other non-qualified donee to develop the skills, tools, and resources necessary to address their own problems. Capacity-building activities may be charitable if they relieve poverty or advance education, or further another recognized charitable purpose.
One of the principles behind capacity building is that simply transferring money to a group or community, without providing ongoing support, rarely leads to long-term solutions. Instead, a long-term relationship can ultimately lead to ownership of the program by the charity’s partner, such that the charity may be able to withdraw its resources from the project entirely, and leave its successful operation in the hands of its former partner.
In these cases, the line between intermediary and beneficiary may become harder to distinguish. Although this guidance typically assumes intermediaries are a medium or means for a charity to carry out its own activities, in some cases they may also be a beneficiary of the charity’s activities, such as by receiving training or operational resources.
Before starting capacity-building programs, charities should make sure that their objects and activities as registered with the CRA allow them to carry out the charitable activities they anticipate will be required.”